No. VII.6 - Duty to pay interest

(a) If the parties have not agreed otherwise, the debtor, who does not pay a sum of money when it falls due has to pay to the creditor interest on that sum from the time when payment was due.

(b) The rate of interest is to be determined on the basis of the average bank short-term lending rate to commercial borrowers prevailing for the currency of payment at the place of payment. The average bank long-term lending rate to commercial borrowers may be applied in cases in which a significant amount of time has elapsed from the date of the breach or maturity date of the debt to the date of the award.

(c) If the creditor's actual costs of borrowing are higher, he may recover the costs which exceed the rate of interest determined pursuant to subsection (b) as damages pursuant to Principle VII.1 and Principle VII.2, provided that he has exercised reasonable efforts in securing competitively priced financing.

1 A claim for interest on a sum of money can be qualified either as a damage claim, because the creditor has to borrow the money he does not receive from his debtor elsewhere and has to pay interest for this money, which constitutes his damage. Alternatively, a claim for interest can be characterized as a claim for restitution because the debtor, while withholding the money and investing it, is unjustifiably enriched because it would have been the right of the creditor to invest the sum owed to him or to use it for other purposes. From a functional perspective, the first approach is to be preferred because in business life, there is a general presumption that businesses work with bank credit for money they do not have or that is due to them but that they have not yet received. With this credit-oriented perspective derived from commercial reality, the view that the damage calculation for interest claims should rather be based on lost investment opportunities of the creditor (treasury bill rates or similar reference rates) is rejected.

2 Consequently, interest for sums in arrears are regularly awarded by international arbitral tribunals to compensate for the damage resulting from the fact that the creditor is deprived for a certain period of time of the use of and disposition over the sums to which he is entitled. Based on what has been stated above in para. 1, the damages must fully compensate the creditor for is actual costs of replacing the sum owed to him.

3 The interest rate must be reasonable and must be fixed taking into account all relevant circumstances, in particular all relevant contractual stipulations, the nature of the facts which have caused the damage, the interest rates in force on the markets for the relevant currency, the inflation rate of that currency and the time that has elapsed between the breach of contract leading to the damage claim or the maturity date of a claim not honored by the debtor and the time of the award. Given that the interest rate to be paid for a loan depends to a large extent on the term of the loan and increases with the term of the loan, it could be punitive to the creditor to assume that he would have loaned the substitute funds on a short term basis if the time until the award is rendered is significant. For these reasons and depending on the time that has elapsed between the moment of breach or maturity date of the debt and the time of the award, the reasonable rate would be the average short- or long-term bank lending rate to commercial borrowers for the currency of payment at the place of payment. This means that, in order to determine the proper interest rate, a tribunal would have to determine how much time has elapsed between the moment of breach or the maturity date and the date of the award and then assess what the longest-term loan in that period would have been.

4 The creditor may of course always prove that his costs for borrowing substitute funds were higher than the costs calculated pursuant to Subsection b) of the Principle. The creditor may, however, not shift the increased economic burden arising out of the fact that he did not pursue a reasonable search for competitive interest rates to his debtor. That would mean a violation of his duty to mitigate damages pursuant to Principle VII.4.

5 In light of the significance of the duty to pay interest under this Principle, the parties' agreement not to allow for a claim for interest must be clear and unequivocal.

Please cite as: "Commentary to Trans-Lex Principle ,"


Arbitral Awards
Ad Hoc-Award of July 23, 1981, YCA 1983, at 89, 94 et seq.
Ad Hoc-Award of October 27, 1883, Owners of M/S Parthenia (Mssrs. Houlder Bros and Co.) v. The Executors of the Late Ralph Firbank
Alabama Claims Arbitration 1872, in John Bassett Moore (ed.), History and Digest of the International Arbitrations to which the United States has been a Party, 1898
Banque Arabe et Internationale D'Investissement (BAII) et al. v. The Inter-Arab Investment Guarantee Corporation (IAIGC), 11 Mealey's Int'l Arb. Rep., April 1996, at 1 et seq.
CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8, at:, at p. 7 et seq.
CRCICA Case No. 310/2002 (ad hoc), in: Alam-Eldin, Mophi-Eldin Ismail, Contruction Arbitral Awards rendered under the Auspices of CRCICA (2010), at 5 et seq.
France v. Venezuela: Award of the President of the Swiss Confederation in the Case of Fabiani (30th Dec. 1896), in: Moore, John Bassett, History and Digest of the International Arbitrations to which the United States has been a Party, Washington 1898, Vol. V, at p. 4878
ICC Award No. 1930, YCA 2001, at 181 et seq.
ICC Award No. 3226, Clunet 1980, at 959 et seq.
ICC Award No. 5835, 10 ICC Bull. No. 2, 1999, at 33 et seq.
ICC Award No. 6219, Clunet 1990, at 1047 et seq.
ICC Award No. 6527 of 1991, YCA 1993, at 44 et seq.
ICC Award No. 6653, Clunet 1993, at 1040 et seq.
ICC Award No. 6962 of 1992, YCA 1994, at 184 et seq.
ICC Award No. 7197, Clunet 1993, at 1028 et seq.
ICC Award No. 7331, Clunet 1995, at 1001 et seq.
ICC Award No. 7575, Clunet 2010, at 1378 et seq.
ICC Award No. 8128, Clunet 1996, at 1024 et seq.
ICC Award No. 8769, 10 ICC Bull. No. 2, 1999, at 75 et seq.
ICC Award No. 8874, ICC Bull. 10/No. 2 (1999), at 82 et seq.
ICC Award No. 8908, ICC Bull. 10/No. 2 (1999), at 83 et seq.
ICC Award No. 9333, 10 ICC Bull. No. 2, 1999, at 102 et seq.
ICC Final Award No. 11849, YCA 2006, at 148 et seq.
ICSID Award, Asian Agricultural Products Ltd. v. The Republic of Sri Lanka, YCA 1991, at 106 et seq.
ICSID Award, Maritime International Nominees Establishment (MINE) v. The Republic of Guinea, YCA 1989, at 82 et seq.
ICSID Award, Southern Pacific Properties (Middle East) Ltd. v. Arab Republic of Egypt, YCA 1994, at 51 et seq. (also published in: ICSID Rev.-FILJ 1993, at 328 et seq.; ICSID Rep. 1995, at 189 et seq.; ILM 1993, at 933 et seq.; Clunet 1994, at 121 et seq.)
Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft in Österreich, SCH-4318 of June 15, 1994, RIW 1995, at 590 et seq.
Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft in Österreich, SCH-4366 of June 15, 1994, RIW 1995, at 590 et seq.
Iran-US Claims Tribunal, McCollough & Company, Inc. v. Ministry Of Post, Telegraph and Telephone, 11 IRAN-U.S. C.T.R., at 3 et seq.
Iran-US Claims Tribunal, Starrett Housing Corp. v. Iran, 16 IRAN-U.S. C.T.R., at 112 et seq.
Iran-US Claims Tribunal, Sylvania Technical Systems, Inc. v. Iran, 8 IRAN-U.S. C.T.R., at 298 et seq.
Norway v. United States of America (Norwegian Shipowner‘s Claims), Permanent Court of Arbitration, available at .
Permanent Court of Arbitration, Case No. 95, of Januray 11, 1912 concerning Russian-Turkish War Claims, Digest of the Decisions of the Permanent Court of Arbitration
Permanent Court of Arbitration, Norway v. United States of America (Norwegian shipowner‘s claims), Permanent court of arbitration,
SCC Award of March 29, 2005, Petrobart Limited v. The Kyrgyz Republic, Arbitration No. 126/2003
Sir Alexander Cockburn's dissenting opinion in the Alabama Claims Arbitration of September 14th, 1872, in: Papers Relating to the Treaty of Washington (1872), at 230 et seq.
Arbitration Rules
London Court of International Arbitration (LCIA) Rules
Court Decisions
LG Hamburg, IPRax 1991, at 400 et seq.
Ali, Osama Mohamed, Making sense of Islamic banking, IFLR, June 1992, at 30 et seq.
Arnaldez, Jean-Jacques, note to ICC Award No. 6653, Clunet 1993, at 1047 et seq.
Asam, Herbert, UN-Kaufrechtsübereinkommen im deutsch-italienischen Rechtsverkehr, RIW 1989, at 942 et seq.
Berger, Klaus Peter, Der Zinsanspruch im internationalen Wirtschaftsrecht, 61 RabelsZ 1997, at 313 et seq.
Berger, Klaus Peter, International Economic Arbitration, Deventer, Boston 1993
Bianca, C. Massimo/ Bonell, Michael Joachim, Commentary On The International Sales Law, Art. 7, Milan 1987
Bishop, R. Doak, International Arbitration of Petroleum Disputes: The Development of a Lex Petrolea, YCA 1998, at 1131 et seq.
Cerina, Paolo, Interest as Damages in International Commercial Arbitration, Am.Rev.Int'l Arb. 1993, at 255 et seq.
Dasser, Felix, Internationale Schiedsgerichte und Lex Mercatoria, Zürich 1989
Domingo, Ortega, Rodriguez-Antolin, Zambrana, Principios de Derecho Global, Navarra, 2006
Drobnig, Ulrich, General Principles of European Contract Law, in: Volken/ Sarcevic (eds.), International Sale of Goods - Dubrovnik Lectures, New York, London, Rome 1986, at 305 et seq.
Ferrari, Franco, Das Verhältnis zwischen den Unidroit-Grundsätzen und den allgemeinen Grundsätzen internationaler Einheitsprivatrechtskonventionen, JZ 1998, at 9 et seq.
Ferrari, Franco, The CISG's Interpretative Goals, Its Interpretative Method and Its General Principles in Case Law (Part II), IHR 5/2013, at 181 et seq.
Flessner, Axel, Geldersatz bei Zahlungsverzug- Eine Skizze zum europäischen Vertragsrecht, in: J.-F. Gerkens, H. Peter, P. Trenk- Hinterberger, R. Vigneron (Hrsg.), Mélanges Fritz Sturm, Éditions Juridiques de l‘Université de Liége, 1999
Fouchard Gaillard Goldman on International Commercial Arbitration (edited by Emmanuel Gaillard and John Savage) The Hague 1999
Fouchard, Philippe, L'Arbitrage Commercial International, Paris 1965
Gotanda, John Y., Awarding Interest in International Arbitration, 90 AJIL 1996, at 40 et seq.
Gotanda, John Yukio, Damages in Private International Law, 326 (2007) Recueil des cours 83
Gotanda, John Yukio, Supplemental Damages in Private International Law, Kluwer Law International, The Hague 1998
Gotanda, John Yukio, Supplemental damages in private international law: the awarding of interest, attorneys' fees and costs, punitive damages and damages in foreign currency examined in the comparative and international context, The Hague / Boston 1998
Guggenheim, Paul, Lehrbuch des Völkerrechts, Basel 1948
Hascher, Dominique, note to ICC Award No. 7197, Clunet 1993, at 1037 et seq.
Hascher, Dominique, note to ICC Award No. 7331, Clunet 1995, at 1006 et seq.
Hascher, Dominique, note to ICC Award No. 8128, Clunet 1996, at 1028 et seq.
Heuzé, Vincent, La Vente Internationale de Marchandises, Paris 1992
Hobe, Stephan, Enteignung zu Zwecken des Umweltschutzes, Iprax 02, 249
Honnold, John, Uniform Law for International Sales, Deventer, Antwerp, Boston, Frankfurt a.M. 1987
Horn, Norbert, Zinsforderung und Zinsverbot im Kanonischen-Islamischen und Deutschen Recht - Eine rechtsvergleichende Problemskizze, in: Festschrift Lange, Stuttgart 1991, at 769 et seq.
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Karrer, Pierre, Transnational Law of Interest in International Arbitration, in: Gaillard (ed.), Transnational Rules in International Commercial Arbitration (ICC Publ Nr. 480,4), Paris 1993, at 223 et seq.
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Lauterpacht, Hersch, Private Law Sources and Analogies of International Law, New York, Toronto 1927
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Magnus, Ulrich, Die allgemeinen Grundsätze im UN-Kaufrecht, 59 RabelsZ 1995, at 469 et seq.
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Neumayer, Karl H./Ming, Catherine, Convention de Vienne sur les Contrats de Vente Internationale de Marchandises, Commentaire, Lausanne 1993
Ortscheidt, Jérôme, La réparation du dommage dans l'arbitrage commercial international, Paris 2001.
Reinhart, Gert, Fälligkeitszinsen und UN-Kaufrecht, 11 IPRax 1991, at 376 et seq.
Ripert, Georges, Les Règles du Droit Civil Applicables aux Rapports Internationaux (Contribution à l'Etude des Principes Généraux du Droit Visés au Statut de la Cour Permanente de Justice Internationale), 44 Rec.Cours 1933-II, at 569 et seq.
Schönle, Herbert, Intérêts Moratoires, Intérêts Compensatoires et Dommages-Intérêts de Retard en Arbitrage International, in: Festschrift Pierre Lalive, Basel, Frankfurt a.M. 1993, at 649 et seq.
Schlechtriem, Peter (ed.), English Commentary on the UN Convention on the International Sale of Goods (CISG), Comment on Art. 78 by Hans Hermann Eberstein and Klaus Bacher, Oxford 1998
Schlechtriem, Peter, Einheitliches Kaufrecht - wissenschaftliches Modell oder praxisnahe Regelung, Heidelberg, Karlsruhe 1978
Seckelmann, Robert, Zinsrecht, Baden-Baden 1992
Secomb, A Uniform, Three-Step Approach to Interest Rates in International Arbitration, in: Kröll et al. (eds.), International Arbitration and International Commercial Law: Synergy, Convergence and Evolution - Liber Amicorum Eric Bergsten, pp. 431 et seq.
Smit, Hans, Substance and Procedure in International Arbitration: The Development of a New Legal Order, 65 Tul.L.Rev. 1991, at 1309 et seq.
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van Houtte, Hans, Les Principes UNIDROIT et lArbitrage Commercial International, in: ICC (ed.), The UNIDROIT Principles for International Commercial Contracts - A New Lex Mercatoria?, Paris 1995, at 181 et seq.
Wöss, Rivera, Spiller, Dellepiane, Damages in International Arbitration Under Complex Long-Term Contracts, Oxford 2014
Wühler, Norbert, Application of General Principles of Law, in van den Berg (ed.), Planning efficient Arbitration Proceedings - The Law Applicable in International Arbitration, p. 553 et seq.
Wetter, J.Gillis, Interest as an Element of Damages in the Arbitral Process, 5 IFLR, Dec. 1986, at 20 et seq.
Whose Arbitration is it anyway: The parties or the Arbitration Tribunal - an interesting question?, in: Newman, Lawrence W. / Hill, Richard D. (ed.), The Leading Arbitrators
International Legislation
Art. 13 Energy Charter Treaty
United Nations Convention on Contracts for the International Sale of Goods (CISG)
Message of the Swiss Bundesrat concerning the Vienna Sales Convention, of January 11, 1989, Bbl. 1989, No. 235.3
Report and Recommendations Made by the Panel of the Commissioners Concerning the First Instalment of Claims for Departure From Iraq or Kuwait (Category "A" Claims), S/AC.26/1994/2, 21 October 1994
Miscellaneous Legislation
United Nations, Responsibility of States for Internationally Wrongful Acts, 2001.
Model Laws
A Contract Code: Drawn up on Behalf of the English Law Commission
OHADA Uniform Act Relating to General Commercial Law (Translation)
Uniform Law on the International Sale of Goods
Model Terms
FIDIC 1999 Conditions of Contract for Construction (Red, Yellow, Silver)
Orgalime General Conditions for the Supply of Mechanical, Electrical and Electronic Products; Brussels, August 2000
National Legislation
Contract Law of the People's Republic of China
Ethiopian Civil Code
Russian Civil Code
Scottish Arbitration Bill 2009
Principles / Restatements
Principles of European Contract Law - PECL
The Most Recent Legal Principles Adopted by the Arbitral Tribunals under the Auspices of the Cairo Centre, CRCICA-Newsletter, Jan. 1997, page 2 et seq.
UNIDROIT Principles of International Commercial Contracts
Contract Clauses
1. Contractual Clause Foreseeing Payment of Interest following an Event of Default
Employment Contract

In the event a default is not cured within the grace period, the Administrator may direct the Trustee to report the outstanding principal balance of the loan and accrued interest thereon as a taxable distribution to the Participant.
Sales & Purchase Contract
Late Payment
If either Party owing an amount to the other Party fails to pay in accordance with this Contract, that Party shall pay interest on any overdue amount at a rate equal to the lesser of: (i) the posted prime rate in The Wall Street Journal as listed under "Money Rates", plus two percent (2%), or (ii) the maximum rate allowed by law, from the due date until such principal amount and interest thereon are paid.
Claims, Pre-Estimated Damages
In the case of any delay in payment hereunder respectively, the Buyer or the Seller, shall pay to the other Party interest for each day of delay at LIBOR for 1 month deposits in USD plus 1% (one per cent), calculated on the basis of 360 day-year.
Payment of the Purchase Price
Without prejudice to any other contractual or statutory rights and remedies of the sellers arising from a default on the part of the Purchaser, if the Purchase Price or part of the Purchase Price is not credited to the accounts (...) interest at a rate of 17,5% (Default Interest) shall become due and payable by the Purchaser on any outstanding amounts of the Purchase Price (...) whereby such Default Interest shall in each case be calculated daily on the basis of a year of 360 days and the actual number of days elapsed.
Invoicing and Settlement of Costs
(...) each Party agrees to pay all of the Service Costs on or before {X} days after the date on which an invoice for Service Costs is delivered to such Party by check or wire transfer of immediately available funds; provided that the Parties may agree to a net amount owed by one Party to the other. If a Party fails to pay any monthly payment on or before the Payment Date, such Party shall be obligated to pay, in addition to the amount due pursuant to such invoice, interest on such amount at the prime rate published in The Wall Street Journal (as of the applicable Payment Date) plus {X} percent per annum, compounded monthly from the relevant Payment Date through the date of payment (...)
Services Contract
Validity Period and Breach of Agreement
Party B should timely make bottom-line payments to Party A for the exclusive advertisement agency fee. In the case of a late payment, for the delay per day, Party B should pay a late fee at 0.1% of the amount of the late monthly payment.
Accounts Receivable Agreement
Default Rate
If any Obligation is not paid when due, the amount of such unpaid Obligation bears interest at the Applicable Rate plus five percent until the earlier of (a) payment in good funds or (b) entry of a final judgment when the principal amount of any money judgment will accrue interest at the highest rate allowed by law.
Loan Contract
Default Rate; Usury
During any period in which an Event of Default has occurred and is continuing, Company shall pay interest on the unpaid principal balance hereof at a rate per annum equal to the rate otherwise applicable hereunder plus two percent (2%). If any interest is paid on this Bridge Note is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Bridge Note.
Interest after Default
Upon the occurrence of any Event of Default, including, but not limited to, (i) any material adverse change in the business assets, affairs, prospects or financial condition of Borrower or any guarantor, (ii) failing to provide financial statements, copies of Federal tax returns and other information relating to the financial condition, properties and affairs of the Borrower, any guarantor or grantor, as provided for in this Note and/or any Related Document, or (iii) failure to pay upon final maturity, Lender may, at Lender's option and if permitted by applicable law, a) add any unpaid accrued interest to principal and such sum will bear interest therefrom until paid at the rate provided in this Note, including any increased rate, and/or b), increase the interest rate on this Note by X percentage points (the "Default Rate Margin"). The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied had there been no Event of Default. However, in no event will the interest rate exceed the maximum interest rate allowed under applicable law.
2. Interest Due Following Late Payment
Employment Contract
Interest on Late Payment
In addition to its other liabilities under this deed the Surety will pay to the Landlord on demand interest at the rate of 4% above the base rate from time to time of Lloyds TSB Bank Plc compounded with quarterly rests (before and after judgment) on any amount payable by the Surety pursuant to this deed for the period from the date when the payment became due until the date on which it is paid.
Sales & Purchase Contract
Late Payment
If either Party owing an amount to the other Party fails to pay in accordance with this Contract, that Party shall pay interest on any overdue amount at a rate equal to the lesser of: (i) the posted prime rate in The Wall Street Journal as listed under "Money Rates", plus two percent (2%), or (ii) the maximum rate allowed by law, from the due date until such principal amount and interest thereon are paid.
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