The Supreme Court lays down guidelines for determining interest to be awarded in arbitration.

The Supreme Court in its recent judgment in Vedanta v Shenzen Shandong Nuclear Power Construction Co[[1]] has laid down guidelines to be followed by arbitrators for awarding interest in international commercial arbitrations which have a seat in India. The principles of reasonableness and proportionality were applied by the Court while determining the quantum of interest.

Facts

An award was passed in an international commercial arbitration between Vedanta Ltd ('Vedanta') and Shenzen Shandong Nuclear Power Construction Co Ltd ('Shenzen') in a set of Engineering Procurement and Constructions (EPC) Contracts. The seat of arbitration was India. The arbitral tribunal passed an award against Vedanta on various claims in multiple currencies i.e. INR and EUR. Further, the award granted interest to Shenzen at different rates and in different currencies.