• Rate of interest

The dispute concerns the alleged breach by Defendant, an Indian company, of a marketing agreement entered into with Claimant, a German company. Claimant seeks damages plus interest for such breach. The sole arbitrator decided in a previous interim award that Swiss law would apply to the merits of the case, in accordance with the parties' contract.

'65. Claimant contends that the amounts to be paid as damages are subject to interest. The sole arbitrator considers that Defendant is at default at least as from 1 October 1991. A formal reminder in the sense of Art. 107 CO was not necessary. Actually the behaviour of Defendant indicates that such reminder would have been useless. Defendant was in no case prepared to make any delivery of [product] in the future (Art. 108 CO and ATF 122 III 71). All the facts described above clearly establish the decision made by [Defendant] not to perform the Marketing Agreement. Therefore the interests shall be paid as from 25 September 1991.

66. The question of interest has not been dealt with very thoroughly by the parties. Claimant contends that the rate of interest should be 10% per annum. The rate of interest is not mentioned in the Request for Arbitration but in the "Reply on the Merits and Answer to the Counterclaim". At page 2 Claimant indicates the following relief sought: "Defendant shall be ordered to pay Claimant the amount of . . . plus 10% interest as from September 24, 1991 . . ." In the submission itself there is no explanation or clarification concerning the rate of interest. Claimant's post-hearing brief indicates that "the rate is not contested by Defendant".

Defendant contended that the rate of interest to be added to its counterclaim is of 18% per annum. This rate is mentioned in the correspondence sent by [Defendant] to [Claimant] . . .

There is no written agreement concerning the rate of interest.

Actually the issue was simply not touched, not raised at any time by the parties during the hearing. The issue of interest is part of the proper law of the contract. Swiss law rules at Art. 73 CO "where the object of an obligation is the payment of interest, and no rate is fixed either by contract, by law or by custom, then the interest shall be paid at the rate of 5% per annum".

In the discussion concerning the counterclaim . . ., Claimant admits that an interest at a rate of 10% would be payable to Defendant and denies the admissibility of an interest of 18%.

The sole arbitrator considers that both parties agreed that the Swiss legal interest of 5% as set out by Art. 73 CO is not acceptable. This issue has not been mentioned in the Marketing Agreement, has not been discussed orally at the hearing. Nevertheless the sole arbitrator considers that there is a tacit agreement on the rate of 10% which will be applied to both the claim and the counterclaim.'