Can pre- and post-award interest be included on the principal claim and costs incurred?
International Arbitration (2nd Edition)
Section 33, AA regulates the power of arbitral tribunals to award interest. Following the 2018 amendments to section 33, arbitrators can now award both pre- and post-award interest on the whole or any part of the principal claim and costs incurred. To avail themselves of this arbitral power, parties must ensure that any interest claimed must be sufficiently pleaded.
The Rules of International Commercial Arbitration of the Santiago Arbitration and Mediation Center contain only one provision regarding interests, according to which “the arbitration award may order the payment of simple or compound interest, including interest prior or subsequent to the award”. Parties shall make such payment after the parties have fulfilled the arbitral award (Article 33(7)).
Parties are also entitled under Chilean law, to agree on an interest rate in the contract binding them. Nevertheless, such interest cannot exceed the 50% of the legal interest rate. If parties do not specify the interest rate applicable to their agreement, current interest rate shall apply.
Yes, pre- and post-award interest can be included on the principal claim.
Yes they can.
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.
Yes. The tribunal may grant interest to the extent that the applicable substantive law allows a claim for interest. For example, with respect to principal claims, German law stipulates interest rates from the date of commencement of the arbitration (or from the date of the breach of contract or default).
No distinction is drawn between the award of interest in the pre-award period and in the post-award period. Instead, interest is payable up to the date of payment as a matter of course. There is no discretion to exercise for state courts or tribunals.
The issue of pre- and post-award interest is regulated by rules of Ukrainian contract law as the Arbitration Act is silent on this issue. In general, 3 per cent interest rate is calculated on the amount of indebtedness annually unless specific rules apply or the parties agreed otherwise. As regards post-award interest, theoretically, the arbitral tribunal may award 3 per cent annual interest on the amount awarded until its full payment. However, in practice, this issue turned out to be problematic due to the absence of direct provision allowing the court or the bailiff to calculate the exact amount of the post-award interest. For instance, in Nibulon SA v Company Rise case this issue has become the central one. This case is now pending before the High Civil and Criminal Court of Ukraine and its outcome, not being obligatory, may nevertheless outline the practical possibility of recovering post-award interest in Ukraine. Furthermore, the Draft Law fills the above mentioned gap explicitly allowing the post-award interest and establishing the right of the bailiff to calculate the exact amount due on the date of enforcement of the arbitral award.
The general practice in Panama is to claim interests and costs incurred in addition to the principal.
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 UAE Federal Law 18 of 1993 (also known as the UAE Commercial Transactions Law) 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.
Interest on the principal claim will be included on request of a party, both pre- and post-award interest. Interest may also be added to a party’s costs from the date of the award until payment is made.
Yes, pre- and post-award interest, may be included on the principal claim.
Under Spanish law the parties may have agreed to capitalize interest in order to accrue additional interest.
The general principle is that the applicable interest rate will be agreed between the parties. Failing agreement between the parties, the applicable interest rate will be the legal interest rate approved by the Spanish Government every year (3% per annum in 2017). In the event of commercial receivables, the interest rate of Act 3/2004 of 29 December 2004 may apply. This interest rate is equal to the interest rate applied by the CEB to its most recent financing transaction, plus 7%.
Costs are ordinarily not subject to interest.
The issue of interest on a principal of a claim is a matter of applicable substantive law. Under Serbian law, interest may be requested from the time a claim becomes due. Therefore, it is possible to claim both pre and post award interest.
When it comes to costs of proceedings, Serbian law does not contain any specific provisions on interest on costs, but as a general principle (which is widely applied in court proceedings), it is deemed that the claim on costs becomes due at the time the award becomes enforceable. Therefore, in the court proceedings any interest on costs could only be requested during the enforcement of the award. On the other hand, in case the arbitral tribunal order the payment of pre-award interest on costs this kind of award could be recognized and enforced in Serbia.
There is no specific provision on pre- and post-award interest under the ADR Act, Arbitration Law, and the Special ADR Rules. However, this may be subject to the agreement of the parties in the arbitration clause or submission agreement.
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.
The claim may include a petition for pre-award and post-award interest to compensate the claimant for damage from the date when the damage was caused up to the date of payment. The claim may also include a petition for the respondent to reimburse costs incurred in or derived from the arbitral proceedings.
The tribunal can award damages, pre-award and post-award interest. Compound interest may not be awarded. As part of the final award, the tribunal can also order specific performance.
Issues regarding pre-award interest arise in most cases where damages are awarded. Typically tribunals assess damages as of a date in the past, and interest is applied to this amount up to the date of the award. Whether pre-award interests are due, will depend on the agreement of the parties, or on the applicable law. The general rule is that interest follows the principal.
Tribunals often award post-award interest in addition to the amount specified in the award. Post-award interest is added until the award is actually paid. The starting point for post-award interest is normally 14 days after receipt of the award. Post-award interest is often applied at the same rate as late payments. This reflects the view that a higher interest rate will generally discourage late payment.
Pre-award interest can be included in the award (if it was included in the claim and up to the extent permitted by substantive law). Post-award interest is the statutory default interest if the amounts determined by the award are not paid by maturity. The matter of post-award interest is determined by enforcement regulations (an award is enforceable under the same conditions as a final court judgment).
Pre-award interest may be included in the award if the Tribunal deems it appropriate to do so, usually pursuant to relevant provisions of the contract on the basis of which the dispute arose. Unless otherwise provided in the arbitral award, an award issued on the basis of Cap.4 shall bear the same legal interest as the one relevant to judicial judgments, from the day of the issue of the award until final repayment. Currently the legal interest is at 3,5% per annum.
The question of whether interest should be applied on the principal claim and costs incurred is normally regarded as a substantive rather than a procedural question. Under French law, nothing precludes including interest on any monetary claim. Generally, in France, the interest rate is fixed annually by statute and should be respected unless the parties agree to apply a different rate.
Under French law, post-award interest may be obtained at the enforcement stage even where it has not been awarded by the arbitral tribunal (see Court of Cassation, First Civil Chamber, 30 June 2004, 2005 Rev. Arb. 645).
The arbitral tribunal can award interest and compound interest. Every year the Minister of Finance determines the applicable interest rate. Parties may agree on a different rate within the limit established by Italian usury legislation.
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.
Interest can, in principle, only be awarded upon request by a party.
The amount payable on the principal claim(s) depends on the applicable substantive law(s). In Austria, the default interest rate in general civil law is 4% per annum; in the case of reproachable default amongst entrepreneurs, it is 9.2% above a certain base rate (currently, negative).
As regards interest on cost, it is generally considered that interest can only start running as of the issuing of the award.
The FAA is silent on this issue, but U.S. courts have recognized the authority of the arbitral tribunal to award both pre- and post-award interest.
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.
According to the Interest and Linkage ruling Law, 5721-1961 ('the Interest Law'), a judicial authority may rule interest on the determined amount and on the legal costs and attorney's professional fee. As, pursuant to Section 1 of the Interest Law, the definition of 'judicial authority' also includes an 'arbitrator', an arbitrator may in fact also rule interest, not only until the award date but also thereafter – until the actual day of payment. Moreover, Israeli case law regarding ruling of interest by the court are also relevant to an arbitrator, namely, ruling of linkage differentials and interest is a matter of the court's discretion, but the reality is that only in unusual cases will the court refrain from exercising such discretion.
If the arbitrator did not rule interest, the parties or one of them may approach him asking to amend the arbitral award in this matter. If the arbitrator was not approached – the court may rule interest with respect of the period starting on the date of filing the application to ratify the award, but not with respect of the preceding period, since the absence of ruling of interest in the arbitral award is not one of the flaws that may be amended by the court while deliberating the application to ratify the award or set it aside. It is also noted that the head of the execution office is authorized to rule interest as of the date of payment stated in the award or as of the award date if no payment date was indicated therein, and not as of the date on which the award was approved by the court.
It is clarified that where there is agreement between the parties on the payment of interest, linkage differentials or other compensation resulting from a delay of payment, or where the law provides for payment of interest or other remedy as compensation for delay of payment, the arbitrator will not rule interest or linkage differentials in excess thereof.
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 to do so 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 to do so on any outstanding amount of any award. The award of interest can be made on any award as to costs (s.49(4)).
The parties are entitled to recover interest (pre and post-award interest) on the principal claim upon such request, but not also interest to the costs incurred.
Parties may agree on the interests. Under Turkish law, the interests will be added to the costs if there is no compromise between the parties.