Practical Considerations

  • Arbitration in Sierra Leone – relative bargaining position of the parties – who drafts the contract and the arbitration clause.
  • What is the prevailing law governing the contract and where is the seat of arbitration- finance and construction agreements.
  • The role of the national courts, their reliability and experience in handling complex commercial transactions.
  • Convenience : hotels, arbitration rooms, transportation, power, security and other logistics resulting in foreign seats of arbitration.

General Considerations for the Arbitrator

  • Interest must be considered and included in an award.
  • Arbitrator must consider pre-award interest – from date of breach to the date of the award.
  • Arbitrator must also consider post award interest – from the issuance of the award to the date of payment.
  • If interest is not addressed by the parties, the arbitrator may draw the attention of the parties to the issue.
  • See if the parties can agree on the applicable interest rate for pre and post award interest.
  • Pursuant to the Chartered Institute of Arbitration Guidelines for Drafting Arbitral Awards…..

“The amount of interest shall be designed purely to compensate a receiving party for being kept out of its money and to provide it with a form of commercially realistic restitution without punishing the paying party.”

Pre-Award Interest

  • Interest may be recoverable as of right:
    • Pursuant to an express term of the contract or based upon trade usage.
    • Pursuant to statute. See India’s Arbitration & Conciliation Act, Section 31 (7) –  Interest at 18% for pre-award interest.
    • As damages for late payment –default rate of interest.
  • Interest is otherwise recoverable in the discretion of the arbitrator in the form of pre and post award interest on the award.
  • In international commercial arbitration, interest on the award is usually set at the general prevailing rate for that jurisdiction or in accordance with international commercial practice:
    • Libor + 2%
    • Bank of England plus 1% uplift
    • US prime rate plus ?% uplift
    • 8% – UK High Court
    • 9% – New York Courts
  • Awarding interest on the award is usually a substantive issue governed by the prevailing law and not merely a procedural matter.
  • Where the arbitrator has a discretion in awarding interest, this may encompass interest on the debt due and interest on damages.
  • The arbitrator should consider interest that is due where the principal remains unpaid at the date of the award.
  • The arbitrator should also consider awarding interest where the principal sum is unpaid when the arbitration commences but is paid before the award.
  • Interest is usually awarded from the date the damage / loss or liability arose. This may be delayed where:
    • The respondent needed time to ascertain his liability to pay the principal sum.
    • The claimant delayed unreasonably in bringing his claim.
  • Interest in international arbitration is often awarded as compound interest.
  • It is usual to award compound interest where it is contemplated that the claimant had to secure a bank loan to perform the tasks assigned.
  • Compound interest can be awarded with monthly or quarterly rests.

Post Award Interest

  • It is usually up to the arbitrator’s discretion to provide for post award interest.
  • Frequently, the arbitrator will use the same interest rate that was used for the pre-award interest.
  • The purpose of awarding interest is to compensate the claimant for the loss it will incur if the sum awarded is not paid promptly.
  • If in a climate where interest rates fluctuate, then the arbitrator may use the base rate (which fluctuates) as a platform plus a reasonable uplift.
  • In awarding post award interest, the arbitrator may consider what interest rate that a business person with the general attributes of the claimant would have to pay.
  • Another basis of awarding interest is the ‘weighted average cost of capital’ formula which considers what return would an equity investor expect by way of returns on this type of investment.

{This formula can be unduly favorable to the claimant as equity investments usually attract a higher return that debt financing}

  • The arbitrator must also ensure that he carefully considers the applicable interest rate prevalent in the currency of the award. An award in leones, naira or dollar may attract a different interest rate.
  • In the case of Mobil Cerro Negro v. Bolivarian Republic of Venezuela, (2015) Southern District of New York, the U.S. District Court confirmed that it would not review denovo the interest rate granted by the arbitral tribunal on a $1.6 billion award where the debtor sought to argue that a lower statutory limit on interest was provided for by US law.
  • In August 2019, the UK High Court granted P & ID’s request for the enforcement of an award against the Government of Nigeria in the sum of $6.597 billion @ 7% compound interest. Amount currently owed to date is $9.6 billion and the Nigerian Government is seeking to appeal the amount awarded.


  • In conclusion, the award of interest in international commercial arbitration is a vital part of the Arbitrators award and it must be given serious consideration in order to avoid an incomplete award or an appeal against the award.

GARBER & CO., Freetown, Sierra Leone

Scroll to Top