Arbitration Interest in UAE: Claiming Pre and Post-Award Interest

Interest is not an afterthought to a monetary claim. It compensates for the money a party has been kept out of, so that a party is adequately compensated for the delay in payment or performance. It is also decided under different rules on either side of the award: one set governs the period from the date payment fell due to the date the award is rendered, another governs the period from the award until payment arrives. Interest claims are fundamental to answering the financial disadvantage caused by protracted proceedings or delayed enforcement. The right to claim it sits in the interplay between the arbitration rules, UAE statutory provisions and judicial interpretation.

Where a tribunal's power to award interest comes from

Arbitration in the UAE is governed primarily by Federal Law No. 6 of 2018 on Arbitration (the “Arbitration Law”), which codifies many principles derived from international conventions and established regional protocols. The Arbitration Law includes provisions on the award of interest. It operates alongside the UAE Civil Code, which contains the substantive provisions on contractual and statutory interest rates and their application.

The two periods are not treated alike. Post-award interest is explicit: the Arbitration Law expressly gives an arbitral tribunal the power to award it. Pre-award interest is not explicitly mandated under the Arbitration Law. It is generally recognised under UAE law and under arbitration rules such as the DIAC or arbitrateAD rules, and tribunals often exercise their power to award it, to answer the financial prejudice caused by delayed payment.

Whatever a tribunal decides, the Civil Code sets the outer limits. Its provisions on interest caps and usury rules impose significant constraints on the quantum and the nature of the interest that may be awarded, especially where the claim involves compound interest. Those limits are why precise legal argument is needed to assert an entitlement to interest, and why the UAE courts may intervene in the question later, particularly when enforcement or challenge proceedings arise.

Related: Our arbitration team advises on interest claims in UAE arbitration.

Pre-award interest runs while the arbitration does

This head of claim compensates the claimant for the loss of use of its funds, from the date the payment was due until the arbitral award is rendered. Delay can significantly erode a claimant's financial position, and that erosion is what the claim answers. Under UAE law it is generally permissible where the claim is contractual or arises from a debt obligation, and the Civil Code provides for interest on overdue payments.

The rate is another matter, and so is the question of whether the interest should be simple or compound. Both are often in dispute. A tribunal setting them has to reconcile conflicting principles: the need to compensate the claimant fairly, against the legal restrictions on usurious interest rates and, in some cases, on compound interest. The absence of explicit statutory guidance in UAE law on the method of calculation is what keeps the point contentious.

The start date is argued as hard as the rate

Claimants put the beginning of the period at the date of default or breach. Respondents argue for a later date. The burden sits with the claimant to prove the timing and the quantum of its losses, and both sides commonly produce expert valuations and competing interpretations of the contractual terms.

That makes the interest claim an evidential exercise, not a line added at the end of a submission. What supports it is documentation of the payment defaults and the accrued losses, a calculation the tribunal can follow, and financial expert evidence that places the figures in the commercial reality of the dispute. Detailed claim drafting matters for the same reason, and precise documentation of the defaults and the accrued losses strengthens the claimant’s position. Our arbitration team prepares interest claims with the expert evidence that supports them.

Compound interest needs a clause that says so

Simple interest accrues on the principal amount alone. Compound interest accrues on the principal and on interest already accrued, which produces exponential growth over time. The distinction carries profound implications for the quantum of a claim.

UAE law restricts compound interest significantly. The Civil Code and the related jurisprudence generally do not recognise it unless the parties have expressly agreed to it. The restriction comes from broader public policy concerns: discouraging usurious practices, and protecting debtors from excessive financial burdens. The UAE courts have historically been conservative in awarding compound interest, viewing it as potentially punitive.

So tribunals in the UAE regularly face arguments that a compound interest claim is inconsistent with mandatory legal provisions. To succeed with one, a party needs a clear contractual clause authorising compound interest, or established commercial customs recognised in the relevant industry; some tribunals also cite comparative international jurisprudence to justify such an award. Without express contractual authorisation, tribunals often default to simple interest, which reduces the claimant's recovery.

Respondents work the same ground from the other side. They challenge whether the clause exists and whether it applies, and they invoke the statutory restrictions against it.

Related: The clause that permits compound interest is written long before any dispute. Our contract drafting and arbitration teams work on that wording.

What happens between the award and the money

Post-award interest accrues after the award is issued and until payment is received in full. The rate is typically the one specified in the contract, or agreed between the parties, or determined by the tribunal in the exercise of its discretion, subject to statutory ceilings and to public policy considerations aimed at preventing excessive or punitive interest.

The entitlement also works as a deterrent against delayed enforcement. Respondents contest these claims. The usual arguments are that the award itself should suffice, and that any delay in enforcement is not their fault. The claim matters most in exactly those cases: where a respondent delays payment after the tribunal has decided, accruing interest can significantly increase the ultimate recovery.

It also has a use before enforcement begins. Setting out what continued delay will cost in accrued interest gives a respondent a reason to pay promptly, and can bring a settlement forward rather than into a long enforcement fight. Our arbitration team works on interest recovery at that stage as well as before the tribunal.

None of that helps a claimant who has not planned for the enforcement scenario, and for that the entitlement has to be there to rely on. Arbitration agreements and claims should address post-award interest explicitly, which avoids protracted disputes about enforceability afterwards.

Where public policy limits an interest award

Enforcement proceedings may involve scrutiny of the interest claimed. The UAE courts have the authority to review arbitral awards on limited grounds, including public policy, and public policy can encompass an excessive interest award. Courts have occasionally rejected excessive interest claims on that ground, or in the context of the usury prohibitions.

The risk this creates falls on the claimant, after the award has already been won. A claim that complies with UAE law and does not fall foul of the usury provisions is the one that survives the enforcement stage. Supporting it means legal memoranda, expert opinions and precedents that establish the reasonableness and the legality of the interest sought, and addressing the point before a respondent raises it.

Related: Our commercial litigation team acts in UAE court proceedings.

The clause, the rules and the seat

Most of what decides an interest claim is settled before there is a dispute. Express contractual provisions should govern entitlement to pre-award and post-award interest, the rate, the method of calculation, and whether compound interest is permitted — and where it is, the formula and the compounding frequency. Provisions of that kind give an arbitral tribunal a clear mandate and reduce the uncertainty, leaving less for a respondent or a court to challenge later.

The choice of arbitration rules and of the seat deserves the same attention, because both influence how a tribunal approaches interest awards. Some institutional rules provide more explicit guidance on entitlement and calculation than others, which lets a party frame a claim with greater predictability. Our international arbitration practice in Dubai advises on that procedural design.

Where no such provisions exist, the claimant is left to argue entitlement from the general law and to support it with expert evidence, within the constraints UAE law imposes. That is a harder position, and it is avoidable at the drafting stage.

Our dispute resolution team supports clients seeking to recover interest in UAE arbitration.

Related Services: Explore our arbitration services for practical legal support in this area.

Disclaimer: This article is for informational purposes only and does not constitute legal advice.

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