Present Day Valuation in International Arbitration: A Five Principle-Based Framework for Awarding Interest

13 Pages Posted: 22 Apr 2008

Date Written: April 2, 2008

Abstract

In international arbitration, there is often a significant delay between the time when the injury occurs and the decision is rendered by the arbitral tribunal. Consequently, arbitrators and parties are often confronted by the challenging question of how to deal with the passage of time and propose with confidence a method to adjust the award to present day value.

Despite the fact that an overwhelming body of international law jurisprudence supports the general proposition that the award should include an interest component, there is still considerable uncertainty concerning the calculation of interest. Consequently, the use of interest in international arbitration is often dependent on the circumstances at hand and tribunals having a wide discretion in respect of awarding interest.

In this article, we argue that the question of interest can be as important as the valuation of the loss itself in international arbitration. Indeed, awards of interest may, in some cases, exceed the principal owed because of extensive delays between the occurrence of the underlying injury and the resulting award. We strongly advocate that an international standard should be developed for awarding interest. Such a standard is required to ensure that a party is made whole after being deprived of the opportunity to earn a return on the use of its money. To help arbitrators and parties decide what interest can be reasonably and consistently applied, we must introduce a conceptual framework around a set of five principles.

Keywords: Interest, damage

JEL Classification: F30

Suggested Citation

Senechal, Thierry J., Present Day Valuation in International Arbitration: A Five Principle-Based Framework for Awarding Interest (April 2, 2008). Available at SSRN: https://ssrn.com/abstract=1122584 or http://dx.doi.org/10.2139/ssrn.1122584

Thierry J. Senechal (Contact Author)

International Chamber of Commerce ( email )

Financial Services & Insurance Commission
38 Cours Albert 1er
Paris, France 75008
France

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