LD Paris, May 21, 2024, order concerning security for legal costs, UPC_CFI_495/2023

The criterion of the Claimant’s financial situation is decisive for the Court when it has to decide whether or not to order a security for the legal costs. The Applicants (Defendants in the main proceedings) submitted that there are no public records about Respondent’s (Claimant in the main proceedings) assets and financial situation. They pointed out that Respondent’s only income was from the licensing of its patents. The official documents submitted did not provide any information about Respondent’s financial situation or its current assets. The Court therefore considered that there was a potential risk of Respondent’s inability to cover the legal costs of the other party in case of losing the litigation.

The risk of enforcement in the United States of America is not decisive in this case, as the place of registration of the company and the address of its main office are indicated and not disputed. In addition, the Court did not identify any particular difficulties in enforcing the UPC’s decision in the United States, even if it has to be done in different states of the USA. It had already been stated by the UPC Munich Local Division: “In the United States of America, judgments of foreign courts as well as associated cost decisions can in principle be recognised and enforced.” (UPC_CFI_15/2023 (LD Munich) Order of 29/09/2023). In the present case, there were no exceptional circumstances that could have been considered as unduly burdensome to justify the order. Nor did the mere fact that the Respondent is domiciled in the United States justify an order for security for costs.

Respondent has taken out an insurance policy to assure a reimbursement of procedural costs. The insurance broker’s declaration was not sufficient to safeguard that the legal costs can be recovered from it by Applicants for two reasons. Firstly, the purpose of this type of insurance is to provide a financial protection for Respondent (the insured party), and not to protect the potential rights of the Applicants. Secondly, the full terms of the said insurance were not disclosed and the actual terms of the insurance were, hence, unclear.

Applicants submitted that the ceiling for recoverable costs (based on the value of the action declared by the Claimant and Respondent at the amount of 18,000,000 EUR) would be 1,200,000 EUR. The Respondent argued that certain events which occurred after the statement of claim was lodged caused the value of the case to drop to EUR 15,000,000, in which case the ceiling for costs would be EUR 800,000. The value of the case and hence the ceiling for legal costs was not decided by the Court at this stage of the proceedings. A security in the amount of one third of the presumed maximum amount, i.e. EUR 400,000, as proposed by the Respondent in its subsidiary submissions, was found to be reasonable and proportionate at this stage.

In order to guarantee the secure recovery of the legal costs potentially due to Applicants, which are all based in Europe and most of them in the EU, a guarantee from a bank licensed to operate in the EU must be provided. The Respondent’s request to approve a guarantee from a bank licensed to operate in the United States of America was dismissed. The Court noted that there are banks that are licensed to operate in the EU and in the United States, and hence the dismissal was not unreasonable even though the Respondent is domiciled in the United States.