When awards are issued in an international arbitration—whether for breach of contract in commercial arbitration or expropriation in investment arbitration—an essential component is interest on the compensatory amount of the award. The interest component can, particularly when long periods of time have passed and/or generally prevailing interest rates are high, exceed the amount of compensation on the merits. We discuss here how awards of interest in international arbitration have been made and how commentators have urged that they be made.
It is axiomatic that the purpose of an award of damages in arbitration or in court is to restore the claimant to the position that it would have been in had there been no wrongful conduct on the part of the respondent. To the extent that this righting of the balance is delayed, there is additional harm to the claimant that must be redressed. Thus, it is generally accepted that the award of interest is part of the award of compensatory damages to the claimant, to take into account the passage of time since the respondent’s wrongdoing took place. Therefore, claimants formulaically include in their prayers for relief requests that interest be awarded, sometimes adding the request that it be awarded through the time when payment of the award is made.