Case Alert -  EWHC 1679 (Comm)
Applicable law for recovery of interest plus judgment debt interest
Stephenson Harwood for claimant
It was held that the defendant had breached duties owed to the claimant Latvian bank. The issue in this case was which law governed the bank's claim for interest on its damages. Some breaches occurred pre-January 2009 and some occurred after that date. The breaches before January 2009 fell outside the temporal scope of Rome II and so the Private International Law Act 1995 applied instead. This meant that the existence of a right to recover interest was a question governed by Latvian law, but the English court's discretion to award interest is a procedural issue which is governed by English law. By contrast, Leggatt J held that the position under Rome II meant that the rate of interest recoverable on damages is governed by Latvian law.
The judge also held that for sums denominated in Euros, the appropriate commercial rate of interest should be 2% above the European Central Bank rate (and for damages denominated in US dollars, it should be 2.5% above 6 month US dollar LIBOR).
The Judgments Act 1838 provides that every judgment debt shall carry interest at a rate of 8% p.a.. However, the court has a discretion (under the Administration of Justice Act 1970) to award a different rate of interest if the judgment debt is expressed in a currency other than sterling. Leggatt J held that in this case, the appropriate rate should be 6% p.a. (the rate which a Latvian court would have applied). That was because: "I do not think it right that for any period while the judgment remains unpaid the Bank should be prejudiced by the fact that these proceedings have been brought in England because the defendant had re-located here after the Bank collapsed, rather than in Latvia where the Bank's losses were incurred and are being felt".