Security for Costs

In legal systems that apply the indemnity principle a litigant, usually a plaintiff, but sometimes a defendant, may be required to provide “security” to show that it can pay the other party’s costs in the event that it fails to win its case. However, as security for costs is regarded as potentially making it impossible for someone to bring a suit, even if well founded, it is usually only ordered where the party security is ordered from has a very weak case and there is some sound reason to believe it will not pay costs if it loses the case, e.g., it is a foreign party that could dodge paying costs, it is teetering on the edge of bankruptcy or it has failed to pay costs or damages awards in the past (including in other jurisdictions.)

Orders requiring security for costs in trial courts (i.e., courts of first instance) are usually very rare; such orders are more common when an appeal is brought, especially for a costs award in the lower court and may form part of an appeal bond. In the UK a system has developed where contingency-fee plaintiffs can obtain insurance from specialist insurers to secure the other party’s costs should they lose.

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