I can't speak for England or Europe but here in Australia it's typical for judges to 'award costs' to the winning party. In other words, the judge determines whether or not it's appropriate for the losing party to pay the legal costs of the winning party. It is not mandatory for judges to award costs but it is so common as to be expected.

In principle, awarding costs is 'fair': if Party A has caused Party B to incur legal costs in enforcing their legal rights then it's only fair for Party A to compensate Party B for their legal costs. A positive consequence of 'loser pays' is that there is far less litigation - and certainly less spurious litigation - in Australia than there might otherwise be.

On the other hand, while the practice seems fair in principle it can be very unfair - and financially crippling - in practice. You can imagine a situation where Party A is actually in the right, tries to appeal the judge's decision, but can't do so because they are financially in the hole because of having costs awarded against them!

So, while I still favour the idea of awarding costs, other mechanisms are needed to account for situations where parties are appealing decisions and the like.