OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195
Part 36 offers are an essential part of any litigator’s armoury. A Court of Appeal decision may mean higher awards of interest for claimants who make well-judged Part 36 offers.
The Court of Appeal has held that a defendant should have been ordered to pay enhanced interest on both damages and costs at the maximum rate of 10% above base rate where it failed to accept the claimant’s Part 36 offer, overturning a High Court decision awarding a lower rate.
The Court of Appeal’s decision gives guidance on how the court should exercise its discretion to award interest at up to 10% above base rate where a claimant beats its own Part 36 offer, overturning suggestions in previous case law that an award of enhanced interest under Part 36 should be purely compensatory.
Instead, an award may be pitched at a level designed to incentivise defendants to act reasonably in seeking to settle litigation and to mark the court’s disapproval of any unreasonable or improper conduct.
The judgment makes it clear that the level of interest must be proportionate to the circumstances of the case, and that 10% above base rate should not be regarded as a starting point. However, the recognition that an award of enhanced interest under Part 36 need not be entirely compensatory may mean that the court is prepared to award higher levels of interest than previously where a claimant beats its own Part 36 offer, particularly where the defendant has acted unreasonably.
The Court of Appeal did however stress that appeals on issues of this kind should in future be rare, as the judge’s discretion as to the appropriate rate of enhanced interest is a wide one.