Interests, Auxiliary

and Alternative Remedies

in International Arbitration
Edited by Filip De Ly and Laurent Lvy

D O S S I E R S
DOSSIERS OF THE ICC INSTITUTE OF WORLD BUSINESS LAW ICC Institute of World Business
1 Law
INTERESTS, AUXILIARY AND ALTERNATIVE REMEDIES IN INTERNATIONAL ARBITRATION

This text is the work of independent authors and does not necessarily
represent the views of ICC. No legal imputations should be attached
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omissions or misleading statements caused by negligence or otherwise.

Copyright 2008
International Chamber of Commerce

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ICC Publication No. 684

ISBN: 978-92-842-0033-7

2 DOSSIERS OF THE ICC INSTITUTE OF WORLD BUSINESS LAW

 Contents

FOREWORD ......................................................................................................... 5
By Serge Lazareff

INTRODUCTION ................................................................................................... 7
By Laurent Lvy, Co-Editor

Contractual remedies: clauses pnales and liquidated damages

1 clauses .................................................................................................... 13
Antonias Dimolitsa

Judicial penalties and specific performance in international

2 arbitration ............................................................................................... 53
Alexis Mourre

Compound interest and specific performance:

3 arbitral imperium and sections 49 and 48 of the English
Arbitration Act 1996 .............................................................................. 81
V.V. Veeder

How to control the impact of time running between the

4 occurrence of the damage and its full compensation:
complementary and alternative remedies in interim relief
proceedings .......................................................................................... 91
John Beechey and Gareth Kenny

Issues of applicable law and uniform law on interest:

5 basic distinctions in national and international practice .............. 131
Andrea Giardina

A study of interest ............................................................................... 169

6 John Y. Gotanda

The issue of interest in Middle East laws and Islamic law .............. 203
7 Tarek Fouad A. Riad

DOSSIERS OF THE ICC INSTITUTE OF WORLD BUSINESS LAW 3

INTERESTS, AUXILIARY AND ALTERNATIVE REMEDIES IN INTERNATIONAL ARBITRATION

A practitioners approach to interest claims under Sharia law in

8 international arbitration ..................................................................... 211
Homayoon Arfazadeh

Present-day valuation in international arbitration: a conceptual

9 framework for awarding interest ...................................................... 219
Thierry Snchal

CONCLUDING REMARKS ............................................................................... 237

By Filip De Ly, Co-Editor

KEY-WORDS INDEX .......................................................................................... 247

4 DOSSIERS OF THE ICC INSTITUTE OF WORLD BUSINESS LAW

 Foreword
By Serge Lazareff
Member of the Paris Bar
Chairman, ICC Institute of World Business Law

Once again, the ICC Institute of World Business Law held its Annual
Meeting on a topic that concerns business the most: the bottom line.

During arbitral procedures, lawyers enjoy submitting sophisticated

briefs, raising incidents on language, jurisdiction, challenge of arbitrators
and so forth, followed by long hearings and, sometimes, interminable
oral presentations. Under the auspices of the ICC International Court
of Arbitration, a great effort has recently been made to reduce the
duration and costs of arbitral proceedings, and the Institute contributes
towards moving even faster in this direction, particularly through the
training programmes it conducts.

Nevertheless, it is striking to note that, while no legal stone remains

unturned in procedures, when it comes to calculating damages and
auxiliary financial matters such as interest, liquidated damages, judicial
penalties and, more globally, the amounts claimed, the arbitrator is at a
loss most of the time because these issues, as important as they may
be, often remain neglected.

This is quite regrettable, as auxiliary financial claims often represent

huge sums. It is therefore essential to have a clear approach for rightly
assessing the time value of money so as to adjust the amount of the
damage suffered to reflect present-day monetary values. There are many
facets to this evaluation and the purpose of the present Dossier of
the Institute is to cover as many as possible.

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INTERESTS, AUXILIARY AND ALTERNATIVE REMEDIES IN INTERNATIONAL ARBITRATION

How far does the authority of the arbitrator go to control the amount
of the damage and its full compensation? Add to this the sometimes
emotional approach to interest and the interference of religious and
social factors, which in certain cases are centuries old and deeply routed
in various cultures. Approaches for awarding damages, in particular
interest, may vary not only from one law to another but also depending
on the background and the personal approaches of the arbitrator.

It is therefore essential to firmly establish the principles in this field

and to study each item that needs to be taken into consideration when
calculating and awarding interest, auxiliary and alternative remedies.

This is the ambition of this new Dossier, which forms the fifth volume
of our series.

Welcome to our readers, who will, I hope, enjoy this book as much as I
had the pleasure (and interest!) in listening to the speakers at our Annual
Meeting, each a renowned specialist in his or her field.

6 DOSSIERS OF THE ICC INSTITUTE OF WORLD BUSINESS LAW

 Introduction
By Laurent Lvy
Co-Editor

Justice delayed is justice denied (Gladstone)

Jura vigilantibus non dormientibus prosunt / jura vigilantibus
tarde venintibus ossa
A party who knows that any provision of, or requirement
under, these Rules has not been complied with and yet proceeds
with the arbitration without promptly stating his objection to
such non-compliance, shall be deemed to have waived his right
to object. (UNCITRAL Arbitration Rules Article 30)1

How long a reasonable time ought to be is not defined in law, but is

left to the discretion of the judges (Blacks Law Dictionary ad time,
reasonable time quote from a US court decision).

Time is among the most elusive dimensions in human life. Even more
than the sense of direction and space geometry, time consciousness
pervades every aspect of human existence. As is well known, in addition
to length, width and height, time may be identified as the fourth
dimension, at least according to the Theory of Relativity, and this theory
is beyond the understanding of the layman, especially the lawyer.

As the preceding quotations show, the law cannot avoid taking the time
factor into consideration.

In fact, time will permeate every aspect of the law, including contracts,
torts, procedures, enforcement and so forth.

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INTERESTS, AUXILIARY AND ALTERNATIVE REMEDIES IN INTERNATIONAL ARBITRATION

In general, time saved is always beneficial, especially since time is

money.2 Time efficiency is a factor in arbitration. Rightly or wrongly,
speed is frequently mentioned as one of the advantages of arbitration.
Numerous conferences, writings and court decisions address the issue
of time in arbitration. More often than not, they take issue with efficient
case management and address, for instance, such matters as parties
dilatory tactics, arbitrators pro-active conduct of the proceedings and
the role of institutions in controlling the lapse of time. However, should
the time concern be restricted to the period between the initiation of
an arbitration and the award? Should it not encompass the period from
the occurrence of the damage until the actual discharge of the award,
in other words the compensation?

This book deals with efficiency and time.

However, its approach is different in that it is less procedural and more

substantive than usually the case in arbitration publications.

The initial step is an axiom. With great uniformity, everyone seems to

accept that:
The nature of liability is to re-establish as exactly as possible
the equilibrium that the damage destroyed and to have the
aggrieved party into the same situation that would have been
his if the damaging event had not occurred.3
Le propre de la responsabilit civile est de replacer la victime
dans la situation o elle se serait trouve si lacte dommageable
ne stait pas produit. (Cour de cassation, Deuxime chambre
civile, July 9, 1981, Bulletin civil des arrts de la Cour de
cassation II, No. 1561)

It would be impossible to cite the multitude of decisions (whether of

municipal, international or arbitral courts) calling for full and adequate
compensation of damage. Practically all point to the need for such
compensation to be prompt in order to be adequate.4

This book is an attempt at finding how the parties to a contract or to an

arbitration, as well as the arbitrators themselves, should proceed
efficiently to ensure the timeliness of the compensation or to find a
remedy for the lack of such timeliness.

8 DOSSIERS OF THE ICC INSTITUTE OF WORLD BUSINESS LAW

 INTRODUCTION

It is not unusual quite the contrary to find writings, symposia and

guidelines dealing with the efficiency of the arbitration process itself.5
What has attracted less attention, however, is how the parties and the
arbitrators may find alternative remedies to address those very issues
of time and efficiency.

The parties themselves may forestall the arbitration process and

endeavour to find contractual remedies.They may either think of ways
to avoid time elapsed or endeavour to facilitate the reaction to any
time loss. Monetary penalties and liquidated damages clauses are some
examples of such anticipatory thinking. Antonias Dimolitsa addresses
such contractual remedies.

In principle, between the occurrence of the damage and the actual

compensation, there is a time period with which the arbitrators do not
concern themselves. This is the period of the enforcement of the award,
since the arbitrators do not have any imperium. Should efficient
arbitrators totally disregard the time factor after the handing down of
this award? Do the early 21st century arbitrators still think that lata
sententia arbiter desinit esse arbiter? Not necessarily, if they may resort
to such relief as a judicial penalty.

Judicial penalties may be a way of ensuring the actual and timely enforce-
ment of awards ordering specific performance. Is specific performance
the ultimate remedy? In theory, the answer is obviously yes, provided,
however, that specific performance is admissible under the applicable
laws and actually carried out. Even if it is admissible, specific perform-
ance will in practice raise considerable difficulties, both during the
arbitration process to grant it and subsequently at the enforcement
stage. Alexis Mourre and V.V. Veeder will expound on such questions.

Last but not least, this book would not be complete if it left out the
more classical way of efficiently addressing the time factor in arbitration,
namely interim relief. On this issue, see the contribution of John Beechey
and Gareth Kenny.

As is now clear, the first part of this book looks for alternative remedies
seeking to avoid the rise of any injury due to time lapsing after the
occurrence of the damage.

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INTERESTS, AUXILIARY AND ALTERNATIVE REMEDIES IN INTERNATIONAL ARBITRATION

However, should the parties and the arbitrators not (totally) achieve
this objective, then it will become necessary to compensate the
aggrieved party for such further damages. This is also known as interest,
which forms the subject of the second part of this book.

To be precise, interest is, among other things, compensation allowed

by law or contract for the use, forbearance or deprivation of money. In
fact, interest is a way to take into consideration the lapse of time prior
to, during and after the proceedings.

John Gotanda studies the nature of and the general rules applicable to
the various kinds of interest. Andrea Giardina focuses on some peculiar
rules that frequently apply to the allocation of interest in international
arbitration and, given the general scope of this book, adopts a
substantive rather than procedural approach to such matters. When it
comes to the matter of interest, a book would not be complete without
addressing the specifics of Islamic law, which Tarek Riad does (with
some additional comments from Hamayoon Arfazadeh). Finally, Thierry
Snchal gives a short review of some economic aspects of interest
and deprivation of money.

In summary, arbitrators must navigate between two dangerous reefs.

Should they wish to be extremely efficient, they may endeavour to rush

for their award or resort to alternative remedies that are to a certain
extent terra incognita. This may result in a less than stalwart award.
Should they prefer to be (over-)prudent, they might disregard the time
factor and hand down an award of diminished actual economic value.
The first aim of this book and of the authors is to locate the happy
medium between these two preoccupations. Its second and foremost
aim is to supply material for courageous arbitrators who prefer the first
risk, thus contributing to the progress of efficiency in international
arbitration.

10 DOSSIERS OF THE ICC INSTITUTE OF WORLD BUSINESS LAW