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Interest (Scotland) Bill

BACKGROUND

In November 2003 the then Minister for Justice, Cathy Jamieson  made a reference to the Scottish Law Commission (SLC) asking them to carry out a review of the law on interest on debt and damages:

“To examine the law of Scotland relating to interest on claims for payment of money arising from contractual and other obligations, including claims within the jurisdiction of tribunals and courts or submitted for decision to arbitration, adjudication or some other form of dispute resolution, and to make recommendations as to possible reform of the law.”

As part of that work the SLC published their ‘Discussion Paper on Interest on Debt and Damages’ (Discussion Paper No. 127) in January 2005.

Following their discussion paper the SLC published their Report including a draft bill in September 2006 The report is here. The SLC found five main areas of concern in the existing law on interest on claims for payment of money:

  • the treatment of interest is inconsistent between claims arising from debt and claims arising from damages and this is unjustified;
  • in debt claims, interest is not payable unless the sum has been “wrongfully withheld”. For contractual debts this means that interest does not begin to run from the date payment fell due but rather from the date on which court proceedings were commenced;
  • uncertainty of when interest starts to run on particular heads of claims for damages;
  • the law is unclear in relation to interest in other circumstances; and
  • the current judicial rate of interest (8%) is changed infrequently so does not represent commercial rates of interest and is not truly compensatory.

The Scottish Government consulted in January 2008.

Consultation document here

Analysis of responses here

The non-confidential responses to our consultation are here

CONCLUSION

The Scottish Government concluded not to proceed with the Interest (Scotland) Bill.  The reasons for this decision can be found in a letter to the Scottish Law Commission here

In that response we set out our intention to consider the provisions relating to interest on damages when we come to reform the law on damages generally.  As part of a wider consultation on ‘Civil Law of Damages: Issues in Personal Injury’ the Scottish Government asked whether there would be merit in reviewing again the existing approach to interest on damages for personal injury.  The overwhelming majority of those who provided a view considered that there would be merit in reviewing separately the existing approach to interest on damages for personal injury.   However, the wider policy on damages for personal injury is still under consideration and we have no firm timescale for taking forward any legislation.

I’ve attached below links to the consultation paper and the analysis referred to above.

Consutlation document here

Analysis of responses here