Lloyd's Maritime and Commercial Law Quarterly
INTEREST ON MAXIMUM SUMS
Dr. F. A. Mann * and J. Kurth
Introduction
In the course of the current century numerous Conventions relating to international transport have been concluded and subsequently adopted by national legislatures, which provide for a fixed or maximum liability for damage or loss caused by the enterprise. The question whether such limitations exclude or permit the award of pre-judgment interest is almost invariably left open. The Convention concerning International Carriage by Rail of 9 May 1980 (COTIF) giving effect to the Convention on the Transport of Goods by Railway (CIM) and the Convention on the Transport of Persons and Luggage (CIV), both adopted by the International Transport Conventions Act 1983 is an exception, for CIM, Art. 47 and CIV, Art. 43 respectively allow interest at the rate of 5% from the date of the notification of the damage or loss. Another exceptional case is Art. 27 of the Convention on the Contract for the International Carriage of Goods by Road, which is scheduled to the Carriage of Goods by Road Act 1965 and according to which the claimant is entitled to 5% interest.
In all other cases it is necessary to proceed from principle, unless the interpretation of the Convention provides an answer. The principle, it is submitted, is that interest from the date of default should be allowed, for interest constitutes compensation for the non-payment of the fixed sum rather than for the damage or loss which that sum quantifies. Both items flow from the same event, but their legal character and function is different. In most countries this is an obvious, indeed a platitudinous statement. In England, unfortunately, two decisions of the House of Lords1 failed to analyse the true character of interest and thus reached results which cannot easily be supported.2 But even there Lord Wright put his finger on the point:3
the essence of interest is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded as representing the profit he might have made if he had had the use of the money, or conversely the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation.
The consequence is that in England interest can and should be recoverable, not
* C.B.E., F.B.A., Solicitor, Consultant to Herbert Smith.
1. London, Chatham and Dover Ry. Co. v. South Eastern Ry. Co. [1893] A.C. 429; President of India v. La Pintada Cia. Navigation S.A. (The La Pintada) [1985] A.C. 104. Cf. President of India v. Lips Maritime Corp. (The Lips) [1987] 2 W.L.R. 572; Mann (1988) 104 L.Q.R. 3; K. Michel [1987] 4 LMCLQ 414.
2. See Mann, “On Interest, Compound Interest and Damages” (1985) 101 L.Q.R. 30.
3. Riches v. Westminster Bank Ltd. [1947] A.C. 390, 400.
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