Update on the application of foreign statutory interest by English courts

The question of whether foreign penalty interest should be applied to personal injury compensation awards under foreign law in personal injury claims brought in the jurisdiction of England and Wales has been widely debated by English courts for some time. The debates have traditionally focused on trying to determine whether the inclusion of foreign penalty interest in claims should be considered a matter of substantive or procedural law. As might be expected, this 'dilemma' has given rise to numerous court rulings with a wide variety of judicial opinions on the matter.

It may be useful to provide a brief chronology of the most relevant case law on the issue in order to better understand the nature and scope of the debates:

• Maher v Groupama (2009) in which the court of first instance (also upheld on appeal) concluded that foreign (French) interest was a matter of substantive law and as such should be considered an integral part of the claimant's damages. However, the court also recognised the discretionary powers of the English judge on the matter and concluded that English procedural law was equally relevant in the application of foreign legal interests.
• Wall v Mutuelle de Poitiers Assurances (2014) in which the court concluded that, while the law of the place of the accident was applicable to the assessment of damages, procedural law should be applicable to the manner of proving foreign law. The judge determined that the issue of interest was at the discretion of the judge.
• Hyde v Sara Assicurazioni SpA (2014) specifically addressed the issue of interest, and the court relied on Maher v Groupama to reach the same conclusion: that the application of foreign interest is a matter for the discretion of the judge, regardless of whether or not the interest is considered to be procedural in nature.
• Scales v MIB (2020): in this case, the judge confirmed the existence of the English judge's discretion to determine the question of the application of foreign interest and subsequently decided, using his discretionary powers, to apply foreign (Spanish) interest to the claim, arguing that such interest would have been applied by the Spanish judge if the proceedings had been conducted in Spain. 
• Troke v Amgen (2020): in this case, the Court of Appeal concluded that the application of foreign interest was a procedural matter and therefore fell outside the scope of the Rome II Regulation. The application of foreign interest would therefore be at the discretion of the judge. 
• Nicholls, Woodward and Sedwick v Mapfre (2022): these cases concerned three claimants, Jane Nicholls, Sonia Woodward and Susan Sedgwick, who suffered injuries in Spain. The three claimants had brought legal proceedings in the jurisdiction of England and Wales against Mapfre, the insurer of those responsible for the damage. 

The courts of first instance in these decisions reached the same conclusion: that the issue of interest is procedural in nature and should therefore be subject to the discretion of the English judge. As such, the English judge is free to apply foreign interest regardless of its procedural nature.

As expected, Mapfre appealed the decisions on Woodward and Sedwick v Mapfre, leading to the most recent (joint) Court of Appeal decision in Nicholls, Woodward, and Sedgwick v Mapfre España Compañía De Seguros Y Reaseguros SA, (Court of Appeal - [2024] EWCA Civ 718), published on 27 June 2024.

The main legal issue considered by the appeal judge was whether the interest payable under Article 20(4) of Spanish Insurance Contract Law 50/1980 should be included in the compensation awarded to the claimants.

Mapfre argued that interest under Law 50/1980 was procedural and should be governed by the law of England and Wales. On the other hand, the claimants contended that statutory interest was substantive in nature and should be governed by Spanish law under Rome II.

The Court of Appeal, led by Lord Justice Dingemans, concluded that Spanish statutory interest should indeed be considered substantive and included in the claimant's damages award. The court also emphasised that statutory interest was an integral part of the assessment of damages under Spanish law, the purpose of which is to compensate fully for personal injury. The court also considered whether it was correct for English judges to use their discretionary powers to award interest at the equivalent interest rate payable under Spanish law, concluding that such an award was permissible and consistent with the approach taken in previous case law.

DHV (a protected party by his litigation friend WTX) v Motor Insurer’ Bureau (2025 EWHC 2002 (KB)
This was a personal injury claim arising out of a road traffic accident in Spain and brought against the MIB in England. Although primary liability of the uninsured Spanish driver, and therefore liability of the MIB had been admitted prior to the commencement of the trial, contributory fault and quantum remained in dispute. The claim was pleaded at over £3,000,000.

This case gave rise to the latest decision in a long line of cases in which the English courts have awarded Spanish penalty interest.

Once again, the High Court ruled that Spanish substantive law applied to the claimant’s (British resident) injury claim given that the accident which had caused him severe brain injuries occurred in Spain with a Spanish driver and a with vehicle normally based in Spain.

In particular, the judge determined that the payment of interest under the applicable Spanish law is a question of substantive law and relied on the Court of Appeal decision in Nicholls v Mapfre which said at paragraph 58:

“In my judgment the interest payable under Act 50/1980 is not a matter of procedure for the purposes of article 1(3) of Rome II, and is governed by the law applicable to the non-contractual obligation, namely the law of Spain.”

The judge determined that the relevant statutory provision for the calculation of penalty interest in claims against insurers in Spain is Article 20 of the 50/1980 Insurance Contract Act of 8 October 1980 (“Article 20”). Article 20(9) provides for a specific regime that applies to insurers in the position of a guarantee fund:

“When the Insurance Compensation Consortium has to satisfy the compensation as a guarantee fund, it shall be understood that it is in default only in the event that a period of three months has elapsed from the date on which it is claimed the payment of the compensation without the Consortium having proceeded to pay it in accordance with its specific regulations…”

However, Article 20(8) provides that no penalty interest may be imposed when the delay in the payment of a minimum amount is justified or not attributable to the insurer.

The judge considered that none of the two exceptions applied on the current case and as such imposed that penalty interest must be awarded to the claimant.

Conclusion

It seems clear that most judges who have considered the issue have agreed on the relevance of their discretionary powers to decide whether or not to apply foreign statutory interest.

Ultimately, it would appear that the substantive or procedural nature of the foreign interest is somewhat irrelevant in determining its application by the English judge. This is mainly because if an English judge, exercising his or her discretionary powers, concludes that the foreign judge would have applied the statutory interest rate to the proceedings in his or her country, then he or she would probably be inclined to impose it on the foreign insurers in the English proceedings as well.

In any event, although there seems to be a tendency for English judges to end up applying the foreign interest (for one reason or another), there is no guarantee that they will always do so. Ultimately, it will depend on the specific facts and probative value of the case and how they are presented to the judge.