Interest on Delayed Payments in Arbitration Awards under Spanish Law

Under Spanish arbitration law, interest on delayed payments is generally an arbitral remedy for the creditor’s loss caused by late payment, but the tribunal must identify the contractual or statutory basis for the interest, the date from which it accrues, the applicable rate, and—where relevant—the period extending beyond the award until actual payment.

The principal framework is found in the Spanish Arbitration Act 60/2003 (Ley de Arbitraje) together with the Spanish Civil Code, the Commercial Code, sector-specific legislation, and the parties’ contract. Article 34 of the Arbitration Act requires arbitrators to decide according to the parties’ chosen law and, in all cases, according to the contractual stipulations and applicable usages.

A particularly important point is that the arbitral tribunal’s award of interest is ordinarily a merits question, not something that a Spanish court may freely reconsider in an annulment action. Spanish constitutional and arbitral jurisprudence strongly restricts judicial review of the merits of an award.

1. Legal foundation for interest

A. Party autonomy and the contract

The starting point is normally the parties’ contract.

If the contract provides, for example:

“Any amount unpaid after its due date shall bear interest at 8% per annum until full payment,”

the arbitral tribunal will ordinarily apply that provision, subject to mandatory Spanish law.

Article 34 of the Arbitration Act is important because arbitrators must decide according to the contractual provisions and applicable law.

Thus, the tribunal normally asks:

1. Was the principal amount due?
2. When did it become payable?
3. Was payment made late?
4. Does the contract prescribe an interest rate?
5. Is the contractual interest clause legally valid?
6. Does the clause cover the period before the award?
7. Does it also cover the period after the award?

2. Statutory interest under the Spanish Civil Code

Where the contract does not establish a specific rate, the Spanish Civil Code becomes important.

Article 1108 Civil Code

Article 1108 CC provides the basic rule for monetary obligations in default: where the debtor is in delay and the obligation consists in payment of money, damages, absent a contrary agreement, ordinarily take the form of payment of the agreed interest and, where there is no agreed rate, the legal interest.

Consequently, an arbitral tribunal may award:

• contractual interest;
• statutory/legal interest;
• damages associated with delay where legally justified; and
• post-award interest where the applicable legal framework permits it.

The tribunal must nevertheless establish mora—default or delay—in accordance with the governing substantive law.

3. When does the debtor become liable for interest?

This is often the central issue.

The mere existence of an unpaid claim does not necessarily mean that interest automatically begins on the date asserted by the claimant.

The tribunal normally considers:

(a) Fixed contractual due date

If the contract states:

Payment shall be made within 30 days of invoice.

Interest may begin after expiration of those 30 days.

(b) Demand for payment

Where the obligation does not have a sufficiently determined due date, the creditor may need to place the debtor in default through a demand, depending upon the applicable substantive rules.

(c) Statutory provisions

Certain statutes contain their own special rules on when interest begins.

(d) Contractual conditions

A contract may provide that interest becomes payable only after:

• written notice;
• expiration of a grace period;
• certification of work;
• acceptance of an invoice;
• determination of an undisputed amount.

The tribunal must therefore interpret the particular contractual mechanism.

4. Pre-arbitration or pre-award interest

Pre-award interest compensates the claimant for the period between the moment the payment became overdue and the date on which the arbitral tribunal determines the claim.

For example:

Debt: €1,000,000
Due date: 1 January 2023
Award: 1 January 2026
Interest rate: 5%

The claimant may seek interest for the three-year period preceding the award.

The critical question is whether the underlying debt was already due and whether the debtor was legally in default.

Spanish jurisprudence recognizes the significance of whether the debt was actually due and whether circumstances prevented the debtor from being considered in mora.

5. Post-award interest

Post-award interest concerns the period:

from the award until actual payment.

This is particularly important in arbitration because an award may be challenged, voluntarily unpaid, or subject to enforcement proceedings.

A well-constructed award should therefore expressly specify:

• the principal;
• interest accrued to the award date;
• the interest rate after the award;
• the date from which post-award interest runs; and
• whether interest is simple or compound.

Spanish arbitral decisions demonstrate that tribunals can make detailed determinations concerning interest continuing until actual payment.

For example, STSJ Madrid 18/2022 (10 May 2022) concerned an insurance arbitration in which the award dealt with statutory moratory interest and a subsequent supplementary award corrected the end date for calculating interest so that it corresponded to the claimant's request for interest until complete payment.

6. Insurance disputes: special interest regime

Insurance disputes are particularly significant because Article 20 of the Spanish Insurance Contract Act 50/1980 establishes a special regime for moratory interest.

This can be considerably more stringent than ordinary Civil Code interest.

In STSJ Madrid 18/2022, the arbitral dispute concerned an insurance policy and claims for defence expenses. The claimant sought the statutory insurance interest until full payment. The tribunal awarded the relevant interest but initially limited its calculation to the date fixed for issuing the award. A supplementary award subsequently corrected this because the claim had sought interest until complete payment.

Significance

The case illustrates an important principle:

An arbitral tribunal should not truncate an interest claim at the award date when the applicable substantive law and the claimant's pleaded relief require interest to continue until payment.

It also demonstrates why the operative part of the award must be precise concerning the dies a quo and dies ad quem.

7. Contractual interest versus statutory interest

A tribunal must distinguish between:

Contractual interest

Interest expressly agreed by the parties.

Statutory interest

Interest imposed by legislation.

Moratory interest

Interest arising because the debtor has failed to perform a monetary obligation when due.

Compensatory interest

Interest intended to compensate for the economic consequences of being deprived of money.

The labels are not necessarily decisive.

The tribunal must examine the substance of the contractual provision and applicable substantive law.

8. The “in illiquidis non fit mora” issue

One traditional issue in Spanish private law is the relationship between liquidity of the debt and mora.

The debtor may argue:

“The amount was disputed and therefore I could not be in default.”

The creditor may respond:

“The debt was sufficiently determined and the debtor simply refused to pay.”

Spanish jurisprudence has developed the principle traditionally expressed as in illiquidis non fit mora, although its application is not mechanical.

The important question is whether the uncertainty surrounding the amount genuinely prevented the obligation from being regarded as due and enforceable.

STS 232/2011, 12 April 2011

This case is particularly relevant because the dispute involved interest associated with amounts dealt with in the context of an arbitration and subsequent transactions.

The Supreme Court considered arguments concerning:

• contractual moratory interest;
• whether the amount was sufficiently determined;
• whether there were objective reasons for non-payment;
• whether the debtor could rely upon procedural circumstances to avoid interest; and
• the distinction between contractual interest and general principles concerning mora. 

Principle

A contractual interest provision can be decisive. The tribunal must determine whether the contractual conditions triggering interest have been satisfied rather than simply applying a general formula concerning liquidity.

9. Absence of a fixed maturity date

An important limitation arises where the underlying obligation has no sufficiently determined maturity date.

STS 2612/2008, 30 May 2008

The Spanish Supreme Court considered a dispute involving participation accounts and claims for interest. It held, in substance, that interest could not simply be awarded where there was no established maturity date and consequently no sufficient basis for mora.

Arbitration significance

An arbitrator should therefore avoid assuming:

“Principal awarded = interest automatically due from the date originally claimed.”

Instead, the tribunal should determine:

When did the obligation become payable?

and then:

When did legal default begin?

This is particularly important in:

• construction claims;
• valuation disputes;
• shareholder disputes;
• earn-out claims;
• accounts between partners;
• damages claims; and
• claims requiring substantial contractual calculations.

10. Interest where the principal itself is disputed

A claimant frequently asks for interest from the date of an alleged breach even though the respondent disputes:

• liability;
• the amount;
• contractual entitlement;
• completion of works;
• quality of performance; or
• the calculation of the debt.

The tribunal must distinguish between a genuinely uncertain debt and a debt that is merely disputed by the debtor.

A disputed debt does not necessarily cease to generate interest.

The key issue is whether the substantive law treats the obligation as due notwithstanding the dispute.

11. Interest clauses in commercial contracts

Commercial contracts commonly contain clauses such as:

• “Euribor + 5%”;
• “8% per annum”;
• “statutory interest plus two percentage points”;
• “interest at the maximum rate permitted by law”;
• “late payment interest of 1% per month.”

The tribunal should examine whether the provision is:

1. valid;
2. applicable to the particular payment;
3. triggered by the particular breach;
4. consistent with mandatory law; and
5. sufficiently determinable.

The tribunal should also avoid awarding both contractual interest and statutory interest for the same period and same economic purpose, unless the governing law clearly permits cumulative recovery.

12. Interest under the Late Payment Act

For commercial transactions, Law 3/2004 on combating late payment in commercial transactions may become relevant.

This legislation establishes a special framework for late payment in qualifying commercial transactions.

Consequently, an arbitral tribunal dealing with:

• supply contracts;
• professional services;
• construction invoices;
• commercial sales;
• subcontracting;
• distribution agreements;

should determine whether the transaction falls within the statute.

The statutory regime can become particularly important where the contract is silent on interest.

13. Compound interest

Spanish law distinguishes between ordinary interest and capitalization of accrued interest.

The general principle concerning anatocism means that unpaid interest does not automatically become principal for purposes of further interest merely because it remains unpaid.

Contractual provisions, however, can alter the position within the limits of mandatory law.

An arbitral tribunal should therefore expressly state whether:

• interest is simple;
• interest is capitalized periodically;
• accrued interest becomes principal;
• capitalization is contractually authorized; or
• only post-award interest applies to the principal awarded.

Failure to distinguish these matters can create serious enforcement disputes.

14. Interest and the arbitral tribunal's powers

Article 34 of the Arbitration Act gives the tribunal substantial authority to determine the substantive dispute according to the applicable law and contract.

But this authority is not unlimited.

An arbitrator cannot simply invent an interest rate without legal or contractual justification.

The tribunal should identify:

legal source → triggering event → applicable rate → calculation period → capitalization rule.

A reasoned award should preferably contain a separate interest analysis.

15. Judicial review of an arbitral interest award

This is one of the most important aspects of Spanish arbitration.

A party dissatisfied with the rate of interest cannot ordinarily transform an annulment action into an appeal on the merits.

Spanish courts repeatedly emphasize that an action for annulment under Article 41 of the Arbitration Act is not a second instance.

STSJ Madrid 28/2024, 30 May 2024

The Madrid High Court reiterated that annulment proceedings do not permit a full re-examination of the factual and legal conclusions reached by arbitrators. Judicial intervention is confined to the statutory grounds of annulment.

The same approach is reflected in earlier Madrid jurisprudence, including the line of cases beginning with the court's 3 February 2012 decision and subsequent decisions in 2014 and 2015.

Practical consequence

If the tribunal reasonably interprets the contract and awards 8% interest, the losing party generally cannot ask the court simply to substitute 5% because the court considers 5% preferable.

There must be an Article 41-type defect, rather than merely disagreement with the merits.

16. Constitutional protection of arbitral autonomy

STC 46/2020, 15 June 2020

The Constitutional Court strongly emphasized the distinction between judicial proceedings and arbitration and the importance of respecting the parties' procedural autonomy.

The case concerned an arbitral award and subsequent annulment proceedings. Although it was not principally an interest case, it is important to understanding the judicial treatment of arbitral awards.

The Constitutional Court rejected an excessive conception of public policy that would permit courts to interfere with the substance of arbitral determinations.

Importance for interest

An argument that:

“The arbitrator calculated interest incorrectly”

does not automatically establish a public-policy violation.

There must be a genuine statutory ground for annulment.

17. STC 65/2021 and the limits of judicial review

The Spanish Constitutional Court's subsequent jurisprudence further reinforced the restrictive approach.

The principle is that where the arbitrator has actually reasoned the decision, a reviewing court should not replace the arbitrator's legal assessment merely because it would have decided differently.

This principle was expressly recalled in later Constitutional Court jurisprudence.

Application to interest

If an award explains:

• why contractual interest applies;
• why the debt was due;
• why mora began on a particular date;
• why a particular rate applies; and
• how the interest was calculated,

judicial intervention becomes substantially more difficult.

18. STC 146/2024 / later Constitutional Court approach

The Constitutional Court's more recent jurisprudence has continued to reject the use of public policy as a mechanism for reviewing the substantive correctness of an arbitral award.

The Constitutional Court has stressed that where the arbitrator reasons the decision, the reviewing court should not undertake its own assessment of the applicable law or evidence merely because it disagrees with the tribunal.

Thus, an interest award will ordinarily survive annulment proceedings if:

• the tribunal had jurisdiction;
• the parties had an opportunity to present their positions;
• the interest issue was within the arbitration agreement;
• the tribunal provided adequate reasoning; and
• no genuine Article 41 ground is established.

19. STSJ Madrid 18/2022 — particularly important interest case

This deserves separate emphasis because it is directly concerned with interest.

The dispute arose from an insurance arbitration. The arbitral tribunal awarded the amounts claimed and moratory interest under Article 20 of the Insurance Contract Act.

The tribunal's initial award treated the end of the interest period as the date connected with issuance of the award. A supplementary award subsequently corrected the calculation because the claimant had requested interest until complete payment.

The Madrid High Court examined the award in the context of an annulment challenge.

Lessons

This case illustrates four important points:

1. Interest can continue after the award.
2. The operative part of the award must accurately identify the end date.
3. A supplementary/corrective award may be relevant where the original award contains an error in the treatment of interest.
4. The tribunal must pay attention to the exact relief requested by the claimant.

20. STS 232/2011 — contractual interest and objective reasons for delay

As noted above, STS 232/2011 involved arguments concerning interest after an arbitral determination and contractual provisions regulating interest.

The Supreme Court considered whether there were objective reasons for non-payment and whether the contractual interest mechanism had been triggered.

Principle

Where the parties have contractually regulated interest, the tribunal should first interpret and apply that contractual regime.

The debtor cannot automatically escape contractual interest simply by saying that the amount was disputed.

But if the contractual clause makes interest conditional upon the absence of objectively justified reasons for non-payment, that condition must itself be examined.

21. STS 2612/2008 — no mora without a due obligation

In STS 2612/2008, the Supreme Court dealt with a claim in which interest could not simply be imposed because there was no established maturity date giving rise to mora.

Principle

The existence of a monetary claim is not sufficient.

There must be a legally recognizable basis for concluding that the debtor was late.

This is especially relevant to arbitration involving:

• valuation mechanisms;
• profit-sharing arrangements;
• accounts between partners;
• contingent consideration;
• damages that require judicial/arbitral assessment.

22. STSJ Madrid 47/2023

In STSJ Madrid 47/2023, 12 December 2023, the proceedings concerned an arbitral award involving construction-related monetary claims and interest.

The challenge referred to an interest mechanism under which interest was calculated at 8% per annum, with different starting points for different portions of the amount awarded.

The case is useful because it demonstrates that arbitral awards can employ different dies a quo for different components of the principal, where justified by the contractual arrangement and factual circumstances.

For example:

• 85% of the amount might generate interest from the contractual payment date;
• another 15% might generate interest only from notification of the award.

The tribunal must therefore avoid treating the entire award as automatically having one uniform interest commencement date.

23. STSJ Madrid 10 March 2026

A recent Madrid arbitration decision also illustrates the practical use of post-award interest.

In the 10 March 2026 decision, the underlying award required interest at 3% annually from a specified period after the relevant payment or notification event until payment.

This demonstrates that arbitral awards may expressly create a continuing interest obligation, rather than simply calculating interest up to the date of the award.

24. At least six significant cases — consolidated table

25. How an arbitrator should calculate interest

A properly reasoned award should normally proceed in the following sequence.

Step 1 — Determine the principal

Example:

Principal = €2,000,000

Step 2 — Identify the due date

Example:

Contractual due date = 1 January 2023

Step 3 — Determine the date of mora

Example:

Mora begins = 15 January 2023

because the contract contains a 14-day grace period.

Step 4 — Identify the applicable rate

For example:

Contractual rate = 8% annually

Step 5 — Calculate pre-award interest

Suppose the award is issued on 1 January 2026.

Interest period:

15 January 2023 → 1 January 2026

Step 6 — Determine post-award interest

The tribunal should state expressly whether:

“Interest at 8% per annum shall continue until complete payment.”

or whether a different statutory/post-award rate applies.

Step 7 — Address capitalization

The award should state whether interest is:

• simple;
• compounded;
• capitalized annually; or
• otherwise treated under the applicable law.

26. Example of an arbitral interest formula

Assume:

• Principal: €1,500,000
• Rate: 6%
• Period: 730 days

Simple interest:

Interest = Principal × Rate × Days / 365

Therefore:

€1,500,000 × 0.06 × 730 / 365 = €180,000

Total:

€1,680,000

If interest continues after the award, the tribunal should expressly state the rate and mechanism applicable after the award.

27. Can an arbitrator award interest when the claimant did not specifically quantify it?

This depends upon the pleadings, applicable substantive law, and procedural circumstances.

The tribunal should generally remain within the relief requested and the issues submitted to arbitration.

An award that grants interest beyond what was pleaded may create a serious argument concerning excess of jurisdiction or procedural fairness.

The STSJ Madrid jurisprudence demonstrates the importance of examining exactly what the claimant requested concerning the interest period. In STSJ Madrid 18/2022, the request expressly sought interest until complete payment, which became important in correcting the original award's treatment of the end date.

28. Can a tribunal award interest on interest?

Not automatically.

The tribunal must distinguish:

Principal → interest

from

accrued interest → further interest.

Capitalization requires an appropriate legal or contractual basis.

A tribunal should therefore expressly identify whether the award is calculating:

interest solely on principal,

or:

interest on principal plus previously accrued interest.

This distinction becomes particularly important in long-running arbitrations.

29. Can a court reduce an excessive arbitral interest rate?

The answer depends on the applicable substantive law and the circumstances.

A court hearing an annulment action does not ordinarily possess a general appellate power to substitute its preferred interest rate.

The fundamental distinction is:

Ordinary merits disagreement

“8% is too high; 5% would have been more appropriate.”

This ordinarily does not justify annulment.

Genuine legal defect

“The tribunal awarded interest contrary to a mandatory statutory prohibition, outside the arbitration agreement, or without observing a fundamental procedural guarantee.”

This can potentially engage Article 41.

The restrictive approach to annulment is repeatedly confirmed by the Spanish courts.

30. Interest and public policy

Interest can theoretically raise public-policy questions in exceptional circumstances, particularly where mandatory consumer or insurance protections are implicated.

But public policy is not a general appellate mechanism.

The Constitutional Court's jurisprudence is particularly important here. STC 46/2020 and subsequent cases emphasize that courts should not use public policy to review the substance of an arbitral determination.

Therefore, an ordinary disagreement over:

• interest rate;
• calculation methodology;
• starting date;
• ending date;

will generally remain within the arbitral merits determination unless accompanied by a genuine Article 41 defect.

31. Practical drafting requirements for an arbitral award

A Spanish-seated tribunal should ideally include a dedicated section titled “Interest” and specify:

1. Legal basis — contract, Civil Code, Commercial Code, special legislation.
2. Principal amount — exact figure.
3. Maturity date — when payment became due.
4. Date of mora — when default commenced.
5. Rate — contractual or statutory.
6. Period before award — exact dates.
7. Interest accrued — exact amount.
8. Post-award rate — if applicable.
9. Post-award commencement date.
10. Capitalization — whether permitted.
11. Currency — especially in international arbitration.
12. Tax treatment, where relevant.
13. Treatment of partial payments.
14. Interest on costs, if legally and contractually justified.

This minimizes later disputes during enforcement.

32. Special importance of partial payments

Suppose the debtor pays:

• €500,000 before the award;
• €500,000 after the award;
• €1,000,000 remains unpaid.

The tribunal should specify how payments are allocated.

Questions can include whether payments first discharge:

1. costs;
2. accrued interest;
3. principal;

or whether the contract establishes another allocation mechanism.

Without such clarification, enforcement calculations may become contentious.

33. International arbitration seated in Spain

For international arbitration seated in Spain, Article 34 is particularly important.

The tribunal applies the legal rules chosen by the parties. If the parties have not chosen applicable rules, the tribunal applies the rules it considers appropriate, while also respecting contractual stipulations and applicable usages.

Therefore, an international tribunal seated in Spain may be applying:

• Spanish law;
• English law;
• French law;
• Swiss law;
• another substantive law;

while Spanish arbitration law governs the arbitration's procedural framework as the law of the seat.

The interest question must therefore be separated into:

(1) substantive entitlement to interest, and
(2) Spanish procedural/arbitration law governing the tribunal and award.

34. Key distinction: seat versus applicable substantive law

This is crucial.

If the seat is Madrid, but the contract states:

“This Agreement shall be governed by English law,”

the tribunal does not automatically apply Spanish substantive interest law merely because the seat is Spain.

The tribunal must determine the applicable substantive law pursuant to the parties' choice.

Conversely, Spanish arbitration law governs matters falling within the law of the arbitral seat, including the framework governing the arbitral process and annulment.

35. Enforcement consequences

An interest provision should be sufficiently precise to allow the enforcing court to determine the amount owed without reopening the merits.

A problematic award might simply state:

“The respondent shall pay appropriate interest.”

That is undesirable.

A better formulation specifies:

“The Respondent shall pay interest at 8% per annum on €2,000,000 from 15 January 2023 until the date of actual payment, calculated on a simple basis of 365 days per year.”

Such precision assists:

• voluntary compliance;
• enforcement;
• calculation by court officers;
• cross-border recognition;
• avoidance of subsequent disputes.

36. Major principles emerging from Spanish jurisprudence

The cases collectively establish the following propositions:

Principle 1 — Interest follows the governing substantive law

The tribunal must identify the legal or contractual basis for interest.

Principle 2 — Mora matters

A monetary claim does not automatically produce moratory interest merely because the claimant says money was owed.

Principle 3 — Contractual interest is highly important

Where parties have agreed an interest mechanism, the tribunal should interpret and apply it.

Principle 4 — Liquidity and maturity can matter

Where the debt was not legally due or its maturity was genuinely undetermined, moratory interest may not begin as claimed.

Principle 5 — Interest can continue after the award

Where legally and contractually justified, the award can provide for interest until actual payment.

Principle 6 — Different amounts can have different interest periods

The tribunal may establish different dies a quo for different components of the claim.

Principle 7 — Annulment is not an appeal

Spanish courts cannot normally revisit the tribunal's interest calculation merely because they disagree with it.

Principle 8 — Reasoning is important

The award should explain the basis of the interest calculation sufficiently to demonstrate that the tribunal actually decided the issue.

37. Conclusion

Under Spanish arbitration law, interest on delayed payments is a substantive component of the monetary relief that an arbitral tribunal can award, provided that it is supported by the parties' contract or the applicable substantive law.

The tribunal should carefully distinguish between:

contractual interest → statutory interest → moratory interest → pre-award interest → post-award interest → interest on interest.

The most important practical questions are:

When did the debt become due?

When did mora begin?

What interest rate governs?

Does the contractual clause control?

What happens between the commencement of default and the award?

What happens from the award until actual payment?

Spanish jurisprudence, particularly STS 232/2011, STS 2612/2008, STSJ Madrid 18/2022, STSJ Madrid 47/2023, STSJ Madrid 28/2024, STC 46/2020, STC 65/2021 and STC 146/2024, demonstrates that interest questions are closely connected to contractual interpretation, mora, the applicable substantive law, and the limits of judicial review.