Can pre- and post-award interest be included on the principal claim and costs incurred?

International Arbitration (4th edition)

Argentina Small Flag Argentina

Under Argentine law, compensatory interest can be agreed between the debtor and the creditor, including the rate. If it was not agreed by the parties, interest should be determined in accordance with the law, the custom and practice or by the court (Art. 767 NCCC). The same rules apply to default interest. Punitive interest is only available if it was agreed by the parties.

With respect to the costs of the arbitration proceedings, Art. 68 of the CP sets forth the general principle according to which the losing party shall pay all costs even if the prevailing party has not required this in its pleadings.

Austria Small Flag Austria

Austrian arbitration law does not contain any explicit provisions on whether the parties are entitled to recover interest. In most cases, this will be considered as dependent on the law applicable to the merits of the dispute.

Bulgaria Small Flag Bulgaria

This issue shall be governed by the applicable substantive law. If this is Bulgarian law, a statutory interest rate equal to the basic interest rate determined by the Bulgarian National Bank plus 10% is applied to the late payments.

United States Small Flag United States

The FAA is silent on interest. However, U.S. courts have generally held that unless parties have specified otherwise in their agreement, arbitrators have the authority to award interest and to determine the amount of interest and the date from which the interest should be calculated. See, e.g., Matter of Hawai’i State Teachers Ass’n, 140 Haw. 381, 400 (2017); Haddon v. Shaheen & Co., 231 Ga. App. 596, 599 (1998); Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 991 F.2d 141, 148 (4th Cir. 1993).

Canada Small Flag Canada

The arbitral tribunal’s authority to award interest may arise from the substantive contract in dispute, the applicable law, or the arbitration agreement. If the applicable law is Canadian law, the award of pre-judgement interest is an issue of substantive law; accordingly, the arbitral tribunal may make an award for interest. In some jurisdictions, such as in the province of British Columbia, the applicable international arbitration legislation explicitly provides for an award of interest.

Cyprus Small Flag Cyprus

Arbitration Law allows the tribunals to direct accordingly on interest rates. Where the law does not provide express provisions as to interest, the Tribunal can make an award based on simple or compound interest. Unless the arbitral award decided otherwise, under Article 22, Cap. 4, the amount of such award bears statutory interest, from the date of judgement.

UAE Small Flag UAE

In general, interest is awarded in most UAE-based arbitration proceedings, commonly as post-award, unless specific contractual provisions allow for pre-award interest.

Pre-award interest may be claimed pursuant to Article 88 of the UAE CPC which provides for a commercial obligation (essentially, the monetary debt) being a sum of money which was known at the time that the obligation arose.

The above provision stipulates that in such an instance, if the debtor delayed its payment, it shall be bound to pay to the creditor as compensation for delay, interest up to 12% per annum, unless the parties have agreed otherwise.

The creditor does not have to prove actual loss incurred in order for it to claim interest and this is stipulated in Article 89 of the aforementioned law

United Kingdom Small Flag United Kingdom

Unless otherwise agreed by the parties, the 1996 Act allows the tribunal to award simple or compound interest:

(a) Pre-award interest: from such dates as it considers just on the whole or part of any amount awarded by the tribunal, in respect of any period up to the date of the award (s.49(3)(a)).

(b) Post-award interest: from the date of the award (or any later date) until payment, at such rates that it considers just on any outstanding amount of any award, including any award as to costs (s.49(4)).

Singapore Small Flag Singapore

In Singapore, s 20(1) of the IAA provides as follows:

‘Subject to subsection (3), unless otherwise agreed by the parties, an arbitral tribunal may, in the arbitral proceedings before it, award simple or compound interest from such date, at such rate and with such rest as the arbitral tribunal considers appropriate, for any period ending not later than the date of payment on the whole or any part of —

(a) any sum which is awarded by the arbitral tribunal in the arbitral proceedings;

(b) any sum which is in issue in the arbitral proceedings but is paid before the date of the award; or

(c) costs awarded or ordered by the arbitral tribunal in the arbitral proceedings’.

S 20(3) of the IAA (referenced as ‘subsection (3)’ above) provides that ‘[w]here an award directs a sum to be paid, that sum shall, unless the award otherwise directs, carry interest as from the date of the award and at the same rate as a judgment debt’. Para. [77] of the Practice Directions of Singapore’s Supreme Court provides for a default interest rate of 5.33% per annum for post-judgment interest. As such, pre-award and post-award interest may be included on the principal claim and costs incurred, and 5.33% is the default rate applicable (absent agreement by the parties otherwise) for post-award interest on the principal claim as well as on any costs awarded. In practice, however, pre-award interest is rare absent specific agreement by the parties.

South Korea Small Flag South Korea

Absent any agreement between the parties, the arbitral tribunal may award interest “if it finds appropriate in making an arbitral award, considering all circumstances of the relevant arbitration case” (Article 34-3 of the Arbitration Act).

Where the dispute is governed by Korean law, parties may agree on an interest rate which does not exceed 24% pursuant the Interest Limitation Act and related regulations. Either party may seek pre-award and post-award interests. If there is no agreement on any interest rate, either party may seek pre-award and post-award interest at the statutory rate of 5% per annum for general civil claims (Article 379 of the Civil Code) and 6% per annum for claims arising out of commercial activities (Article 54 of the Commercial Code).

For Korean litigation, Article 3(1) the Act on Special Cases Concerning Expedition of Legal Proceedings provides for post-judgment interest at the rate 15% per annum. Whether the 15% rate is applicable to post-award interest in arbitral proceedings is subject to debate.

Germany Small Flag Germany

Interest may be granted and awarded by the arbitral tribunal if and to the extend the respective substantive law provides for entitlement for interests. German law stipulates that interest may be added to a payment claim from the date of commencement of the arbitration (lis pendens). In addition, pre-arbitration interest may be awarded if the party had been in breach of contract or default.

Interest accrues and is thus payable up to the date of payment. No distinction is made between a pre-award period and post-award period.

India Small Flag India

The arbitral tribunal can award pre-and post-award interest on the principle claims, however, for the costs, it has to be post-award interest.

Indonesia Small Flag Indonesia

The answer to this will depend on the substantive law governing the dispute and the law governing the arbitration agreement, which tend to be the same. For example, Indonesian contract law would allow a claim for interest in a breach of contract claim, including interest accrued before the arbitration commences and after the award is issued, until full performance of the award.

Liechtenstein Small Flag Liechtenstein

Interest can be included on the principal claim from the date the claim has fallen due (pre-award) until the date of payment (post-award). Interest on cost can be included from the date of the award until payment.

Malaysia Small Flag Malaysia

In light of the amendments to the Arbitration Act through the Arbitration (Amendment) (No.2) Act 2018, Section 33 has been amended to include subsection 33(8) which provides that ‘where an award directs a sum to be paid, that sum shall, unless the award otherwise directs, carry interest as from the date of the award and at the same rate as a judgment debt

France Small Flag France

An arbitral tribunal can award interest. The arbitral tribunal must determine the relevant factors (including the relevant law) to determine the rate. Under French law, the legal interest rate, where applicable, is fixed by Decree each semester.

There are two types of late payment interest (“intérêts moratoires”) in France:

• According to FCCP Article 1153, interest on damages (“intérêts sur les dommages-intérêts”) must be claimed by the parties. It runs from the notice to pay or its equivalent, which in international arbitration would often be the request for arbitration.

• The arbitral tribunal has wide latitude to decide from when post-award interest (“intérêts de condamnation”), pursuant to FCCP Article 1553-1 should run (Fontan Tessaur v. Société ISS Abilis France, Paris Court of Appeal, 1st Chamber, 25 mars 2004, REV. ARB., 2004.671). However, for interest related to enforcement (exequatur), the French Court of Cassation has stated that interest runs from the date of the enforcement decision (RSCC v. Orion Satellite, French Court of Cassation, First Civil Chamber, 6 March 2007, case No. 04-17.127).

Egypt Small Flag Egypt

It is a standard practice that arbitral awards include an award of interest insofar as claimed by the parties, either pre- or post-award interest, such that the arbitral tribunal has the ultimate power to decide on issues of compensation and interest. In this regard, the EAL does not limit the arbitral tribunal’s power as to the award of interest. However, a legal cap of 7% interest rate exists and is characterized as a public policy rule by Egyptian courts. (Court of Cassation, challenge no. 3778 of JY 64, hearing session dated 17 February 2004)

However, certain exceptions to the cap on interest rate exists, amongst which is the award of interest in banking transactions which can and do exceed the 7% cap. Similarly, interest may be payable at the rate set by the Central Bank of Egypt (‘CBE’) which in fact may exceed 7% at the CBE’s annual decision, in relation to (i) commercial loans; and (ii) amounts/expenses pertinent to the trader’s trade (Article 50 of the Egyptian Commercial Code).

Furthermore, it is worth noting that compounding interest is generally perceived to be contrary to public policy, unless a trade usage on compounding exists in the pertinent transaction.

Mexico Small Flag Mexico

The arbitrators can award interests only if the parties requested it during the proceedings and according to the rate established in such request, but if the interest’s rates were not specified, the interest’s rates stated in the law applies. For this matter, the Commercial Code, pursuant to article 362, states an annual legal rate of 6%.

Nigeria Small Flag Nigeria

The ACA does not limit the power of the arbitrator to order interest. Interest can be awarded based on the parties’ agreements in this regard, at a rate agreed by the parties or proved before the arbitral tribunal. The arbitrator would, however, be duty-bound to award interest based on evidence presented to the tribunal and upon such legal indices as may be fair and just in the circumstances. In practice, interest is usually guided by the Nigeria Inter Bank Official Rate (NIBOR), plus any reasonable amount depending on the peculiarities of the case.

Norway Small Flag Norway

The tribunal may award interest in accordance with the law applicable to the dispute. The penalty interest rate pursuant to Norwegian law per 1 July 2019 is 9.25% a year, and is subject to adjustment twice a year. Such penalty interest will apply for the principal claim when the claim is due (damages claims are due 30 days after notice requiring payment has been given) and for the costs incurred when the time limit for paying the award has expired.

Philippines Small Flag Philippines

Under Philippine Law, interests that may be awarded based on a money claim is only interest stipulated upon in writing by the parties under the contract (Art. 1956, Civil Code of the Philippines). A legal interest of 6% is likewise due on an award of money until satisfaction of such award, in the absence of written stipulation. (Bangko Sentral ng Pilipinas Circular No. 799, series of 2013)

Saudi Arabia Small Flag Saudi Arabia

Payment of interest is not allowed in KSA as it is contrary to the principles of Islamic law.

Czech Republic Small Flag Czech Republic

Interest may be included on the principle claim.

Chile Small Flag Chile

The ICA Act does not address this matter. Thus, it will be governed by the applicable substantive law or by parties’ agreement or by the applicable arbitration rules.

Switzerland Small Flag Switzerland

The payment of interest on principal claims and costs is governed by the applicable substantive law to the matter in dispute (art. 187 para 1 PILA). If Swiss law is the applicable substantive law to the matter, pre- and post-award interest can be included on both, the principal claim and the costs incurred.

Greece Small Flag Greece

This question is governed by the substantive law applicable to the merits of the dispute. Under Greek substantive law all questions posed are to be answered in the affirmative as regards default interest.

Controversy exists as to litigation interest i.e. interest accrued only by virtue of initiation of litigation. According to the prevailing view in case law, a Request for arbitration does not trigger litigation interest since the Request for Arbitration is merely notified and not stricto sensu “served upon” the Respondent (service of process is a prerequisite for litigation interest under Greek law). In legal literature the opposite view prevails on the assumptions that this is merely a technicality and that arbitration proceedings constitute litigation not to be distinguished by State Court proceedings in relation to litigation interest.

Turkey Small Flag Turkey

The arbitral tribunal may include interest onto the principal claim and costs incurred upon request of the parties and of course if and to the extent that the respective substantive law provides for entitlement for interests.

Updated: November 6, 2019