Costs in DIFC Employment Cases: Two New Decisions Confirm the Strength of Practice Direction 1/2025

Two recent reasoned decisions from the DIFC Court of First Instance — AZ v BY (CFI 119/2025, 14 July 2026) and BGC Brokers LP v Adam Tillman (CFI 038/2025, 21 August 2026) — offer the first detailed judicial treatment of the costs regime introduced by Practice Direction No. 1 of 2025 ("PD 1/2025"), which we addressed in a post when the Practice Direction was published in October 2025. 

Both reach the same result of each party bearing its own costs, but they do so by different routes and, read together, provide valuable guidance for practitioners handling employment disputes in the DIFC.

The default rule under PD 1/2025

PD 1/2025 reverses the usual "loser pays" approach in employment claims. Paragraph 3.1 provides that each party bears its own legal costs. Paragraph 3.2 permits an adverse costs order only where a party has acted unreasonably, vexatiously or in bad faith, or where the interests of justice otherwise require it.

AZ v BY 

In AZ v BY, the claimant employee sought costs of an expedition application, arguing the defendant-employer had unreasonably refused to agree to an expedited timetable. Justice Pelling set out three key propositions:

1. Exceptional circumstances. The power under paragraph 3.2 is engaged only in exceptional circumstances and establishing a gateway is necessary but not sufficient.
2. A high degree of unreasonableness is required to displace the default rule. Drawing an analogy with the English indemnity-costs threshold (Excelsior Commercial & Industrial Holdings Ltd [2002] EWCA Civ 879), Justice Pelling held that "unreasonable conduct" under paragraph 3.2(a) required unreasonableness "to a high degree."
3. Expedition is a court decision. Parties cannot simply agree to expedite; it is for the court to direct on application. A party is therefore entitled to resist expedition without that resistance being characterised as unreasonable unless urgency was objectively inevitable.

Applying those principles, Justice Pelling found that the defendant employer’s refusal to consent to expedition was not unreasonable to a high degree, particularly because the urgency around post-termination restraints only crystallised after the claimant later amended his pleading.

BGC Brokers LP v Adam Tillman

In BGC Brokers, the claimant employer sought costs of a successful document-production application (USD 171,332.40). Justice Le Miere approached the matter differently in several respects:

1. English authorities are persuasive but not controlling. Where Justice Pelling was cautious about importing English Employment Tribunal jurisprudence, Justice Le Miere accepted that English decisions such as Yerrakalva v Barnsley MBC [2012] ICR 420 provided "useful guidance" on the policy rationale, while emphasising they cannot displace the language of PD 1/2025.
2. Success alone is not enough. Even though the claimant was the "more successful party" on the application, Justice Le Miere held this does not of itself justify departure from the general rule. To hold otherwise would "frequently displace" paragraph 3.1 and diminish its practical effect.
3. Reasonably arguable opposition to an application is not unreasonable conduct per se. The defendant employee's objections achieved a measure of success (one request refused entirely, several narrowed). A party does not act unreasonably merely because its arguments are "ultimately rejected."
4. Commercial significance and third-party funding is irrelevant. Neither the value of the dispute nor the defendant's alleged indemnification by a third party constitutes a basis for departure under paragraph 3.2.

Practical implications

These decisions send a clear signal that the DIFC Courts will treat adverse costs orders in employment cases as genuinely exceptional once PD 1/2025 is engaged. Whereas the judge in AZ considered the costs threshold under PD 1/2025 to be akin to that for indemnity costs, the judge in Tillman did not reiterate that point, nor did he repeat the rejection made in AZ of the comparison between the costs’ regime in the DIFC with the UK Employment Tribunal framework (one being creatures of statute, the other of common law). 

For applicants, whether claimant or defendant, employer or employee, the practical hurdle under PD 1/2025 is high. Simply winning an interlocutory application even convincingly will not ordinarily shift costs. To succeed, the applicant will likely need to demonstrate conduct that crosses into territory comparable to that justifying indemnity costs in general civil litigation: conduct that is out of the norm and unreasonable to a high degree. For respondents, the decisions offer some comfort. Resisting applications on reasonably arguable grounds, even if those grounds ultimately fail, should not expose a party to an adverse costs order. However, parties should remain alert to the second and third gateways under Paragraph 3 of the Practice Direction, namely conduct that is vexatious and/or in bad faith, or where the interests of justice favour making a costs award, which remain available and have yet to be fully tested in reported DIFC authority.