Indemnity principle

In the context of dispute resolution, a principle of law which provides that costs ordered to be paid as between parties to litigation are given as an indemnity to the person entitled to them. They are not imposed as a punishment on the party who pays them or given as a bonus to the party who receives them. The amount which the paying party has to pay cannot exceed the amount which the successful receiving party has to pay to their solicitor. The principle also means that where the receiving party is not liable to pay costs to their solicitor, for example, because the solicitor agrees to work for nothing, the receiving party does not need (and is not entitled to) an indemnity. However, this may have changed somewhat now with the advent of pro bono orders (which direct payment to a charity).

See further, paragraph 2.6, Senior Courts Costs Office Guide and Practice note, Detailed assessment: what it is and the basis of assessment: The indemnity principle, Practice note, Recovery of costs: overview: Pro bono legal representative costs, Practice note, Conditional fee agreements entered into before 1 April 2013 and in the excepted cases: an overview: Simplified CFAs or CFA-lites and Practice note, Damages-based agreements in civil litigation (other than employment tribunal matters): overview: The indemnity principle applies.