Lucinda Spearman successful in High Court appeal on the law applicable to interest under Rome II

On 6 November 2020, Mr Justice Griffiths handed down judgment in Troke and Allen v Amgen Seguros Generales Compania de Seguros y Reaseguros SAU (formerly RACC Seguros Compania de Seguros v Reaseguros SA) [2020] EWHC 2976 (QB), the first High Court (or higher) judgment to determine conclusively the law applicable to the award of interest under Regulation (EC) 864/2007 (the Rome II Regulation). The court held that the lex fori governs the award of interest under Rome II.

The Claimants were in a road traffic accident in December 2014 in Spain. Liability was admitted, and it was agreed that the claim fell within the scope of Rome II. The only issue in dispute was the law applicable to the awards of interest claimed on special and general damages.

The Claimants argued that the applicable law was Spanish law as the lex causae, which, it was said, provided for a mandatory rate of interest to be awarded where an insurer failed to pay an interim payment within 3 months of the accident. They contended that the English court was accordingly compelled to award interest in accordance with Spanish law, giving them an interest award of over £13,500. The Defendant contended that awards of interest were a matter of procedure, and should accordingly be governed by the lex fori. In addition, the Defendant argued that the relevant Spanish law provision was itself procedural in nature.

The Defendant was successful at first instance, and the Claimants were awarded interest under section 69 of the County Courts Act 1984, at a rate of 2% on general damages from the date of service of the claim form and 0.5% on special damages from the date on which they were incurred. This gave the Claimants a total interest award of just over £260.

The Claimants appealed to the High Court, arguing that interest was a matter of substance for the lex causae. The Defendant cross-appealed, arguing that the Claimants had not proved their right to interest under Spanish law as a matter of fact and that the interest claims should therefore fail.

The High Court dismissed the Claimants’ appeal, holding that an award of interest was characterised as a procedural matter under Article 1(3) of Rome II. The law of the forum (i.e. the law of England and Wales) therefore applied. The relevant Spanish law on interest was also procedural in nature: it concerned the provision of an interim payment, which had the quality of procedural matters, and imposed a penalty interest rate, which was a procedural sanction.  There was no substantive right to interest at Spanish rates to be awarded under the lex causae. The judge was entitled to award interest at English rates. The cross-appeal did not fall to be considered.

In the future, therefore, interest in claims brought in England and Wales that fall within the scope of Rome II will be awarded in accordance with the English court’s wide discretionary powers under either section 69 of the County Courts Act 1984 or section 35A of the Senior Courts Act 1981. Although corresponding interest provisions under the lex causae are a factor which the court may take into account in exercising its power to award interest, the English court will retain a total discretion per the domestic legislation.

This decision will have a considerable impact on the approach to interest in Rome II cases in the future. It is also a welcome development in this complex area of law, clarifying considerable ambiguities in earlier authorities on the point (cf. for example: Maher and anr v Groupama Grand Est [2010] 1 WLR 1564; Knight v Axa Assurances [2009] EWHC 1900 (QB); XP v Compensa Towarzystwo SA and anr [2016] EWHC 1728 (QB); As Latvijas Krajbanka v Antonov [2016] EWHC 1679 (Comm)).

For a copy of the judgment, please click here.

Lucinda Spearman was instructed by Irwin Mitchell LLP and appeared for the successful Defendant.