Interest in Arbitration: Currency, Period and Calculation Method

An interest claim in arbitration should state the currency, principal amount, start and end of the interest period and the legal calculation method. A general request for “statutory interest” leaves material questions open and makes a clear award more difficult.

The applicable substantive law must be identified before the rate can be assessed. Article 27 of the Vienna Rules refers the tribunal to the law or rules of law agreed by the parties. If there is no choice of law, the tribunal applies the law or rules it considers appropriate. The interest issue therefore does not automatically follow from the seat of the arbitration.

This article addresses interest on the principal claim. It keeps interest separate from arbitration costs and set-off, explains the distinction between sections 1000 ABGB and 456 UGB under Austrian law and shows how the calculation can remain verifiable in the award.

Building an Interest Claim in Arbitration

A clear claim separates the principal from the interest. It states the principal amount, currency and period for which interest is sought. Each invoice or part payment needs its own allocation where several amounts are involved.

The rate needs a legal basis. It may arise from a contractual clause, statutory interest or both. The pleading should also say whether the rate is fixed for the entire period or follows a variable reference value.

The page on preparing arbitration proceedings helps organise the contract, chronology and evidence. The interest claim should be supported by a separate calculation sheet.

Determining Currency and Principal

Interest generally follows the claim on which it is calculated. If payment is sought in euros, the pleading should show the euro amount as the calculation base. For a foreign-currency claim, it must be decided whether the award should be in that currency or whether conversion at a specified date is sought.

Several currencies should not be combined in one calculation line. Each position needs its own principal, currency and maturity date. Exchange-rate issues can raise a separate dispute and should be identified as such.

In an international case the choice of law must also be secured. The topic page on international arbitration explains the cross-border setting. Currency alone does not determine the applicable law.

Proving the Start and End of Interest

Interest starts at the point defined by the contract or applicable law. Maturity, a reminder, a calendar date or another event establishing default may be decisive. The pleading should connect the date to the invoice, contract and proof of delivery or notice.

The end must be stated just as precisely. Interest is often claimed until payment or until a specified cut-off date. A part payment may end the interest period for the paid amount on a different date from the remaining balance.

A period with changing rates should be divided into separate periods. This shows which basis applies to which dates. The article on expedited VIAC arbitration illustrates why tight procedural planning requires the figures to be prepared early.

Distinguishing Sections 1000 ABGB and 456 UGB

Austrian law distinguishes general statutory interest from the special default-interest rule for business transactions. Section 1000 ABGB is the general statutory starting point where no different rule applies. Section 1333 ABGB addresses compensation for delay through statutory interest.

Section 456 UGB may apply to monetary claims between businesses arising from business transactions where payment is delayed. Its application depends on the parties, the transaction and maturity. A rate should therefore not be adopted without checking those conditions.

The pleading should set out the relevant facts and state the rate used for each period. A contractual interest clause also requires review to determine whether it replaces, supplements or limits the statutory claim.

Applicable Law under Article 27 of the Vienna Rules

Article 27 of the Vienna Rules requires the tribunal to decide the dispute under the law or rules agreed by the parties. An agreement on a national law generally refers to its substantive law. The interest issue therefore follows the legal system applicable to the monetary claim.

If there is no choice of law, the tribunal determines the law or rules it considers appropriate. The Austrian seat is an important procedural connection, but it does not by itself answer the substantive interest question. Contract, choice of law, mandatory rules and the claim must be reviewed together.

The arbitration clause review should include the choice-of-law clause and the payment provisions. The article on protection before constitution of the tribunal also shows why procedural timing and the substantive interest claim must be kept separate.

Calculation Method, Part Payments and Rounding

A verifiable calculation states whether simple interest is calculated on the outstanding principal. It identifies the rate, number of days or time convention and starting amount. Compound interest belongs in the claim only where there is a legal basis for it.

Part payments change the calculation base. The payment must be allocated to principal, interest and any costs under the applicable rule. Each change in the outstanding principal should be recorded with its date and amount.

Rounding should generally occur at the end of the relevant calculation period. Separate periods should retain their intermediate values so the tribunal can check the total. A clear table is often more useful than a single final figure.

Interest in the Award and Possible Correction

Article 36 of the Vienna Rules requires a written award with reasons unless the parties have validly agreed otherwise. A precise interest claim helps the tribunal state the principal, period and rate in the operative part and explain the basis in the reasons.

If a claimed interest item remains undecided, Article 39 paragraph 1.3 may permit an additional award for a claim made in the arbitration but not resolved. Calculation errors and similar errors may be corrected under the same Article. This does not replace a precise pleading or a review of the applicable time limits.

For enforcement, it helps to keep principal, interest and costs separate. The page on enforcing an arbitral award addresses enforcement as a separate step. The interest claim should already be stated so the awarded amount can be calculated.

Frequently Asked Questions about Interest in Arbitration

Does the seat of arbitration automatically determine the interest rate?

No. Article 27 of the Vienna Rules refers to the law or rules agreed by the parties or selected by the tribunal. An Austrian seat alone therefore does not decide the substantive interest issue.

What should an interest claim state?

It should state the principal, currency, start and end of the interest period, the rate or formula and the legal basis. Each position needs a clear allocation where there are part payments or several claims.

When can section 456 UGB be relevant?

Section 456 UGB may be relevant to monetary claims between businesses arising from business transactions where payment is delayed. The parties, transaction and maturity must be checked in the individual case.

Can an award convert a foreign-currency claim into euros?

That depends on the claim, applicable law and contractual basis. The pleading should state whether the foreign currency is sought or conversion at a specified date is requested.

What happens if the award contains a calculation error?

Article 39 of the Vienna Rules provides, among other things, for correction of calculation errors and an additional award for a claim made but not decided. The applicable deadline and the exact error must be reviewed.

Next step

Contract, arbitration clause, correspondence and deadlines should be collected. It can then be assessed whether negotiation, preservation or arbitration is central.