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Interest (Scotland) Bill
[Consultation Draft]

Contents

Section

1 Entitlement to interest
2 Circumstances in which interest not payable
3 Starting date generally
4 Starting date: certain obligations where provision is made for date of payment of principal sum
5 Starting date: certain obligations where no such provision is made
6 Starting date: contracts of loan
7 Starting date: damages
8 Starting date: fees and outlays in proceedings
9 Calculation of interest
10 Principal sum payable in foreign currency
11 Power of court to waive or reduce interest
12 Tenders
13 Application of Act
14 Ancillary provision
15 Modification and repeal of enactments
16 Orders
17 Interpretation
18 Short title and commencement

Schedule 1 -Modification of Enactments
Schedule 2 -Repeals

Interest (Scotland) Bill
[CONSULTATION DRAFT]

An Act of the Scottish Parliament to make provision for the creation of an entitlement to interest in certain circumstances; to change the law on entitlement to interest on damages payments; to make provision about interest and tenders in proceedings; and for connected purposes

1 Entitlement to interest

(1) A person entitled to payment of a sum of money is entitled to interest on that sum in accordance with the provisions of this Act.

(2) Interest to which a person is entitled under subsection (1) is in this Act referred to as "statutory interest".

2 Circumstances in which interest not payable

Where a person (in this section referred to as "the creditor") is entitled to payment of a sum of money from another person (in this section referred to as "the debtor"), statutory interest is not due on that sum if-

(a) there is express or implied agreement between the creditor and the debtor-

(i) that interest is to be due on that sum on a basis different from that provided for in this Act; or
(ii) that no interest is to be due on that sum;

(b) the payment represents a fine, penalty or tax due to a public authority;

(c) any enactment (other than this Act or the Late Payment of Commercial Debts (Interest) Act 1998 (c.20))-

(i) makes provision for interest to be due on that sum; or
(ii) provides that no interest is due on that sum;

(d) interest is due on that sum by virtue of that Act of 1998 and is claimed as so due by the creditor; or

(e) the payment is of a type specified by the Scottish Ministers by order.

3 Starting date generally

(1) In a case where a starting date falls to be ascertained in accordance with section 4, 5, 6, 7 or 8, statutory interest runs for the period beginning on the day after that date and ending on the day or days on which the principal sum is paid.

(2) In any other case, statutory interest runs for the period beginning on the day after the date on which the principal sum is due and ending on the day or days on which that sum is paid.

4 Starting date: certain obligations where provision is made for date of payment of principal sum

(1) Where a contract (other than a contract of loan or a contract of cautionry) makes provision as to the date on which any payment under the contract is due, that date is the starting date in respect of that payment.

(2) In the case of a cautionary obligation, where provision is made as to the date on which any payment due in satisfaction of the cautioner's right of relief against the principal debtor or any co-cautioner is due, that date is the starting date in respect of that payment.

5 Starting date: certain obligations where no such provision is made

(1) Where-

(a) a contract of a type referred to in subsection (2) makes no provision; or

(b) in the case of an obligation of a type referred to in subsection (3) no provision is made,

as to the date on which any payment due under the contract, or the obligation, and mentioned in that subsection is due, the starting date in respect of that payment is to be ascertained in accordance with whichever of those subsections is applicable.

(2) In the case of a contract for the supply of goods or services (other than a contract of employment or apprenticeship), the starting date in respect of any payment due under the contract is the date 30 days after whichever is the later of-

(a) the day on which the supplier's obligation is performed; and

(b) the day on which the other party has notice of-

(i) the amount of the debt; or
(ii) where that amount is unascertained, the sum which the supplier claims is the amount of the debt.

(3) In the case of a cautionary obligation, the starting date in respect of any payment due in satisfaction of the cautioner's right of relief against the principal debtor or any co-cautioner is the day on which the payment in respect of which the right of relief arises is made by the cautioner.

6 Starting date: contracts of loan

In the case of a contract of loan, the starting date is the day on which the loan is made.

Starting date: damages(1) Where statutory interest is due on a sum of money payable as damages, the starting date in respect of any part of that sum representing a head of loss is the day on which the loss in question is sustained.

(2) Nothing in this section prevents a court from treating a loss (including non-patrimonial loss) in respect of which an award of damages is made as having been sustained over a period of time.

8 Starting date: fees and outlays in proceedings

Where a party to proceedings is liable to pay any fees or outlays incurred by another party to those proceedings, the starting date is the day on which they are paid by the other party.

9 Calculation of interest

(1) Subject to section 10, statutory interest in respect of any period runs at the statutory rate for that period.

(2) Subject to subsection (3), statutory interest is simple interest.

(3) Where a court orders payment of a sum of money on which statutory interest is to run, interest starts to run on the day after the date of the order on both-

(a) the principal sum; and

(b) any interest accrued on that sum as at that date.

(4) Subsection (3) does not apply in respect of-

(a) an order authorising execution in Scotland of a foreign judgment; or

(b) any order made in connection with, or in consequence of-

(i) the registration of a document for execution; or
(ii) a bill protested for non-payment by a notary public.

10 Principal sum payable in foreign currency

(1) Where a principal sum is payable in a foreign currency, statutory interest on that sum runs at-

(a) the rate 1.5% per year over such rate as is, in relation to the foreign currency in question, that currency's nearest equivalent to the official dealing rate; or

(b) if it is not possible to identify such an equivalent, such rate as best meets the interests of justice.

(2) The Scottish Ministers may by order amend paragraph (a) of subsection (1) so as to substitute a different percentage for the percentage for the time being specified there.

11 Power of court to waive or reduce interest

(1) If a court considers that it would be in the interests of justice to do so, having regard in particular to any conduct which it considers relevant of the person to whom statutory interest would be payable, it may decide that-

(a) statutory interest which, but for this section, would be payable is not to be payable;

(b) an amount payable as statutory interest is to be less than, but for this section, it would be.

(2) In subsection (1), "conduct" includes any act or omission (whether before or after the time when the principal sum fell due for payment).

12 Tenders

(1) Where a tender is made in the course of any proceedings, the tender is, unless it states otherwise, in full satisfaction of any claim for interest in the action by any person in whose favour the tender is made.

(2) Where a court is considering whether a sum of money payable under an order made by it is equal to or greater than an amount tendered in the proceedings, it is to leave out of account any element of the sum which represents interest in respect of the period between the making of the tender and the date of the order.

13 Application of Act

This Act binds the Crown.

14 Ancillary provision

(1) The Scottish Ministers may by order make such incidental, supplemental, consequential, transitional, transitory or saving provision as they consider necessary or expedient for the purposes, or in consequence, of this Act or for giving full effect to any of its provisions.

(2) An order under subsection (1) may modify any enactment.

15 Modification and repeal of enactments

(1) Schedule 1, which modifies enactments, has effect.

(2) The enactments mentioned in the first column of schedule 2 are repealed to the extent specified in the second column.

16 Orders

(1) Any power conferred by this Act on the Scottish Ministers to make orders-

(a) must be exercised by statutory instrument;

(b) may be exercised so as to make different provision for different purposes.

(2) A statutory instrument containing an order made under this Act (except an order made under section 18(2)) is, subject to subsection (3), subject to annulment in pursuance of a resolution of the Scottish Parliament.

(3) A statutory instrument containing-

(a) an order under section 2(e);

(b) an order under section 14 containing provisions which add to, replace or omit any part of the text of an Act,

is not to be made unless a draft of the instrument has been laid before, and approved by resolution of, the Scottish Parliament.

17 Interpretation

(1) In this Act-

"court" includes any tribunal, arbiter or adjudicator;

"the official dealing rate" means the rate announced from time to time by the Monetary Policy Committee of the Bank of England ("the Bank") and for the time being in force as the official dealing rate, being the rate at which the Bank is willing to enter into transactions for providing short term liquidity in the money markets;

"principal sum" means a sum of money on which statutory interest is payable;

"starting date" means the date on which statutory interest on a sum of money begins to run;

"statutory interest" has the meaning given by section 1(2);

"the statutory rate" means the rate 1.5% per year over the official dealing rate;

"supply" includes "sale" and "supplier" includes "seller".

(2) The Scottish Ministers may by order amend the definition of "the statutory rate" in subsection (1) so as to substitute a different percentage for the percentage for the time being specified there.

18 Short title and commencement

(1) This Act may be cited as the Interest (Scotland) Act 2007.

(2) This Act (other than sections 14, 16, 17 and this section) comes into force in accordance with provision made by the Scottish Ministers by order.

Schedule 1
(introduced by section 15(1))

Modification of Enactments

Trusts (Scotland) Act 1921 (c.58)

1 In section 29 of the Trusts (Scotland) Act 1921, after the word "interest" insert "at the statutory rate (within the meaning of the Interest (Scotland) Act 2007 (asp 00))".

Conveyancing and Feudal Reform (Scotland) Act 1970 (c.35)

2 In paragraph 7(3) of Schedule 3 to the Conveyancing and Feudal Reform (Scotland) Act 1970, for the words "bank rate" substitute "statutory rate (within the meaning of the Interest (Scotland) Act 2007 (asp 00))".

Law Reform (Miscellaneous Provisions) (Scotland) Act 1980 (c.55)

3 In section 18 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1980, for the words from "same rate" to "that decree or extract" substitute "statutory rate (within the meaning of the Interest (Scotland) Act 2007 (asp 00))".

Bankruptcy (Scotland) Act 1985 (c.66)

4 In section 51(7)(a) of the Bankruptcy (Scotland) Act 1985, for the words "prescribed rate" substitute "statutory rate (within the meaning of the Interest (Scotland) Act 2007 (asp 00))".

Debtors (Scotland) Act 1987 (c.18)

5 In the definition of "specified rate" in section 73(1) of the Debtors (Scotland) Act 1987, for paragraphs (a) and (b) substitute "means the statutory rate (within the meaning of the Interest (Scotland) Act 2007 (asp 00))".

Late Payment of Commercial Debts (Interest) Act 1998 (c.20)

6 In section 3(2) of the Late Payment of Commercial Debts (Interest) Act 1998, after the words "of this Act" insert "or the Interest (Scotland) Act 2007 (asp 00)".

Adults with Incapacity (Scotland) Act 2000 (asp 4)

7 In each of section 81(1) of, and paragraph 8(7) of schedule 2 to, the Adults with Incapacity (Scotland) Act 2000, for the words "rate fixed by Act of Sederunt as applicable to a decree of the sheriff" substitute "statutory rate (within the meaning of the Interest (Scotland) Act 2007 (asp 00))".

Schedule 2
(introduced by section 15(2))

REPEALS

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