[...]

80." Dr. Reineccius claimed interest on the additional compensation due under the Partial Award, reasoning that on 8 January 2001 he had become "a creditor of the Bank. Therefore, the compensation due to me has to carry interest . . . the money market interest in Swiss francs on that particular date . . ."120 which he quantified as no less than 3,25% per annum.121 First Eagle maintained it was entitled to interest from 8 January 2001 on the outstanding compensation payment, as well as on its costs, fees, and expenses, at a rate of at least 7% compounded monthly. Mr. Mathieu also requested a minimum of 7% interest with "la capitalisation des intérêts sur une base mensuelle".122 First Eagle and Mr. Mathieu base their claim for interest on the principle of full compensation. As Mr. Mathieu contended:

En tout état de cause, les intérêts ayant pour fonction d' "( . .) indemniser un créancier de I'absence, pendant un certain temps, des fonds qui lui sont dus (. . .)", le Demandeur a droit aux intérêts portant sur la somme qui aurait duêtre versée le 8 janvier 2001.123

81." First Eagle and Mr. Mathieu argued that the measure of interest should be the return the Bank would have received on the retained funds. First Eagle also reasoned that 7% interest reflects the minimum return First Eagle would have expected to earn on alternative investments of the same risk had it received full compensation when it was due. First Eagle argued that were it paid less than 7% interest, the Bank would earn a windfall from the compensation withheld and thereby be unjustly enriched. First Eagle asserted:

A reasonable rate of interest should first and foremost reflect the fact that the Bank retained part of the compensation payment due the private shareholders and had the funds available for its own use as equity.124

82." Similarly, Mr. Mathieu stated:

Le Tribunal tiendra également compte du fait que la Banque a réalisé une économie substantielle en retenant le complément d'indemnité dû aux actionnaires évincés et qu'elle a pu faire libre usage de ce capital obtenu sans rien débourser entre la date de rachat forcé et la date où elle devra effectivement verser le complément d'indemnité.125

83." First Eagle and Mr. Mathieu claimed alternatively that the interest rate should be the rate used by J.P. Morgan to discount future dividend payments in its Dividend Perpetuity Model126 analysis, because payment of interest is analogous in this case to a dividend payment.127

84." Mr. Mathieu also claimed interest on the original payment of compensation from 8 January 2001.128

85." The Bank responded at the May 2003 Hearings129 that an award of interest was not provided for by the Bank's Statutes, the lex specialis of the Arbitration, nor, argued the Bank, was it mandated under international law. However, if the Tribunal should award interest on the additional compensation due under the Award, the Bank took the view that it should pay simple interest at the three-month Swiss franc LIBOR (London Interbank Offered Rate) on the additional compensation the Bank has agreed to pay to all the former private shareholders.

86." The Bank argued:

[T]he Bank's lex specialisdoes not speak directly to the question of interest. However, Article 18A of the Statutes clearly provides that compensation after the 8 January 2001 share recall will be paid to former private shareholders only after they present their share certificates to the Bank and does not provide for the accrual or payment of interest during the open-ended period for presentation of share certificates, verification by the Bank and payment of the recall price. Nor is an award of interest required under general principles of international law. Should the Tribunal nonetheless make such an award with respect to the additional amount of compensation, it should be made at the Swiss (noncompounded) market rate, since the compensation is payable in Swiss francs and Switzerland is the place where payment is due.130

87." Further, the Bank addressed the Claimants' argument that interest should be determined by reference to the rate of return on its investments stated in the Morgan Report:

[A]ny other argument that the former private shareholders should receive interest that is in any way linked to the profits or returns of the Bank, is fundamentally inconsistent with the Tribunal's decision upholding the lawfulness of the shares withdrawal. While shareholders, they did have a claim on the profits of the Bank (in the attenuated form of dividends, as declared by the Board of Directors under Article 51), but on 8 January 2001 that property right was transformed into something different, i.e., a statutory claim far compensation not in any way related to the earnings or profits of the Bank.131

88." With respect to Mr. Mathieu's claim for interest on the original offer of compensation from the Bank, the Bank contended that no interest at all should be due. The Bank pointed out that receipt of the original compensation had been within the control of Mr. Mathieu. His refusal to tender his shares should not make the Bank liable for interest.

89." As indicated above, the Claimants have proposed rates of interest varying frotn 3,25% to 7%, based upon different theories of public international law (including theories of unjust enrichment), international commercial law and Swiss practice. The Tribunal also heard extensive arguments on recent international arbitral decisions awarding compound interest and on the extent to which it may or may not have become customary international law.

90." Neither the 1930 Hague Agreement, nor the 1907 Hague Convention,132 nor the Statutes of the Bank prescribes, expressis verbis, a rate of interest for any purpose, let alone for a compulsory repurchase of privately held shares. Yet, as it stated in the Partial Award, the Tribunal is of the opinion that interest is due,133 for it is a general rule that interest is owed where payments are to be made on a specific date but are not made. The Tribunal has found that this rule also applies to the Bank as far as its relations with its shareholders are concerned. The question is the proper rate of interest.

91." International law does not prescribe a specific rate of interest, but several other legal systems, which do so, could be relevant. In circumstances in which the laws of several different legal systems could be applied to a particular transaction or event, it is a frequent practice to select the law of the legal system with which the question to be decided has, in the specific case, the closest contacts. In this regard, the Tribunal notes that Article 2 of the Statutes of the Bank designates Basle, Switzerland, as the place where the registered office of the Bank shall be situated and that Switzerland has consistently been the siègeand operational center of the activities of the Bank. In addition, the Bank has made dividend payments in Swiss francs, and the currency in which interest must be paid is the Swiss franc.

Moreover, the private shareholders dealt with the Bank in Switzerland, and their dividends were paid in Swiss francs. These reciprocal relationships between the Bank and its shareholders constitute elements of practice. All of these facts, extending over more than seven decades of continuous operation of the Bank, indicate that the Swiss legal system is the one having the closest contacts with this question.

92." In the view of the Tribunal, these facts make it appropriate to refer to Swiss law134 for guidance on the rate of interest. Article 73 of the Code of Obligations provides:

1. Celui qui doit des intérêts don't le taux n' est fixé ni par la convention, ni par la loi ou l'usage, les acquitte au taux annuel de 5 pour cent.

2. La répression des abus en matière d'intérêt conventionnel est réservée au droit public.

Article 104 (intérêt moratoire)of the Code provides:

1. Le débiteur qui est en demeure pour le paiement d'une somme d'argent doit l'intérêt moratoire à 5 pour cent l'an, même si un taux inférieur avait été fixé pour l'intérêt conventionnel.

2. Si le contrat stipule, directement ou sous la forme d'une provision de banque périodique, un intérêt supérieur à 5 pour cent, cet intérêt plus élevé peut également étre exigé du débiteur en demeure.

3. Entre commerçants, tant que l'escompte dans le lieu de paiement est d'un taux supérieur à 5 pour cent, l'intérêt moratoire peut être calculé au taux de l'escompte.

Swiss law thus applies a 5% simple rate for moratory interest.

93." As is apparent, the decision to apply Swiss moratory interest is the result of the application of a number of factors with respect to the practice of the Bank and the preponderance of contacts with Swiss law. It is not based upon any assumption of subjection of the Bank to Swiss law. Nor should the Tribunal's decision be taken as indicating any position, for or against, recent trends with respect to the application of compound interest in contemporary international law; that is a question that does not arise in this case, in view of the dispositive effect of the Bank's practice and the preponderance of contacts with the Swiss legal system insofar as interest in the present case is concerned.

94." Accordingly, the Tribunal decides that the rate of interest to be paid by the Bank is 5% simple interest.