Supreme Court’s Latest Interpretation On Late Payment Interest

The Supreme People's Court of China recently issued an interpretation on how to calculate the interest accrued on delayed payment – Interpretation of the Supreme People's Court of Several Issues Concerning the Applicable Law for Calculating Interest On Delayed Payment in the Enforcement Action (FaShi [2014] No.8).

The Interpretation made a clear distinction between General Interest and Penalty Interest, provided guidance on when and how to calculate Penalty Interest, including interest payment in foreign currency.

According to this interpretation, the interest accrued on late payment has two components: (i) interest agreed between the parties under the contract and recognized by the court ("General Interest") and (ii) penalty interest provided by the statute ("Penalty Interest").