A Protective Costs Order is an Order made by a court that the Party granted the Order will not be liable for the other party's costs if they lose, or sometimes just not liable for a proportion of the costs or possibly a capped amount. If successful however they will be entitled to recover all of their costs from the other side.
Although usually made when a judge first considers the claim, they can be made at any stage in the proceedings and on any condition that the court thinks appropriate. They will however only be made in 'public interest' cases.
Before making a protective costs order the court must be satisfied that:
a) The case raises issues which are of general public importance;
b) These issues should be resolved in the general public interest;
c) The Applicant does not have a private interest in the outcome of the case
d) It would be fair and just to make an Order having regard to the likely costs and the financial resources of the Applicant;
e) If a Protected Costs Order is not made the Applicant is likely to discontinue the Proceedings and it would be reasonable for him to do so.
When costs are capped, the Applicant must restrict the costs incurred to what is reasonable and be no more than modest. This will usually be solicitor's costs and those of junior counsel. Whenever it is possible pro bono representation should be sought.
The procedure to apply for Protected Costs Order will usually be to make the application on the originating claim form. It must be supported by a statement of evidence providing full details and a schedule of likely costs. The Respondent will then have the opportunity to oppose the making of an Order and will do so when completing the acknowledgment of service. Should the application not be successful the Applicant will of course be liable for the Respondent's costs in opposing although these will usually be limited to 1000 pounds.
If a PCO is made it can be set aside at any time as proceedings continue although there must be a compelling reason to do so. The courts have said that an unmeritorious application to set aside a PCO should be met with an indemnity costs order.
Although a case must have general public importance before a protective costs order can be made it is probable that it does not have to be a 'test case' on the law as such. Many applications will be with regard to cases of statutory interpretation but applications do not need to be limited to these cases. The governing principle is that the making of an order should be fair and reasonable in all the circumstances and of general public importance.