Interest for late payment / Receivability if the legal basis for the claim on interest differs in the Claimant's submission from what was set forth in the Terms of Reference: yes / Egyptian law, Articles 215, 221, 226 and 227 / Preaward interest not awarded/ Postaward interest claim: rejected for lack of payment due by Defendant as a net result of the award

'A. Introduction

The Claimant also seeks to be paid interest or other compensation for the late payment of sums awarded by this Arbitral Tribunal to be due from the Defendant to the Claimant.

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B. Arbitral Tribunal's Findings

i. Introduction to Arguments

The Claimant seeks to recover interest or to be otherwise compensated for damages incurred as "financial costs" over the sums the Arbitral Tribunal awards with respect to other claims. The Claimant argues that it is entitled to this form of "damages" under Article 221 of the Egyptian Code. Alternatively, the Claimant argues that all or part of the amount that this Arbitral Tribunal may award comprises either (1) liquidated amounts under Egyptian Civil Code Article 226 or (2) sums liquidated prior to an Arbitral Award that are found to be payable by the Defendant to the Claimant. The Claimant argued that interest should accrue under three alternative theories:

a. First, interest should accrue at 10 percent per annum under Contract Clause XXX;

b. Second, interest should accrue at 7 percent per annum under Egyptian Civil Code Article 227; or

c. Finally, interest should accrue at 5 percent per annum under Egyptian Civil Code Article 226.

As a preliminary defence, the Defendant disputes the receivability of the Claimant's Interest Claim asserting that it is an entirely new and different claim from that described in the Terms of Reference. The Defendant further challenges the Interest Claim on the merits, arguing that Article 221 of the Egyptian Civil Code is not applicable to the matters that the Claimant raises and that the only statutory or contractual basis for "financial damages" is either Article 226 or 227 of the Egyptian Civil Code.

ii. Receivability

The Defendant raises a procedural defence to the Interest Claim, asserting that it falls outside of the Terms of Reference.

The Terms of Reference set forth the issues relevant to this Interest Claim:

In case the Arbitral Tribunal awards any or all of the [amounts sought in Claims A through H], is the Claimant entitled to the interest referred to in paragraph XXX supra, on any or all of the amounts awarded, and if so, at which rate and from which date is said interest to be calculated ?

Paragraph XXX of the Terms of Reference refers to interest from [date] on the sums sought in Claims A through G, and from the respective due dates on the sums claimed in Claim H.

In its Submission on the Interest Claim, the Claimant states that it is not seeking "interest" but rather damages under Egyptian Civil Code Article 221 for compensation for late payments. The Defendant argues that the Claimant has thus dropped its claim under paragraphs 15 and 25 of the Terms of Reference and is advancing a new claim outside of the Terms of Reference.

The Arbitral Tribunal rejects the Defendant's arguments on this point. The Claimant has from the outset of this Arbitration contended that it was entitled to compensation for the time value of the principal sums it has sought under Claims A through H. Although this claim has at different times been labelled a claim for "interest", the Claimant's most recent formulation of it as "damages" under different Code articles does not alter its nature or essence. The reference to specific Code articles constitutes merely a new legal basis for the compensation the Claimant seeks, but not a different claim from that provided for in the Terms of Reference.

The Arbitral Tribunal finds that the Claimant may change the legal basis for its claim, provided the Defendant is not prejudiced thereby. The Defendant had a full opportunity to respond to the Claimant's alternative theories and has not otherwise shown any prejudice on this point. The Arbitral Tribunal therefore finds this Claim to be receivable as articulated in the Claimant's Submission.

iii. PreAward Interest

The Claimant bases its Interest Claim in the first instance on Article 221 of the Egyptian Civil Code. This Article provides:

The judge will fix the amount of damages, if it has not been fixed in the contract or by the law. The amount of damages includes losses suffered by the creditor and profits of which he has been deprived, provided that they are the normal result of the failure to perform the obligation or of delay in such performance. These losses shall be considered to be a normal result, if the creditor is not able to avoid them by making a reasonable effort. When, however, the obligation arises from contract, a debtor who has not been found guilty of fraud or gross negligence will not be held liable for damages greater than those which could have normally been foreseen at the time of entering into the contract.

The Arbitral Tribunal finds this article inapplicable to the facts of this matter. Article 221 deals with damages in the event a debtor fails to perform a contractual obligation. (See Article 215, the lead article in that code section entitled "Compensation in lieu of performance", which states: "when specific performance by the debtor is impossible, he will be condemned to pay damages for nonperformance of this obligation..."). In this case, the Claimant has failed to prove any nonperformance by the Defendant upon which the "compensation for late payment of sums" it seeks can be founded under Article 221.

The Claimant initially argued that the Engineer's failure to recognize the Claimant's entitlement to the amount granted in the Arbitral Tribunal's Partial Award of 24 December 1988 constituted a breach of Contract. This argument is, however, without merit. In this Arbitration, the Claimant has challenged a number of the Engineer's decisions not to certify sums requested by the Claimant. Although the Arbitral Tribunal has overturned some of the Engineer's judgments and awarded the Claimant additional sums under the Contract, this does not mean that the Defendant has failed to perform its Contract obligations to the Claimant. In Clause XXX, the Contract establishes a procedure under which the Engineer may certify sums payable to the Claimant. Until a sum is so certified, it is not due and payable from the Defendant. The Engineer's refusal to certify a sum is an exercise of his own independent judgement and cannot be attributed to the Defendant as a breach.

The Claimant has not otherwise proven any contractual nonperformance by the Defendant. Accordingly, the Claimant's reliance upon Article 221 does not support its case.

The Claimant also argues that it is entitled to interest at the rate of 5 percent per annum under Article 226 of the Egyptian Code. This Article provides:

When the object of an obligation is the payment of a sum of money of which the amount is known at the time when the claim is made, the debtor shall be bound, in case of delay in payment, to pay to the creditor, as damages for the delay, interest at the rate of four percent in civil matters and five percent in commercial matters. Such interest shall run from the date of the claim in Court, unless the contract or commercial usage fixes another date. This article shall apply, unless otherwise provided in law.

Article 226 applies to claims for sums of money the amount of which is known at the time the claim is made. Expert testimony in this case has confirmed that this refers to claims for liquidated amounts. The Claims in this case have not involved liquidated amounts and, indeed, have required a separate hearing for presentation of evidence as to quantum. Accordingly, the Arbitral Tribunal finds that Article 226 is not applicable in this case.

The Claimant argues alternatively that it is entitled to interest over periods preceding the Arbitral Tribunal's Final Award at the rate of 7 percent per annum under Article 227 of the Egyptian Code. The Article provides:

The parties may agree upon another rate of interest either in the event of delay in effecting payment or in any other case in which interest has been stipulated, provided that it does not exceed seven percent. If the parties agree to a rate exceeding seven percent, the rate will be reduced to seven percent and any surplus that has been paid shall be refunded. Any commission or other consideration of whatsoever nature stipulated by the creditor which, together with the agreed interest, exceeds the maximum limits of interest set out above, will be considered as disguised interest and will be subject to reduction, if it is not established that this commission or this consideration is in respect of a service actually rendered by the creditor or of a lawful consideration.

The Arbitral Tribunal finds that this Article is not relevant to the period for which the Claimant seeks to recover. In general, under the contract scheme embodied in the FIDIC Third Edition (as utilized here), the cost of financing the execution of the work is for the contractor's account. Specifically in relation to this Contract, Clause XXX of the PreAward Minutes expressly includes "financial costs" as one of the elements to be covered by the Contractor's 22 percent addition for offsite overheads.

This Contract is no different. A close scrutiny of the Contract reveals that the only potentially relevant Contract provision for interest in the event of delay is Subclause YYY. The 10 percent rate agreed upon in Subclause YYY, however, only applies to periods of "overdue" sums. The quantum amounts accepted by the Arbitral Tribunal under other Claims in this arbitration constitute the elements of an overall Final Award which itself is not due and payable until 30 days after the date of this Final Award. Therefore, the Arbitral Tribunal finds that Article 227 does not justify any award of interest over periods prior to this Final Award.

iv. PostAward Interest

Were it the case that the Claimant were to receive, as a net result of this Award, a payment from the Defendant, then the Claimant's claim with respect to postaward interest would indeed be relevant. As shall be seen in Section XXX, Decisions, infra, that is not the case. Thus, this respect of the Claimant's claim is dismissed.

C. Conclusion

For the foregoing reasons, the Arbitral Tribunal dismisses the Claimant's Interest Claim.'