Remedies - Scottish Construction Contracts - page 264

This perceived inadequacy has now been remedied by virtue of the Scottish Arbitra-
tion Rules, contained within Schedule One to the Arbitration (Scotland) Act 2010.
Rule 50 now provides that an arbitrator's award may order interest to be paid on any
amount in respect of any period up to the date of the award. This goes some way to
removing the uncertainty left following the decision in Elliott .
10.6.2 The Late Payment of Commercial Debts (Interest) Act 1998
heCourtofSessionin Elliott stated that it was a matter of concern that in modern
commercial contexts the law did not, in general, allow for interest to run on debts
from a date earlier than judicial demand (that is the date of service of a writ) and
that reform of the law on interest on debts was a matter for government. At or about
the time of the decision in Elliott , this was a subject upon which the government had
beenconsultingandthatprocessresultedintheenactmentoftheLatePaymentof
Commercial Debts (Interest) Act 1998, which came into force on 1 November 1998.
The Late Payment of Commercial Debts (Interest) Act 1998 ('the 1998 Act') was
introduced with a view to encouraging purchasers to pay on time and to compensate
suppliers where late payment persisted. The right to claim interest is to compensate
suppliers for not being able to make use of the money owed to them and to cover the
cost of increased borrowing resulting from late payment. The 1998 Act provides sup-
pliers with a statutory right to interest on late payments. The rate of interest currently
prescribed is 8% over the base rate of the Bank of England. The 1998 Act operates by
implying a term into contracts to which it applies to the extent that any qualifying
debt carries interest at the prescribed rate. A 'qualifying debt' is simply one where an
obligation to make payment of the contract price arises under a contract to which the
1998 Act applies, namely, a contract for the supply of goods and/or services where
boththepurchaserandsupplierareactinginthecourseofabusiness.heinterestto
which the supplier is entitled is simple interest.
All businesses and United Kingdom Public Authorities have the right to claim
interest at the statutory rate against all other businesses and United Kingdom
Public Authorities. A 'United Kingdom Public Authority' is defined at length in the
commencement order for the 1998 Act but, in general, it means any emanation of
the State.
A supplier is free to decide whether or not to claim interest. The statutory right is
not compulsory. The right to claim interest arises when a payment is late. A payment
is late when it is not made by the 'relevant day'. The relevant day is the date agreed for
payment or, in the event that no such date has been agreed, the last day of the period
of 30 days beginning with the later of the day of the supply/performance or the date
of notice to the purchaser of the amount of the debt - in practice, the invoice date.
Different rules exist where the contract requires advance payment. These are dealt
with in s.11 of the 1998 Act. The principle is that the 1998 Act does not give a right to
claim interest unless and until at least some of the goods have been delivered or part
of the service performed. In essence, the section 11 provisions allow for the right to
claim interest 30 days after delivery/performance.