AS Latvijas Krajbanka v Antonov

The substantive right to recover interest on damages is governed by the law applicable to the underlying obligation. The availability and exercise of an English procedural remedy may nevertheless depend on the applicable foreign law where Rome II applies. Under Rome II, the law applicable to the non-contractual obligation governs the assessment of damage and the remedy claimed. Where Latvian law supplied no pre-judgment procedural remedy, interest was unavailable for claims within Rome II. For claims outside Rome II, the court could exercise its discretion under section 35A of the Senior Courts Act 1981 to award compensatory interest. Commercial rates were appropriate for euro and US dollar losses. Post-judgment interest on foreign-currency debts was fixed under section 44A of the Administration of Justice Act 1970.

The claimant bank had obtained judgment for losses caused by the defendant’s dishonest breaches of duties under Latvian law. The judgment of 27 May 2016 left the amount and applicable rate of interest to be determined after further submissions and expert evidence on Latvian law.

The court considered whether interest was governed by Latvian or English law. The transactions fell under different regimes, including the Private International Law (Miscellaneous Provisions) Act 1995, Rome II, and common law choice-of-law rules. The central issues were the availability of pre-judgment interest, the appropriate commercial rates, and the rate of post-judgment interest on euro and US dollar judgment debts.

1. The court held that the existence of a substantive right to recover interest as a head of loss was governed by the law applicable to the underlying obligation. Whether an English procedural remedy was available was ordinarily governed by English law as the law of the forum. This distinction was drawn from Harding v Wealands [2007] 2 AC 1, Cox v Ergo Versicherung AG [2014] AC 1379 and Maher v Groupama Grand Est [2010] 1 WLR 1564.

2. For claims within Rome II, Articles 15(c) and 15(d) meant that Latvian law governed the assessment of damage and the remedy claimed, subject to the court’s procedural powers. The court considered the rate and availability of interest to be intrinsically linked with the assessment of the recoverable damages. Latvian law did not provide pre-judgment interest on the relevant claims, so no such interest was awarded under Rome II.

3. Claims outside Rome II remained subject to the English discretionary remedy under section 35A of the Senior Courts Act 1981. Following JSC BTA Bank v Ablyazov [2013] EWHC 867 (Comm), it was unjust to deny compensation merely because a comparable procedural remedy was unavailable in Latvia. Pre-judgment interest was therefore awarded at suitable commercial rates from the dates of loss.

4. For euro losses, the appropriate benchmark was the European Central Bank rate plus 2%. For US dollar losses, the appropriate rate was 2.5% above six-month US dollar LIBOR, following the approach in Thai Airways v KI Holdings [2015] EWHC 1476 (Comm).

5. Although section 17 of the Judgments Act 1838 prescribed 8% interest, section 44A of the Administration of Justice Act 1970 permitted a different rate for foreign-currency judgment debts. Applying the compensatory purpose identified in Novoship (UK) Ltd v Mikhaylyuk [2015] QB 499, post-judgment interest was fixed at 6% per annum.

6. Judgment was entered for the bank, including interest calculated at the specified pre-judgment rates. The judgment debt thereafter carried interest at 6% per annum.

First-instance determination of the appropriate pre-judgment and post-judgment interest following the court’s earlier judgment on liability and damages.