Foreign Litigation Costs Recoverable As Damages For Breach Of An Exclusive Jurisdiction Clause, Assessed on the Indemnity Basis

The Commercial Court’s decision in Diageo DV Limited v NIO S.R.L. (in liquidation) [2026] EWHC 1198 (Comm) addresses the recovery of foreign litigation costs as damages for breach of an exclusive jurisdiction agreement and the assessment of such costs on the indemnity basis.

Background

This matter concerned an application by Diageo DV Limited (“Diageo”), an English company engaged in the production and distribution of alcoholic beverages, for summary judgment and a final anti-suit injunction against NIO S.R.L. (in liquidation) (“Nio”), an Italian company in voluntary liquidation. The application was heard on 17 April 2026 before Anna Dilnot KC, sitting as a Deputy High Court Judge in the Commercial Court, with judgment handed down on 19 May 2026.

The underlying dispute arose from a Share Purchase Agreement dated 23 November 2023 (the “SPA”), by which Diageo agreed to purchase Nio’s category “A” share in Niococktails s.r.l. (“Niococktails”) for consideration comprising a completion payment of €2.75 million, a deferred payment of €1.25 million, and a contingent exit payment of at least €1 million. The dispute centred on Diageo’s decision to withhold €780,008 from the deferred payment, representing its estimated liability in respect of a settlement reached between Niococktails and entities associated with Conor McGregor and Proximo Spirits Inc (together, the “Proximo/McGregor Entities”).

Prior to the SPA, in around August 2023, Niococktails had entered into a letter of intent and a promotional services agreement with the Proximo/McGregor Entities. Following completion of the share purchase, those arrangements were terminated, prompting the Proximo/McGregor Entities to threaten claims of up to USD 12 million against Niococktails. A settlement agreement was ultimately executed on 2 August 2024, with Niococktails paying USD 1 million in full and final settlement. Diageo subsequently notified Nio of its intention to withhold part of the deferred payment as an estimated liability under clause 6.2 of the SPA.

By letter dated 18 November 2024, Diageo gave notice that it intended to withhold €800,000 from the deferred payment, incorrectly stating the settlement sum as €1 million. Diageo corrected that error in a letter dated 28 November 2024, explaining that the estimated liability was €750,000, being USD 1 million less the €200,000 excess stipulated by clause 7.5(a) of the SPA, converted to euros at an exchange rate of USD 1:EUR 0.95. On 14 January 2025, Diageo paid Nio €469,992, being the deferred payment of €1.25 million less €780,008, the latter figure representing the settlement sum less the excess, converted to euros using the Bank of America spot rate at the date of payment.

Nio objected to the withholding, raising grounds including alleged failures by Diageo to provide sufficient information, non-compliance with clause 5.4 of the SPA (which required reasonable endeavours to settle by way of a product purchase from Proximo), and the contention that Diageo had no unilateral right to withhold any sum without prior agreement or a determination under the Counsel Determination Mechanism provided for in clause 6.2. The parties exchanged correspondence between November 2024 and January 2025 without reaching agreement, and neither party invoked the Counsel Determination Mechanism.

On 26 March 2025, Nio commenced proceedings before the Civil Court of Milan, seeking recovery of the withheld sum. Nio relied upon an exclusive jurisdiction clause in favour of the Italian courts contained in Article 8 of a Deed of Transfer dated 1 December 2023, which had been executed to satisfy the formal requirements of section 2470 of the Italian Civil Code for the transfer of shares in an Italian company. Nio also filed an application before the Italian Supreme Court seeking a declaration that the Milan court had jurisdiction, which resulted in the Milan proceedings being stayed.

Diageo’s position was that the SPA contained, at clause 24.2, an exclusive jurisdiction agreement in favour of the English courts, and that the Italian proceedings had been commenced and pursued in breach of that agreement. Diageo obtained an interim anti-suit injunction from David Bailey KC on 18 July 2025 (reported at [2025] EWHC 2109 (Comm)), restraining Nio from taking further steps in the Italian proceedings. That injunction was continued until further order by HHJ Pelling KC by order dated 8 September 2025, which also addressed service of the claim form and other documents on Nio out of the jurisdiction in Italy. HHJ Pelling KC also made a costs award in Diageo’s favour at that stage in the amount of £85,159 (from a claimed sum of £95,411), covering the costs of the hearing before David Bailey KC and the application to continue the interim injunction, assessed on the indemnity basis.

Diageo’s application for summary judgment and a final anti-suit injunction was issued on 6 January 2026 and served on Nio by certified email on 23 January 2026. Nio did not file any acknowledgement of service or defence, and did not appear or seek representation at the hearing on 17 April 2026. The court was satisfied that Nio had been properly served and was aware of the application, and proceeded to determine it in Nio’s absence.

Costs Issues Before the Court

Three distinct costs matters fell to be determined. The first was whether Diageo was entitled to recover, by way of damages, the legal costs it had incurred in the Italian proceedings as a result of Nio’s breach of the exclusive jurisdiction clause in the SPA. The second was whether an interim payment on account of those damages should be made at this stage, given that the Italian proceedings remained ongoing and the full extent of Diageo’s loss could not yet be quantified. The third was the summary assessment of the costs of the application before the court on the indemnity basis.

On the question of damages, the legal basis for recovering foreign litigation costs as damages for breach of an exclusive jurisdiction clause was well established. The court noted that the proposition had gone unchallenged before the Supreme Court in both Starlight Shipping Co v Allianz Marine and Aviation Versicherungs AG [2013] UKSC 70 and AMT Futures Ltd v Marzillier [2018] AC 439. The measure of recovery is to put the non-defaulting party in the position it would have been in had the foreign proceedings not been brought at all, and can include costs incurred in those foreign proceedings: Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd [2015] 1 Lloyd’s Rep 301 at [37] to [38]. Importantly, such costs are recoverable even where the foreign court lacks the power to award costs: Union Discount Co Ltd v Zoller [2002] 1 WLR 1517 at [31]. The assessment of those costs is conducted on the indemnity basis, with the burden of establishing any failure to mitigate resting on the party in breach: National Westminster Bank plc v Rabobank Nederland (No. 3) [2008] 6 Costs LR 839 at [25].

On the question of the costs of the English proceedings and application, the court noted that a successful claimant for an anti-suit injunction is ordinarily entitled to its costs on the indemnity basis where it can establish that the breach of the exclusive jurisdiction clause caused it reasonably to incur legal costs: A v B [2007] 2 CLC 203 at [9] to [15]. Diageo sought summary assessment of the costs of the application on the indemnity basis, having provided a costs schedule in that regard. The court also had to consider how to treat any costs of the proceedings falling outside the scope of the two earlier applications and the present application, given the prior costs order made by HHJ Pelling KC.

The Parties’ Positions

Diageo’s position on damages was that, by commencing and pursuing the Italian proceedings in breach of clause 24.2 of the SPA, Nio had caused Diageo to incur costs in Italy in challenging the jurisdiction of the Italian courts. Those costs were recoverable as damages. Diageo was not yet in a position to quantify its total loss, given that the Italian proceedings remained ongoing, with the Milan court proceedings stayed pending the Italian Supreme Court’s determination on jurisdiction. Diageo therefore sought an interim payment of damages pursuant to CPR 25.20 and CPR 25.23(b) in the amount of £44,045, representing approximately 90% of the costs totalling €52,238.29 incurred to date in the Italian proceedings. Those costs were evidenced by invoices from Diageo’s Italian lawyers, PedersoliGattai. Diageo also sought an order that the remainder of its damages be assessed following the conclusion of the Italian proceedings.

On the costs of the application, Diageo sought summary assessment on the indemnity basis in the sum of £42,056.90. Diageo submitted that it was entitled to costs on the indemnity basis as a successful claimant for an anti-suit injunction, the breach of the exclusive jurisdiction clause having caused it reasonably to incur legal costs in obtaining the relief granted.

Nio did not appear and was not represented at the hearing. It had not filed any acknowledgement of service or defence, and had not responded to the application other than to dispute service in correspondence.

The Court’s Determination

The court granted summary judgment in Diageo’s favour, finding that Nio had no real prospect of successfully defending the claim. The court found that clause 24.2 of the SPA constituted an exclusive jurisdiction agreement in favour of the English courts. The court rejected Nio’s reliance on the jurisdiction clause in the Deed of Transfer, finding that the Deed was narrow in scope and concerned only with the formalities for effecting the transfer of the share in Niococktails. The construction of the exclusive jurisdiction clause started from the assumption, established in Fiona Trust & Holding Corp v Privalov [2007] UKHL 40, that the parties, as rational business people, are likely to have intended any dispute arising out of the relationship into which they have entered to be decided by the same tribunal unless the language of the clause makes it clear that certain questions are to be excluded from that tribunal’s jurisdiction. The Deed was not concerned with the wider rights and obligations of the parties related to the sale and purchase, including the terms upon which any part of the deferred payment could be withheld. All of the claims brought by Nio before the Court of Milan were disputes or claims which fell within the material scope of clause 24.2 of the SPA. While labelled by Nio as claims for breaches of the Deed of Transfer or of provisions of Italian law, they were in substance claims for breaches by Diageo of the terms of the SPA or the non-fulfilment of the conditions required to be fulfilled before Diageo was entitled to withhold any part of the deferred payment.

The court granted a final anti-suit injunction restraining Nio from continuing with the Italian proceedings, both before the Court of Milan and the Italian Supreme Court. The court also granted declaratory relief confirming that the claims brought by Nio in the Italian proceedings were within the scope of the exclusive English jurisdiction agreement and were brought in breach of that agreement.

On the substantive dispute, the court found that Diageo had complied with its obligations under clause 5.4 of the SPA (including the obligation to use reasonable endeavours to ensure Niococktails gave due regard to settling by way of a product purchase from Proximo, and to consult with Nio prior to entering into the settlement agreement). The court also found that Diageo had complied with clause 6.2 of the SPA and was entitled to withhold the sum of €780,008 from the deferred payment as a genuine and bona fide estimate of Nio’s liability under the indemnity provision. The court rejected Nio’s argument that Diageo was not entitled unilaterally to withhold any amount without agreement or a prior determination via the Counsel Determination Mechanism, finding that clause 6.2 entitled Diageo to withhold the amount of the estimated liability as long as it had notified Nio of the same in writing before the deferred payment became due.

Damages for Italian Litigation Costs

The court held that by commencing and pursuing the Italian proceedings, Nio had breached the exclusive jurisdiction clause in the SPA. As a result of that breach, Diageo had taken steps in Italy to challenge the jurisdiction of the Italian courts and had incurred costs, principally legal costs. The court considered that Diageo was entitled to recover such expenditure which was reasonably incurred as damages in the proceedings.

The court applied the principles established in Union Discount Co Ltd v Zoller and National Westminster Bank plc v Rabobank Nederland (No. 3). A party forced to defend proceedings brought in breach of an exclusive jurisdiction clause can recover reasonable costs incurred as a result of the foreign proceedings even if the foreign court lacks the power to award costs. The assessment of those costs is conducted on the indemnity basis such that the non-defaulting party can recover all costs reasonably incurred and reasonable in amount, with the burden of proof of any failure to mitigate on the party in breach. The court described the indemnity basis as “a useful proxy for an exercise in assessing reasonable costs where the burden is on Nio to establish a lack of reasonableness or failure to mitigate,” drawing an explicit analogy with the burden of proof under CPR 44.3(3).

Diageo was not in a position finally to determine the amount of its loss because the Italian proceedings were ongoing, with the proceedings before the Milan court stayed pending a decision on jurisdiction from the Italian Supreme Court. The court therefore considered it appropriate to grant an interim payment of damages.

The sum of £44,045 sought by Diageo represented approximately 90% of the costs (which totalled €52,238.29) that Diageo had incurred to date in respect of the Italian proceedings. Those costs had been established by way of the invoices submitted by Diageo’s Italian lawyers, PedersoliGattai. The court acknowledged that even assessing the costs on the indemnity basis, 90% would be a high proportion of costs to recover. However, the amount of £44,045 was reasonably modest and the court had no specific reason to reduce the amount of the interim payment sought. Further, it was likely that Diageo would continue to incur legal costs in Italy and it followed that its final costs burden for which it would be entitled to be compensated would likely exceed £44,045.

The court therefore granted Diageo an interim payment in the amount of £44,045, with the remainder of its loss to be assessed in due course following the conclusion of the Italian proceedings. The court considered it appropriate for Diageo to receive some contribution from Nio towards its costs at this point rather than awaiting the conclusion of the Italian proceedings.

Summary Assessment of Application Costs

The court turned to the costs of the application before it. Diageo had been provided with a costs schedule in respect of the application (but not the proceedings), with a request that costs be assessed summarily and on the indemnity basis. The total amount claimed as the costs of the application was £42,056.90.

The court noted that HHJ Pelling KC had already made a costs award in Diageo’s favour in the amount of £85,159 (out of the £95,411 claimed) which sum covered Diageo’s costs of the hearing before David Bailey KC on 18 July 2025 and the costs of the application to continue the interim anti-suit injunction, assessed on the indemnity basis. The court observed that it was unclear whether there existed costs of the proceedings (other than the £10,000 court fee for issuing the proceedings) which fell outside of the scope of those two applications, this application and the Italian proceedings.

The court therefore limited its summary assessment to the costs of this application (plus the £10,000 court issue fee), with any other amounts incurred by Diageo in the proceedings not already subject to costs orders to be assessed at the same time as damages were finally to be assessed. The court assessed the costs of the application on the indemnity basis in the amount of £33,645, being 80% of £42,056 (the judgment uses the rounded figure of £42,056 at paragraph 87, though the claimed sum stated at paragraph 86 is £42,056.90). The court did not provide reasons for the 20% reduction in its judgment.

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