In long-running disputes, the choice between simple and compound interest can move the final award more than any argument about principal.
Arbitrations often take years to resolve, and many claims relate to losses suffered long before the hearing. Over such periods the compounding effect becomes substantial. A claim that looks modest at the valuation date can double once interest accrues, which is why the basis of interest now attracts close attention from tribunals and counsel alike.
How tribunals decide
Investment tribunals have moved steadily towards compound interest, reasoning that a claimant deprived of funds would have reinvested them and earned returns on returns. Commercial tribunals are more varied in their approach, often bound by the governing law or the contract. In both settings, the rate and the compounding frequency are treated as separate questions.
Compounding is not a windfall; it is usually the closest proxy for what the claimant actually lost.
Experts help most when they tie the proposed rate to the claimant’s real position—its borrowing costs, its opportunity cost of capital or a risk-free benchmark—and explain why that choice reflects the economic harm rather than simply maximising recovery. Where the claimant would have repaid debt, its borrowing rate is usually best; where it would have invested, a return on capital may be more appropriate.
Presenting interest clearly
A clear interest schedule shows principal, rate, compounding frequency and accrual period in a form the tribunal can adjust. Offering alternative calculations—simple and compound, annual and quarterly—lets the tribunal apply its own conclusions without reopening the model. Including post-award interest on the same basis avoids a later dispute over the period between award and payment. That flexibility is often decisive when drafting the final award.