Interest as Damages

48 Pages Posted: 7 Apr 2008 Last revised: 24 Jul 2009

See all articles by Thierry J. Senechal

Thierry J. Senechal

International Chamber of Commerce

John Y. Gotanda

Villanova University School of Law

Date Written: July 18, 2009

Abstract

In this article, we posit that when arbitral tribunals decide international disputes, they typically fail to fully compensate claimants for the loss of the use of their money. This failure occurs because they do not acknowledge that businesses typically invest in opportunities that pose a significantly greater risk than the risk reflected in such commonly used standards as U.S. T-bills and LIBOR rates. Claimants also must share the blame when they do not set out a well-constructed claim for interest as damages. However, even when claimants do so, tribunals often award damages at a statutory rate or at rate reflecting a nearly risk-free investment because they are unfamiliar with modern economic and financial principles. We propose changing this practice. We set out a legal framework for allowing an award of interest as damages and then furnish a model for claimants and tribunals to use. Under this model, interest reflects market realities with the interest award to be compounded on a yearly basis. This model would bring awards in line with modern economic realities and more accurately compensate injured parties.

Keywords: Dispute resolutions, Arbitration, Damages, Interest

Suggested Citation

Senechal, Thierry J. and Gotanda, John Y., Interest as Damages (July 18, 2009). Villanova Law/Public Policy Research Paper No. 2008-06. Available at SSRN: https://ssrn.com/abstract=1116384 or http://dx.doi.org/10.2139/ssrn.1116384

Thierry J. Senechal (Contact Author)

International Chamber of Commerce ( email )

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

John Y. Gotanda

Villanova University School of Law ( email )

299 N. Spring Mill Road
Villanova, PA 19085
United States
610-519-7436 (Phone)
610-519-7436 (Fax)

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