The Law Commission

PART II

AN OUTLINE OF THE PRESENT LAW

2.1     In this Part we describe the various ways in which interest is awarded on debts and damages before judgment is entered. We are not concerned with post-judgment interest, which is available at a prescribed rate on all High Court judgments and on county court judgments over £5,000.^[1] The judgment interest rate is set by order, and is currently 8%.^[2] 
2.2     We start with a brief history of pre-judgment interest, before outlining the seven different bases on which interest may be awarded. 

HISTORY

2.3     The English courts have long been reluctant to award interest at common law. In 1893, the House of Lords held that no interest was due on a debt unless a contractual term or trade usage specifically provided for it.^[3] This means that interest is largely a matter for either contract or statute. The courts' inherent power to award interest is confined to a few limited circumstances, such as where interest is claimed as special damages or under the equitable or Admiralty jurisdictions. 

The 1934 Act

2.4     The first statute to give the courts a general power to award pre-judgment interest on debts and damages was the Law Reform (Miscellaneous Provisions) Act 1934.^[4] Under section 3, a court of record was given a general discretion in any proceedings tried before it to grant interest at such rate as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment. 
2.5     Interest had to be simple. Section 3(1)(a) did not authorise the granting of "interest on interest". Nor did the statute apply when interest was already payable under a contract or other provision. 
2.6     Thus the 1934 provision had four principal features: (1) It applied only to cases tried by the court. It did not apply to settlements or default judgments; (2) It did not cover cases where interest was specified in the contract or was due under some other statutory provision; (3) It gave the court very wide discretion – over whether to grant interest at all, over the rate to be awarded, over the amount of the debt to carry interest and over the period interest was to cover; but (4) It specified that interest must be simple rather than compound. 

Personal injury claims and the 1969 amendment

2.7     Judges proved reluctant to use this power in personal injury claims. In 1969, section 3 of the 1934 Act was amended to make interest mandatory in personal injury cases, unless there were "special reasons" why it should not be awarded. A new subsection 3(1A) was added to cover judgments exceeding £200 that included damages for personal injury or death. It stated that the courts "shall exercise" their power to award interest, unless they are "satisfied that there are special reasons why no interest should be given". 
2.8     The statute provided no guidance on what would be a suitable rate of interest on personal injury damages, or for what period interest should be awarded. Those issues were left to the courts. In 1970, the Court of Appeal held in Jefford v Gee^[5] that interest on past pecuniary loss should follow the rate of interest given on money paid into court (now called "the special investment account rate"). Where loss had arisen continuously over a period of time, interest should be granted at half the normal rate. Later, in 1982, Birkett v Hayes set out a separate rule for nonpecuniary loss – namely that interest should run at 2% from the service of the writ.^[6] 
2.9     In Part VII we examine the rules set out in these cases in more detail. For the present it is worth noting that personal injury cases are subject to a slightly different interest regime. There is a presumption that interest should be granted, and case law has set out clearer rules about the rates and calculations than is true for other types of litigation. 

Law Commission's 1978 report

2.10     In 1978 the Law Commission carried out a general review of the courts' powers to grant pre-judgment interest on debts and damages. We found that the main problem with the 1934 Act was that it was too limited. It only applied to the small minority of claims that went to trial. It did not apply to debts that were paid late but before proceedings were started; nor to payments made after proceedings were started but before judgment; nor to default judgments that did not involve a trial.^[7] 
2.11     The 1978 report made two proposals: one for debts and one for damages. For debts, creditors would have a right to interest without issuing court proceedings. Following a written demand, they would have a statutory entitlement to interest at the specified rate, set at 1% over the minimum lending rate. For damages, interest would only be available after court proceedings had started and would remain within the courts' discretion. However, the report recommended that the powers available under the 1934 Act should be widened so as to provide interest in cases resolved after proceedings were issued but before trial, whether through settlement or default judgment. 
2.12     The report recommended that, under both schemes, interest should continue to be simple, on the grounds that a system of compounding is "bound to be either too crude to be fair in all cases or too intricate to be practicable".^[8] The Law Commission thought that annual compounding would lead to arbitrary increases, while for more frequent compounding, the cost of doing the relevant calculations "would be out of all proportion to the sums involved".^[9] However, since 1978, the technology for conducting such calculation has changed beyond recognition and this reason no longer holds the force that it did in 1978. 

The Administration of Justice Act 1982

2.13     The Law Commission's proposals for statutory interest on debts were never implemented. In 1982, however, legislation provided litigants with a right to interest where proceedings had been started but resolved otherwise than by trial.^[10] 
2.14     The new provisions (discussed below) are now contained in section 35A of the Supreme Court Act 1981 (which applies to the High Court) and section 69 of the County Courts Act 1984 (which applies to county courts). Unlike the 1934 Act, these provisions are not confined to trials. They do, however, share the other main characteristics of the 1934 provisions. The courts continue to have a wide discretion over what interest to award – though any interest awarded must still be simple. 
2.15     Section 3 of the 1934 Act continues to apply to other courts of record.^[11] 

The Arbitration Act 1996

2.16     The 1996 Arbitration Act was based on the UNCITRAL Model Law on International Commercial Arbitration (1995). Although the Model Law did not mention interest, it was decided that the Act should grant arbitrators broad discretionary powers to grant simple or compound interest.^[12] It was felt that this would reflect commercial reality and discourage respondents from delaying payment.^[13] It is common for international organisations that provide arbitration services to include powers to award compound interest.^[14] 
2.17     The result is that arbitrators now have a power to award compound interest that the courts do not share. 

THE CURRENT LAW

2.18     As a result of these developments, pre-judgment interest may now be awarded in one of seven ways: (1) under a contract or trade usage (when it may be simple or compound according to the agreement or usage); (2) as special damages (simple or compound); (3) under the equitable or Admiralty jurisdictions (simple or compound); (4) where proceedings have been commenced, under section 35A of the Supreme Court Act 1981 or its county court equivalent^[15] (which is limited to simple interest only); (5) as of right under certain other statutes (simple only); (6) by arbitrators, exercising their discretion under the Arbitration Act 1996 (which may be simple or compound); or (7) after trial, where the defendant has been held liable for more than a refused claimant's offer, under Part 36 of the Civil Procedure Rules (simple only). We summarise each below.^[16] 

Interest under a contract or trade usage

2.19     Commercial lenders usually include provisions for compound interest in their contracts. In fact, so common is this arrangement that the courts have accepted that bankers are entitled to compound interest even in the absence of a specific contractual term, on the basis of an implied trade usage.^[17] Thus a borrower with a bank loan or mortgage, credit card or store card debts will usually be required to pay compound interest up until the date of judgment.^[18] However, many other claimants are not protected by contractual terms in this way. 

Interest as special damages

2.20     In some circumstances, claimants may recover interest as "special damages", on the grounds that, as a result of the defendant's breach of contract, they have incurred a loss through having to pay interest. The courts have taken a restrictive approach. Under the rule in Hadley v Baxendale,^[19] damages may be awarded under two heads. The first is where losses "may fairly and reasonably be considered arising naturally, i.e. according to the usual course of things". The second is where they "may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract".^[20] At first sight, the need to pay interest would appear to arise "naturally" under the first head, whenever a creditor is deprived of money. The House of Lords prevented such an interpretation in 1893, in London, Chatham and Dover Railway,^[21] and no subsequent court has been prepared to overturn that ruling.^[22] 
2.21     Thus compound interest may only be payable as special damages in the much more limited circumstances where the parties specifically contemplated that, in the event of a breach, the claimant would need to borrow money at compound rates. An example is Hartle v Laceys.^[23] Here a solicitor knew that his client had borrowed heavily from the bank at relatively high compound rates of interest and that he needed to sell property to reduce his borrowing. The solicitor acted negligently, and so lost his client the opportunity to sell. The court found that interest could be claimed at compound rates as special damages, because the issue was in the contemplation of both parties. 
2.22     Where interest is claimed under the second limb of Hadley v Baxendale, it must be specifically pleaded as special damage. 

Interest under the equitable or Admiralty jurisdiction

The equitable jurisdiction

2.23     The equitable jurisdiction gives courts an inherent power to award interest, which may on occasion extend to compound interest. The Law Commission's 1978 Report on Interest described the equitable jurisdiction as follows: Interest may be awarded as ancillary relief in respect of equitable remedies such as specific performance, rescission or the taking of an account. Furthermore the payment of interest may be ordered where money has been obtained and retained by fraud, or where it has been withheld or misapplied by an executor or a trustee or anyone else in a fiduciary position.^[24] 
2.24     It was noted that where money had been obtained by fraud or misapplied by someone in a fiduciary position, the court "may direct that such interest be compounded at appropriate intervals".^[25] 
2.25     This suggests two categories of interest. First, simple interest is available in respect of all equitable remedies. This power mirrors the statutory power available under section 35A (see below) and adds little to it. Second, compound interest is available, but is restricted to fraud or misapplication by someone in a fiduciary position. 
2.26     This distinction between "simple only" cases (such as specific performance and rescission) and "possible compound" cases (fraud and misapplication by someone in a fiduciary position) was upheld in Westdeutsche Landesbank Girozentrale v Islington London Borough Council ^[26] As Lord Browne-Wilkinson put it: In the absence of fraud, courts of equity have never awarded compound interest except against a trustee or other person owing fiduciary duties who is accountable for profits made from his position.^[27] 
2.27     In Westdeutsche, the House of Lords majority considered that it would be inappropriate to extend the courts' powers to award compound interest to other areas. They thought that would usurp the function of Parliament. 

The Admiralty jurisdiction

2.28     Unlike the common law courts, the Admiralty courts have been prepared to award interest. There is a long history of interest awards on damages for running down^[28] and (more recently) salvage.^[29] Again, however, the inherent jurisdiction adds little to the statutory power. In President of India v La Pintada Compania Navigacion SA the House of Lords held that interest could be simple only.^[30] Furthermore, interest under the inherent jurisdiction was only available on judgments, not on sums paid before judgment.^[31] 

Interest under section 35A of the Supreme Court Act 1981

2.29     In most cases, interest is awarded under the Supreme Court Act 1981, section 35A, or its county court equivalent, the County Courts Act 1984, section 69 (which is in very similar terms). Section 35A(1) states that Subject to the rules of court, in proceedings (whenever instituted) before the High Court for the recovery of a debt or damages there may be included in any sum for which judgment is given simple interest, at such rate as the court thinks fit or as rules of court may provide, on all or any part of the debt or damages in respect of which judgment is given, or payment is made before judgment, for all or any part of the period between the date when the cause of action arose and (a) in the case of any sum paid before judgment, the date of payment; and (b) in the case of the sum for which judgment is given, the date of judgment. 
2.30     The section goes on to state that where proceedings are instituted, and the defendant pays the full sum before judgment, the defendant is also liable to pay simple interest in the same way (section 35A(3)). Unlike previous legislation, the section is not confined to court judgments but extends to all debts paid after the issue of proceedings. It is important to note, however, that proceedings must be instituted. There is no free standing right to interest on claims paid before issue. 
2.31     Section 35A gives the court wide discretion. McGregor identifies five separate layers of discretion. Four are mentioned in subsection (1) above, namely: whether to award interest at all; the rate of interest; the proportion of the sum that should bear interest; and the period for which interest should be awarded. Section 35A(6) then goes on to confirm that "interest may be calculated at different rates in respect of different periods", giving a fifth discretion on whether to vary the rate.^[32] Although the section allows for rules of court, these only apply to default judgments.^[33] For the most part, the court's discretion is unfettered. 
2.32     A limit to this wide discretion arises in cases of damages for personal injury or death. Here section 35A(2) states that the court shall include interest unless it is "satisfied that there are special reasons to the contrary". 
2.33     The most important limitation in the whole section, however, is that the interest must be simple. The Act does not grant the courts a power to award compound interest. In this the section follows the Law Commission's 1978 report, which decided against allowing compound interest on the grounds of complexity of calculation.^[34] 

Interest under other statutes

2.34     Several statutes grant interest as of right (rather than as a matter of discretion, like section 35A). Under these statutes, interest is available at a prescribed rate before court proceedings are started. 
2.35     For example, the Taxes Management Act 1970 specifies that unpaid income tax or capital gains tax "shall carry interest [at the applicable rate]... from the relevant date until payment.^[35] Interest is also payable under various compulsory purchase statutes. For example, where an acquiring authority takes possession of land before agreeing compensation, the compensation ultimately awarded carries interest.^[36] Another example is the interest payable to an outgoing partner on assets left within a partnership. Under section 42 of the Partnership Act 1890, the outgoing partner is entitled to either a share in the profits or interest at 5%.^[37] 
2.36     These statutory provisions share several characteristics. First, interest is available as of right, without the requirement that court proceedings should be brought. Second, interest is available at a prescribed rate. Third, interest is simple only. However, the interest rates differ. In December 2003, the prescribed rate under the Taxes Management Act was 6.5%,^[38] the rate under the Partnership Act was 5% and the rate on compulsory purchase was only 3.25%.^[39] 

The Late Payment of Commercial Debts (Interest) Act 1998

2.37     The Late Payment of Commercial Debts (Interest) Act 1998 was introduced to protect small businesses against the late payment of commercial debts. The Act applies to contracts "for the supply of goods or services where the purchaser and the supplier are each acting in the course of a business".^[40] Interest starts to run on the day after the agreed date for payment,^[41] and is available irrespective of whether court proceedings have been issued. 
2.38     The Act is characterised by a high rate of interest. It has been set at 8% above the base rate, representing the rate of overdraft interest available to the smallest and most vulnerable businesses.^[42] The rate is simple, rather than compound, on the grounds that it is easier to calculate. The Act is meant to protect businesses that have been deprived of their money for months rather than years, so in most cases the difference between simple and compound rates would be minimal. 
2.39     When the Act was first introduced it only protected small business suppliers who were owed money by larger businesses. In 2000 the European Union adopted a Directive that required member states to introduce measures to protect commercial creditors against late payment.^[43] As a result, the 1998 Act has been extended. For contracts entered into after 1 November 2000 small businesses can claim interest against other small businesses. For contracts entered into on or after 7 August 2002, late payment interest may be claimed by all commercial creditors – by both large and small businesses and by public authorities – who are owed money by commercial organisations.^[44] 
2.40     The Directive also requires a high rate of interest, to reflect the position of vulnerable borrowers. It states that the rate of interest must be set at not less than 7% above the rate set by the national central bank.^[45] Although the Government could reduce the rate by one percent it has decided to preserve the interest rate at 8% above the Bank of England base rate. The Government has, however, simplified the way the interest is calculated. Before 2002, the rate tracked the base rate applicable immediately before payment day. Since 2002, the rate is set for six months at a time. For example, the rate that applied from 1 July to 31 December 2003 was 11.75% - that is, 8% above the base rate applicable on 20 June 2003. 
2.41     Finally, as from August 2002, the Act entitles creditors to charge debtors a fixed sum to cover their enforcement costs. This becomes due as soon as statutory interest begins to run. The fixed sums are set out in the statute, and relate to the size of the debt. For debts of less than £1,000, the sum is £40; for £1,000 or more but less than £10,000, it is £70; and for £10,000 or more it is £100.^[46] 
2.42     The late payment legislation has a deterrent purpose. As the preamble to the Directive explains, "late payment represents an increasingly serious obstacle for the success of the single market".^[47] This not only places "heavy administrative and financial burdens on businesses" but it is a "major cause of insolvencies", which threaten "the survival of businesses" and "result in numerous job losses".^[48] The rationale behind the legislation therefore goes beyond providing fair compensation, and ventures towards imposing penalties for socially damaging behaviour. The preamble also makes clear that the ambit of the Directive is strictly limited. It does not apply to consumers or to compensation for damages.^[49] 
2.43     The Late Payment Act is important in its own field, but it does not provide a guide to the policy that should be applied outside its own parameters. In considering interest on damages or consumer debts, it would be inappropriate to apply similar principles or interest rates. 

The Arbitration Act 1996

2.44     The Arbitration Act 1996 differs from the other statutory provisions in that it provides arbitrators with a discretion to grant interest. It is also the only statute to provide specifically for compound interest. Section 49 states that "the tribunal may award simple or compound interest from such dates, at such rates and with such rests as it considers meets the justice of the case" on the whole or part of the amount claimed.^[50] This means that arbitrators have power to award compound interest where the courts do not. 
2.45     We understand that practice in awarding interest differs, but that compound interest is frequently awarded in large commercial and maritime claims.^[51] 

Interest under Part 36 of the Civil Procedure Rules

2.46     Finally, interest may be used as a sanction where defendants have refused a formal claimant's offer and have had a judgment entered against them that is more advantageous to the claimant than the offer they have refused. Rule 36.21(2) of the Civil Procedure Rules states that the court may award additional interest from the date the defendant could have accepted the offer, at a rate not exceeding 10% above base. Interest must be simple: the rules specifically exclude granting interest on interest. 
2.47     This is an important part of the scheme for encouraging litigants to settle their differences by exchanging formal offers before trial. We return to this subject in Part VIII.^[52] 

CONCLUSION

2.48     Pre-judgment interest on debts and damages may be awarded in many different ways, at a variety of different rates. The statutory provisions alone range from 0.5% below base to 8% above base. The power the courts are most likely to use is contained within section 35A of the Supreme Courts Act and its county court equivalent, section 69 of the County Courts Act 1984. This gives the court a wide discretion to decide what rate to use, over what period. 
2.49     Compound interest is awarded routinely under contracts. For example, contracts for bank loans, mortgages, credit or store cards will almost always include provisions for compound interest. Compound interest may also be awarded in arbitration. However, in the absence of specific contractual conditions or trade usages, the courts rarely award compound interest. The main statutory provisions do not permit it. Meanwhile, the courts have been reluctant to extend case law in favour of compound interest for fear that it would usurp the will of Parliament. Any reform in this area will require legislation. 
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Note 1   In the High Court, judgment debts are governed by section 17 of the Judgments Act 1838. In county courts, judgment interest is governed by the County Courts (Interest on Judgment Debts) Order 1991 (SI 1991 No 1184). The order excludes a range of cases from judgment interest, including suspended orders for possession, debts regulated by the Consumer Credit Act 1974 and maintenance payments (except for lump sums of £5,000 or more). Interest does not run while an administration order or attachment of earnings order is in force.    [Back]

Note 2   The Administration of Justice Act 1970, s 44 allows the Lord Chancellor with the concurrence of the Treasury to amend the interest rate. The power has been used eight times, of which the last was in 1993 (SI 1993 No 564).    [Back]

Note 3   London, Chatham and Dover Railway Co v South Eastern Railway Co [1893] AC 429    [Back]

Note 4   A more limited power to award interest had been provided by the Civil Procedure Act 1833 (Lord Tenterden’s Act). This provided that a jury could award interest on fixed debts under a written instrument, from the date specified for payment in the instrument or the date of the written demand    [Back]

Note 5    [1970] 2 QB 130.    [Back]

Note 6    [1982] 1 WLR 816, CA. The decision was endorsed by the House of Lords in Wright v British Railways Board [1983] 2 AC 773.    [Back]

Note 7   Report on Interest (1978) Law Com No 88, para 13    [Back]

Note 8   Ibid, para 85    [Back]

Note 9   Ibid, para 85    [Back]

Note 10   The Administration of Justice Act 1982 inserted a new section 35A into the Supreme Court Act 1981 and a new section 97A into the County Courts Act 1959. On consolidation, the county court provision was reproduced as the County Courts Act 1984, s 69.    [Back]

Note 11   See paras 5.59 – 5.67, below.    [Back]

Note 12   Arbitration Act 1996, s 49 (see para 2.44, below).    [Back]

Note 13   See Report on the Arbitration Bill of the Departmental Advisory Committee on Arbitration Law (February 1996) para 236.    [Back]

Note 14   For example, World Intellectual Property Organization, Arbitration Rules art 60; London Court of International Arbitration, Arbitration Rules art 26.6; North American Free Trade Agreement art 1135(1)(a).    [Back]

Note 15   County Courts Act 1984, s 69.     [Back]

Note 16   For a fuller account, see Consultation Paper No 167, Part II.     [Back]

Note 17   In National Bank of Greece SA v Pinios Shipping Co (No 1) [1990] 1 AC 637, the House of Lords held that, as implied by the usage of bankers, the bank was entitled to capitalise interest, and it was conceded that the bank was entitled to do so with quarterly rests.    [Back]

Note 18   Normally, compound interest would not be allowed on post-judgment debts. However in Director General of Fair Trading v First National Bank Plc [2002] 1 AC 481, the House of Lords upheld an express contractual provision that allowed compound, variable interest rates on post-judgment debts. They rejected the OFT’s argument that such a term was unfair within the definition of the Unfair Terms in Consumer Contracts Regulations 1994 (SI 1994 No 3159).     [Back]

Note 19   (1854) 9 Exch 341, 156 ER 145.     [Back]

Note 20    Ibid, at pp 354-5.     [Back]

Note 21    London, Chatham and Dover Railway Co v South Eastern Railway Co [1983] AC 429.    [Back]

Note 22   See, for example, President of India v La Pintada Compania Navigacion SA [1985] 1 AC 104.    [Back]

Note 23   [1999] Lloyd’s Rep PN 315, CA. See also Araba Afedua Ata-Amonoo v Grant, Seifert and Grower [2001] EWCA Civ 150 and Amec Process & Energy Ltd v Stork Engineers and Contractors BV (2000) WL 31413913. For further discussion, see McGregor on Damages (17th ed 2003) para 15-015.    [Back]

Note 24   Report on Interest (1978) Law Com No 88, para 10.    [Back]

Note 25   Ibid, para 21.    [Back]

Note 26   [1996] AC 669. See also Consultation Paper, para 2.35 and Elliott, “Rethinking Interest on Withheld and Misapplied Trust Money” [2001] Conv 313.    [Back]

Note 27   Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, at p 701.    [Back]

Note 28   The Dundee (1827) 2 Hagg Adm 137, 166 ER 194.    [Back]

Note 29   The Aldora [1975] QB 748.    [Back]

Note 30   [1985] 1 AC 104, 119H, 120G-121B.    [Back]

Note 31   La Pintada upheld The Medina Princess [1962] 2 Lloyds Rep 17, which found that no interest could be awarded on wages paid late but before trial.    [Back]

Note 32   McGregor on Damages (17th ed 2003) para 15-005.    [Back]

Note 33   See para 3.6, below.    [Back]

Note 34   Report on Interest (1978) Law Com No 88, para 85.    [Back]

Note 35   s 86(1).    [Back]

Note 36   Compulsory Purchase Act 1965, s 11. Other examples of interest on compulsory purchase arrangements include the right to interest on compensation where a general vesting declaration is used (under Compulsory Purchase (Vesting Declarations) Act 1981, s 10); and the right to interest on compensation for injurious affection (under the Land Compensation Act 1973, s 63). For a discussion of these provisions, see Towards a Compulsory Purchase Code: (1) Compensation (2002) Law Com Consultative Report No 165, paras 8.33-8.39. Also Towards a Compulsory Purchase Code: (1) Compensation – Final Report (2003) Law Com No 286, paras 10.12-10.28.    [Back]

Note 37   See Report on Partnership Law (2003) Law Com No 283; Scot Law Com No 192, paras 8.15 and 8.32.    [Back]

Note 38   See Taxes (Interest Rate) Regulations 1989 (SI 1989 No 1297), made under the Finance Act 1989, s 178.    [Back]

Note 39   The Rate is prescribed under the Acquisition of Land (Rate of Interest after Entry) Regulations 1995 (SI 1995 No 2262) at 0.5% below the base rate quoted by the reference banks.    [Back]

Note 40   s 2(1). The definition specifically excludes consumer credit agreements and mortgages (s 2(5)).    [Back]

Note 41   s 4(4). The date must be after the service has been performed. Where the contract does not specify a date, interest starts to run 30 days after supply or invoice, whichever is the later (s 4(5)).    [Back]

Note 42   The Green Paper had originally proposed a rate of 4% above base, to represent the average rate of interest on bank loans to small businesses (Improving the Payment Culture: A Statutory Right to Claim Interest on Late Payment of Commercial Debt, URN 97/781). However, this was increased after consultation.    [Back]

Note 43   Directive 2000/35/EC on Combating Late Payment in Commercial Transactions.    [Back]

Note 44   The Late Payment of Commercial Debts (Interest) Act 1998 (Commencement No 5) Order 2002, SI 2002 No 1673.    [Back]

Note 45   Directive 2000/35/EC, art 3(1)(d).    [Back]

Note 46   Late Payment of Commercial Debts (Interest) Act 1998, s 5A, as inserted by the Late Payment of Commercial Debts Regulations 2002, reg 2 (SI 2002 No 1674).    [Back]

Note 47   Directive 2000/35/EC on Combating Late Payment in Commercial Transactions, preamble para 5.     [Back]

Note 48   Ibid, preamble para 7.    [Back]

Note 49   Ibid, preamble para 13.    [Back]

Note 50   s 49(3).    [Back]

Note 51   The London Maritime Arbitrators Association told us that it was “the general practice” to award compound interest “quite simply because it seems commercially just to do so”. The Worshipful Company of Arbitrators commented that “the power to award compound interest should be exercised unless there is good reason in the particular case not to do so; this, however, is noted not to be universal practice”.    [Back]

Note 52   See paras 8.3 – 8.8, below, which describe the Rules and case law on this subject.    [Back]