The vexed issue of interest awards

The law appertaining to the jurisdiction of an arbitrator to award interest is currently in a state of uncertainty and reappraisal. Given the importance of the question in the every day practice of commercial arbitrations, this uncertainty is unwelcome and hopefully the legislature or a superior court will take an early opportunity to clear the increasingly muddying waters. In examining this area of law there is greater confidence in stating what the law ought to be, than in stating the current position of the law and the manner of its evolution to this position. Few would deny the desirability and justice of a discretionary power to award compensation for the wrongful detention of monies, but the historical course of legal development in this regard, coupled with the constraining force of the doctrine of stare decisis, has made the judicial recognition of such a power at common law both difficult and controversial. There has therefore again arisen in this area of the law the now familiar debate between judicial progressiveness and conservatism.1

The subject of interest awards has in recent years received a substantial amount of attention, both direct and indirect, in the inquiries and reports of official bodies.2 In particular, the Law Commission has directly reported on the subject and some of its recommendations are incorporated in the Administration of Justice Bill currently before Parliament and which will soon be law.3 This official scrutiny has been primarily concerned with the jurisdiction of the courts to award interest, and only incidentally concerned with the arbitral jurisdiction. This is a source of regret. Nonetheless, there exists a very close association between the judicial and arbitral jurisdictions with regard to the power to award interest and therefore any development in the law appertaining to the jurisdiction of the courts is inevitably of material significance to arbitration. Indeed, such is the closeness of the association between the jurisdiction of the courts and arbitrators with regard to interest awards that it would seem to be impossible to attempt a statement of the law appertaining to arbitrators without