Villanova University Legal Working Paper Series
Villanova University School of Law Working Paper Series
Interest as Damages
Article comments
This is a working paper
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 accrues at a risk-free interest rate plus a market risk premium 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.
Subject Area
Comparative Law, Contracts, Dispute Resolution, International Law
Recommended Citation
John Y. Gotanda and Thierry J. Sénéchal,
"Interest as Damages"
(April 2008).
Villanova University Legal Working Paper Series.
Villanova University School of Law Working Paper Series.
Working Paper 107.
http://law.bepress.com/villanovalwps/papers/art107
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