The decision in Various Claimants v Mercedes-Benz Group AG and Others [2026] Costs LR 301 is another important reminder that the courts are continuing to take a firm approach to costs management in large-scale litigation.

The case arose from the ongoing NOx emissions group litigation involving claims against several vehicle manufacturers. While the substantive issues concern emissions systems and alleged defeat devices, the decision itself is highly relevant from a legal costs perspective.

In particular, the judgment demonstrates the court’s increasing willingness to scrutinise large-scale litigation budgets, challenge excessive assumptions, and actively control proportionality in group actions.

For firms involved in high-value litigation, collective actions, or complex commercial disputes, the decision provides several practical lessons on costs budgets, recoverability, and litigation strategy.

What happened in Various Claimants v Mercedes-Benz Group AG?

The judgment followed the second Costs Management Hearing in the NOx emissions litigation. The court was required to consider substantial future litigation budgets relating to the next stage of proceedings. The figures involved were significant.

The claimants sought budgets reportedly exceeding £55 million for the next phase of litigation, while the defendants’ budgets were even higher. The court ultimately approved substantially reduced figures, including reductions of around 20% in certain areas of the proposed budgets.

One of the key themes running through the judgment was proportionality and whether the level of work being claimed was genuinely necessary for the litigation being undertaken.

Costs management remains central in group litigation

The decision reinforces the importance of costs management in large-scale disputes. Group litigation naturally creates substantial legal costs. Multiple parties, expert evidence, disclosure exercises, and extensive case management all contribute to significant expenditure.

However, the court made clear that the scale of litigation alone does not justify unlimited spending. The judges examined whether the proposed costs were proportionate to the actual work required and whether efficiencies should arise from the collaborative nature of group proceedings.

This is particularly important in collective litigation where there may be overlap between firms, duplicated attendance, or excessive levels of supervision.

Judicial concern over “over-lawyering”

One of the most significant aspects of the decision was the court’s criticism of excessive staffing and duplication of work. The court scrutinised:

• The number of fee earners involved
• Attendance at hearings and meetings
• Internal communication structures
• Duplication of work between teams
• The proportionality of senior fee earner involvement

The judgment suggests that the court expects firms involved in large litigation to demonstrate efficiency rather than simply relying on the scale of the case to justify high expenditure. This is significant because it reflects a broader trend within costs management and detailed assessment.

The court is increasingly focused not simply on whether work was carried out, but whether the structure and staffing of the litigation were proportionate.

Comparing budgets against previous litigation phases

Another important aspect of the decision was the comparison between the budgets sought for the new litigation phase and those approved previously. The court appears to have taken the view that where later phases of litigation are narrower or more focused, costs should not necessarily increase simply because the litigation continues.

That is an important point for practitioners. A common assumption in long-running litigation is that costs naturally escalate over time. However, the court emphasised that later phases may involve greater familiarity with the issues, more streamlined processes, and increased efficiency.

Where that does not happen, questions arise regarding proportionality.

The importance of realistic costs budgets

The judgment is another reminder that costs budgets must remain realistic. Inflated assumptions, excessive contingencies, or overstaffed litigation teams are increasingly vulnerable to challenge.

The court’s role is not simply to approve whatever figures parties choose to include in Precedent H budgets. Instead, costs management is being used actively to control litigation expenditure from an early stage. For receiving parties, this creates clear risks.

If budgets are pitched too aggressively, firms may face:

• Significant reductions at the budgeting stage
• Judicial criticism regarding conduct
• Difficulties recovering costs later
• Increased scrutiny at detailed assessment

The case highlights the importance of strategic budgeting rather than simply maximising figures.

What does the case mean for detailed assessment?

Although the decision concerned costs management rather than final assessment, the implications for detailed assessment are clear. An approved budget creates a framework that can significantly affect future recoverability.

Where costs have already been criticised or reduced at the budgeting stage, the receiving party may later face further scrutiny regarding:

• Proportionality
• Duplication of work
• Fee earner attendance
• Internal communications
• Counsel involvement

This is particularly relevant in complex commercial and group litigation where multiple firms and large legal teams are involved. The stronger the budgeting process, the stronger the position later at assessment.

Proportionality remains a dominant issue

One of the clearest themes from the judgment is the continuing dominance of proportionality in modern costs law. The courts are increasingly prepared to intervene where litigation structures appear excessive, even in very large disputes.

Importantly, the court recognised that substantial litigation can still generate disproportionate costs.

This reflects the wider post-Jackson approach to costs recovery, where the court examines not simply whether work was carried out, but whether the level of expenditure was justified. The fact that litigation is high-profile or financially significant does not remove the need for proportionate case management.

The risks of duplication in large litigation teams

The decision also highlights a recurring issue in modern litigation: duplication of work. In large-scale disputes, it is common for multiple solicitors, counsel teams, experts, and support staff to become involved. While some collaboration is inevitable, the court made clear that recoverability remains subject to scrutiny.

The judgment reflects increasing judicial concern regarding:

• Multiple attendances at hearings
• Excessive internal meetings
• Overlapping supervision
• Parallel review structures
• Large numbers of fee earners performing similar tasks

This is particularly relevant for firms managing collective actions or complex multi-party litigation.

Practical lessons for law firms

The case provides several practical lessons for firms involved in costs budgeting and large litigation. Budgets must remain evidence-based and proportionate to the actual work required. Courts are increasingly unwilling to accept broad assumptions or inflated contingencies without proper justification.

Staffing structures also matter. The court will examine whether the number and seniority of fee earners is genuinely necessary for the litigation being undertaken. The judgment also reinforces that efficiency is expected. Large litigation does not justify unlimited internal communication or duplicated attendance.

Finally, firms should recognise that previous litigation phases may be used as benchmarks when later budgets are scrutinised.

How ARC Costs can assist

At ARC Costs, we regularly advise firms on costs management, budgeting strategy, and recoverability in complex litigation. Cases such as Various Claimants v Mercedes-Benz Group AG and Others [2026] Costs LR 301 demonstrate how important it is to approach budgeting strategically from the outset.

Our services include:

• Preparing and reviewing costs budgets
• Advising on proportionality and recoverability
• Assisting with Precedent R negotiations
• Supporting variation applications
• Preparing Bills of Costs
• Advising through detailed assessment proceedings

In large-scale litigation, effective costs management is no longer optional. It is central to protecting recovery and avoiding unnecessary reductions later in the proceedings.

As courts continue to scrutinise litigation expenditure closely, firms that adopt a structured and commercially realistic approach to costs will be in a far stronger position.

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