Chartered Insitute of Arbitrators (CIArb) Pracitce Guidelines 13: Guidelines for Arbitrators on how to approach the making of awards on interest

4. General Principles [...] 4.2. The guidance given below is based on guidance given by the court on the correct approach to the making of awards of interest (under comparable legislation) in cases dealing with awards by the court in pending litigation. The main authorities are cited and extensively discussed in Kuwait Airways Corp v Kuwait Insurance Co SAK [2000] Lloyd’s Rep. IR 678. (1) An award of interest should be compensatory, not penal, in purpose. (2) The best approach is to attempt to assess the commercial rate of interest that someone in the position of the claimant would have had to pay to borrow the money which is to be awarded to him as a debt or damages. (3) The tribunal should not normally embark on an enquiry into the actual financing arrangements of particular claimants. It should however give effect to the probability that the better the ‘‘personal covenant’’ of the borrower the lower the rate is likely to be and vice versa. (4) It is normally irrelevant that the particular claimant was in a special personal position such that he could only borrow the money at a very high rate or was able to borrow at specially favourable rates. (5) Accordingly the right approach is to assess, on a broad brush basis, the rate which a claimant having the general attributes of the actual claimant would have had to pay to borrow the money. (6) The assessment should be based on the rate of interest applicable to short-term unsecured loans, and not on any lower rate that might have been obtainable for a secured loan. It follows that, as a general rule, a successful claimant should not attempt to prove what loss he in fact suffered through non-payment of the sum which the arbitrator is minded to award him.