Why might a claimant need to post security for costs?

Because the defendant fears it will not be able to collect its costs if it wins. In England and Wales, the court may order security if it is just to do so and a condition applies, for example that the claimant is resident out of the jurisdiction, or is a company and 'there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so,' under CPR 25.27. Burford notes the process 'can also be used as an early way to block litigation, where a claimant simply cannot pay a few million pounds into court.'

Can security be ordered against a funder?

Yes, in England and Wales. CPR 25.28 lets the court order security against a non-party who 'has contributed or agreed to contribute to the claimant's costs in return for a share of any recovery in the proceedings' and against whom a costs order may be made. That is one reason funders budget for security and insurance alongside legal fees.

How does ICSID handle security for costs?

Under Rule 53 of its 2022 Arbitration Rules, a tribunal may order a claimant to provide security after considering its ability and willingness to comply with an adverse costs decision, the effect on its ability to pursue the claim, and the parties' conduct, and it 'shall consider all evidence adduced in relation to' those circumstances, 'including the existence of third-party funding.' If security is not provided, the tribunal may suspend the proceeding and, after 90 days, discontinue it.

Can ATE insurance replace a cash deposit?

Often, if the court accepts the policy. Burford says 'ATE insurance from reputable and well-capitalized insurers is accepted by the courts as an alternative to the need for a claimant to part with money,' citing Premier Motorauctions v PricewaterhouseCoopers (2016). Courts look at the insurer, the limit and whether the policy can be avoided; an anti-avoidance endorsement helps.

Does security cover appeals too?

It can. CPR 25.29 lets the court order security for the costs of an appeal on the same grounds, and where the appellant is a limited company with reason to believe it will be unable to pay the other parties' costs. Silver Bull's ICSID award of May 29, 2026, which ordered it to pay about $998,000 of Mexico's costs, shows the kind of liability security is meant to protect.

What does security cost the claimant?

The cost of tying up cash or paying for a guarantee or policy, for the life of the case. A cash deposit earns little while it sits; a bank guarantee charges a fee and may need collateral; ATE costs a premium, often deferred. If funded, the funder's return usually applies to the money provided for security as well, which raises the claimant's total cost.

Security for Costs

Litigation Finance & Legal Claims

Definition

Security for costs is an order requiring a party bringing a claim to provide security, such as a payment into court, a bank guarantee, a bond or an acceptable insurance policy, for the other side's costs in case the claim fails. In England and Wales it is governed by Civil Procedure Rules Part 25, Section VI; in ICSID arbitration by Arbitration Rule 53. Failing to provide it can stop the case.

Why it matters

Security for costs turns a future, contingent liability, the other side's costs if the claim fails, into a present cash need, often early in the case and sometimes large enough to stop it. That is why funders treat it as part of the budget and why ATE policies that courts will accept as security are valuable. Courts and tribunals increasingly take funding into account: CPR 25.28 reaches funders directly, and ICSID's Rule 53 lists third-party funding as evidence to consider. For an investor, security is both a cost and a gate. Ask whether funded cases have faced security applications, how they were met, and what share of a fund's commitments sit in security rather than legal work.

Common misconceptions

•Security for costs is not a fine, because it is held against a possible costs order and returned or released if the claimant wins.
•Having a funder does not shield the claimant, because courts in England and Wales can order security against the funder itself under CPR 25.28.
•A cash deposit is not the only option, because courts can accept bonds, guarantees or ATE policies from strong insurers.
•Security is not ordered automatically, because the court or tribunal must find it just and, in England and Wales, a listed condition must apply.
•Failing to provide security is not a minor default, because the proceeding can be stayed, and under ICSID Rule 53 discontinued after 90 days.

Technical details

Worked example (illustrative): meeting a GBP 1.0 million order

Court orders GBP 1.0 million of security, in two tranches, against a defendant's estimate of GBP 1.5 million to trial.

Cash: GBP 1.0 million paid into court for about three years; at 5% a year, about GBP 150,000 of forgone return on a simple basis.

Bank guarantee: an annual fee of, say, 2%, about GBP 60,000 over three years, often with collateral.

ATE with an anti-avoidance endorsement: a premium of, say, GBP 50,000 upfront plus a contingent amount on success, if the court accepts it.

If the funder provides the cash at 3.0x, its entitlement on that GBP 1.0 million is GBP 3.0 million on a win, which is why insurance is usually preferred.

When security is ordered (England and Wales, CPR 25.27)

Claimant resident out of the jurisdiction.

Claimant company with reason to believe it cannot pay the defendant's costs.

Claimant changed address to evade the litigation, or gave a wrong or no address.

Nominal claimant unlikely to pay.

Claimant took steps with its assets that would make a costs order hard to enforce.

What AltStreet's reviews and filings show

Civil Procedure Rules Part 25, Section VI (England and Wales): a defendant may apply for security for its costs (rule 25.26); the court may order it if just and if a condition applies, such as the claimant being resident out of the jurisdiction or being a company with 'reason to believe that it will be unable to pay the defendant's costs if ordered to do so' (25.27); security can be ordered against a person who 'has contributed or agreed to contribute to the claimant's costs in return for a share of any recovery' (25.28); and on appeal (25.29).

ICSID Arbitration Rule 53 (rules in force July 1, 2022) lets a tribunal order security for costs, weighing a party's ability and willingness to comply with an adverse costs decision, the effect on its ability to pursue the claim and the parties' conduct, and requires it to consider 'the existence of third-party funding'; if security is not provided the tribunal may suspend the proceeding and, after 90 days, discontinue it.

Burford 'Adverse Costs and Insurance': security can be 'an early way to block litigation'; ATE from strong insurers increasingly accepted as an alternative (Premier Motorauctions, 2016).

Silver Bull Resources' funding agreement with Bench Walk Advisors (September 5, 2023) committed up to $9.5 million for legal, tribunal, expert and defined corporate costs of its ICSID arbitration against Mexico; on May 29, 2026 the tribunal dismissed the claim, concluding it lacked jurisdiction and/or the claim was time-barred, and ordered Silver Bull to pay about $998,000 of Mexico's legal costs, and Bench Walk then terminated the agreement (Silver Bull 10-Q for July 31, 2026).

Questions about security for costs

Is the claimant likely to face a security application, given its residence and finances?

Who will provide security: the claimant, the funder or an insurer?

Does the funding agreement treat security money as deployed capital earning the full return?

Is the ATE policy acceptable as security, with an anti-avoidance endorsement?

Could security be ordered again on appeal?

How investors apply the term

Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.

The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.

Frequently asked questions

Why might a claimant need to post security for costs?: Because the defendant fears it will not be able to collect its costs if it wins. In England and Wales, the court may order security if it is just to do so and a condition applies, for example that the claimant is resident out of the jurisdiction, or is a company and 'there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so,' under CPR 25.27. Burford notes the process 'can also be used as an early way to block litigation, where a claimant simply cannot pay a few million pounds into court.'
Can security be ordered against a funder?: Yes, in England and Wales. CPR 25.28 lets the court order security against a non-party who 'has contributed or agreed to contribute to the claimant's costs in return for a share of any recovery in the proceedings' and against whom a costs order may be made. That is one reason funders budget for security and insurance alongside legal fees.
How does ICSID handle security for costs?: Under Rule 53 of its 2022 Arbitration Rules, a tribunal may order a claimant to provide security after considering its ability and willingness to comply with an adverse costs decision, the effect on its ability to pursue the claim, and the parties' conduct, and it 'shall consider all evidence adduced in relation to' those circumstances, 'including the existence of third-party funding.' If security is not provided, the tribunal may suspend the proceeding and, after 90 days, discontinue it.
Can ATE insurance replace a cash deposit?: Often, if the court accepts the policy. Burford says 'ATE insurance from reputable and well-capitalized insurers is accepted by the courts as an alternative to the need for a claimant to part with money,' citing Premier Motorauctions v PricewaterhouseCoopers (2016). Courts look at the insurer, the limit and whether the policy can be avoided; an anti-avoidance endorsement helps.
Does security cover appeals too?: It can. CPR 25.29 lets the court order security for the costs of an appeal on the same grounds, and where the appellant is a limited company with reason to believe it will be unable to pay the other parties' costs. Silver Bull's ICSID award of May 29, 2026, which ordered it to pay about $998,000 of Mexico's costs, shows the kind of liability security is meant to protect.
What does security cost the claimant?: The cost of tying up cash or paying for a guarantee or policy, for the life of the case. A cash deposit earns little while it sits; a bank guarantee charges a fee and may need collateral; ATE costs a premium, often deferred. If funded, the funder's return usually applies to the money provided for security as well, which raises the claimant's total cost.