The criteria for calculation of delay penalty applicable to foreign currencies in international commercial instruments with attention to the Iranian international commercial arbitration practice

The matter of the penalty for late payment has a long history under Iranian law. After all changes, the legislator, by virtue of Article 522 of Iran Civil Procedure Code (December 2000) has allowed for the penalty on the delayed payment of debts in the currency that is commonly used in Iran (namely IRR). However, the matter of legitimacy of the penalty for delayed payment on foreign currencies is still an open question.The current research project principally aims to examine the legitimacy and legality of delayed payment penalty, regardless of the type of currency, by reviewing the Iran international arbitration practice. The next aim is to find a criterion for calculations and determining the rate of delayed payment penalty applicable to foreign currencies. To these aims, after studying and investigating the criteria applied in international commercial documents, usages in international trade, and reviewing the Iranian arbitral awards, some suggestions have been provided. According to such findings, the judge or the arbitrator should, in the first place, attempt to acquire and understand the real intention of the involved parties regarding the matter of delayed payment penalty, and accordingly, render the award based on such an intention. In case that such an acquisition is not possible, the judge or the arbitrator should determine the penalty for foreign currency by considering the type of currency, international practices, and the usages that exist with regards to such a currency.