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Abstract

Judging by the last few years trends, international investment arbitral practice and jurisprudence has evolved quite dramatically with respect to awarding interest from a time when its practice was unreflective of commercial realities. This seems to be particularly true with the recent trend in regards to the award of compound versus simple interest, even though no uniform approach on the issue has yet emerged. The underlying premise of this paper is that, in international arbitration, awards of interest can undoubtedly be as relevant as the principal amount owed for the loss caused. In this light, we submit that awarding compound instead of simple interest would streamline the current practice, which still suffers from a major unpredictability issues that are undesired for the system. Furthermore, the adoption of compounding interest instead of simple interest would enhance the respect for the principle of full compensation. Indeed, it would be realistic, for in conformity with the current state of affairs of modern financial transactions where compound interest is the norm. In this thesis, we seek to explore the mechanics of awarding interest in investment arbitration. In doing so, we will firstly go through a general overview of some of the most pertinent aspects that call for attention in this subject i.e. what are the main reasons for awarding interest. We will thereafter look at issues such as the main legal sources that allow for the award of interest and the way they interplay, if at all. Secondly, we will focus on the interest rate and the different approaches that arbitral tribunals use to choose the appropriate one to be applied to a given case. Lastly, we will endeavor to further arguments in favor of the award of compound interest in international arbitration. In doing so, scholarly literature vehemently advocating on the matter of award of compound versus simple interest, the review of legal sources, and last but not least past and recent investment arbitration case law and other relevant international jurisprudential sources, will be taken into account.

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