Interest in International Arbitration

By Matthew Secomb

Oxford University Press, 2019

320 pages

ISBN: 9780198779513

Many international arbitration practitioners are passionate about their profession. The disputes can present intriguing factual and legal scenarios arising from unimaginable multinational transactions, not to mention the fascinating arbitral procedural dilemmas. Even dealing with arbitral cost claims can be interesting given the wealth of new guidelines on the topic that have emerged in recent years.

After all the excitement of procedural dilemmas and captivating factual scenarios, and after travelling to glamorous hearing destinations, the arbitral tribunal and the parties' counsel have to deal with the question of interest, which is not always viewed with the same enthusiasm and passion.

But interest is very important. The questions of what rate of interest, what kind of interest and from what start date are present in virtually every international arbitration and in every award that involves some kind of monetary compensation. No experienced practitioner could contest the statement in the second sentence of the author’s acknowledgements that ‘interest is of great practical importance in the field of international arbitration’.

Despite its practical significance, interest is very rarely the subject of discussion and debate in international arbitration. To the best of my recollection, I have never seen a conference entirely dedicated to interest and have only seen the topic appear on a conference program on a handful of occasions. Academic studies of interest in international arbitration are similarly rare.

This 270-page work, based on the research from the author’s doctoral thesis on the same topic, is therefore a most welcome addition to the many books published in the field of international arbitration.

The book is logically structured into four main chapters. The first is the ‘Background’ chapter, which includes a section on the history of interest with a subsection explaining why the history of interest maintains practical relevance today. The ‘Background’ chapter also helpfully discusses the economics of interest, applicable law and interest, and interest under Shari'a law.

The next three chapters (‘The Rate of Interest’, ‘Calculation Method’, and ‘Period’) present the core of the author’s research and ideas as well as clear and complete practical material that will serve arbitration practitioners for many years to come. Those three chapters follow an identical, user-friendly structure. Each chapter (i) describes the traditional approaches towards its subject, (ii) critiques those traditional approaches, (iii) suggests a uniform approach, and (iv) finally caveats the uniform approach by setting out its limitations. The subsections within each of those four sections also follow an identical structure, which makes it very easy for a reader quickly and logically to follow through an argument, make a ruling on interest and/or simply to find, effortlessly, what he or she needs to know for a speech or research paper. The user-friendliness of the structure is further enhanced by numerous introductory sentences that remind the reader where he or she is in terms of the overall structure of the chapter or section.

These three main chapters are each the product of exhaustive research and include numerous examples of published arbitral awards, court decisions, international reports, guidelines, articles, books, international conventions, and provisions of domestic laws. Citations from cases and awards are used to illustrate almost every key point, and are then commented upon by reference to their logic and soundness.

Not surprisingly, the largest of these three substantive chapters is that dealing with the rate of interest. It spans 90 pages, one third of the entire book. Subsection 3 contains the author's proposed three-step solution to the determination of interest rates as follows.

1. Any party agreement on the interest rate should be respected.
2. In the absence of agreement, the party claiming interest should prove the damage actually caused to it by the loss of the use of the money via any appropriate means, and the interest awarded should reflect that loss.
3. In the absence of such proof of actual damage, the party entitled to interest should be awarded a ‘commonly used commercial rate, augmented appropriately for the relevant currency at the place of payment’.¹

Much of the following discussion focuses on that last step which is described as the ‘most important question because, in practice, in most cases, the parties' agreement does not determine the interest rate and the claimant does not try to prove its actual loss‘.² The author is absolutely correct in that statement, although it might be hoped that this book will encourage parties to think through their interest claims more thoroughly in the future and to give more consideration to properly proving damages arising from the loss of the use of money.

Mr Secomb obviously needed to draw a line somewhere, so the book does leave unanswered certain questions that might result from decisions on interest. As he points out in several places, and as is consistent with my experience, part of the difficulty in deciding interest claims can be that parties often give scant attention to the issue in their submissions, even after prompting from the tribunal. The question, then, is what the tribunal can do if it does not consider either side to have articulated a sensible approach to determining a critical issue such as the rate of interest. The interesting uniform approaches are designed to accommodate that situation to some extent by providing a fallback for the arbitral tribunal. The fallback is legally justified where the parties' agreement or the applicable law clothe the arbitral tribunal with sufficient discretion in relation to the awarding of interest. The book does not, however, address the extent of any potential due process/ultra petita concerns that might arise from an arbitral tribunal granting interest on one of the author's default bases where that basis has not been debated between the parties. Nor does it address in what circumstances it would be appropriate for an arbitral tribunal to suggest to the parties the adoption of one of his default approaches to interest. A comparative law answer to those peripheral questions was understandably outside the scope of the author’s work, but would be equally welcome.

The book includes a list of cases, a list of statutes, a table of abbreviations and an index. It is unfortunate that the publisher's format does not appear to include a reference list or bibliography, which the author’s thesis presumably does.

Despite the plethora of arbitration texts already on our shelves, this particular addition is most welcome because it is refreshingly unique and because interest is so frequently an important - yet insufficiently considered - issue in international arbitration practice. The book will no doubt be referred to in arbitral awards and parties' submissions for many years to come. Any lawyer acting for a party claiming money would be very well advised to consult Matthew Secomb's tips on claiming compensatory interest, which will often result in significantly higher and better articulated interest claims. Similarly, arbitrators no longer have an excuse for tacking on a poorly reasoned interest decision the day before they complete their awards.

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