Set-off defences in international commercial arbitration : a comparative analysis / Christiana Fountoulakis.
2011
K2238 .F68 2011 (Map It)
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Author
Title
Set-off defences in international commercial arbitration : a comparative analysis / Christiana Fountoulakis.
Published
Oxford ; Portland, Or. : Hart pub., 2011.
Call Number
K2238 .F68 2011
ISBN
9781849460323 (hbk.)
1849460329 (hbk.)
1849460329 (hbk.)
Description
xxvi, 257 pages ; 24 cm
System Control No.
(OCoLC)607975199
Bibliography, etc. Note
Includes bibliographical references (pages [229]-248) and index.
Record Appears in
Gift
Purchased from the income of the Szladits Fund
Gift
The Arthur W. Diamond Law Library
Purchased from the income of the Szladits Fund
Table of Contents
Preface
vii
List of Abbreviations
xix
Introduction
1
1.
Key Aspects of Set-off
7
I.
Definition
7
II.
Significance and Functions of Set-off
9
A.
Set-off as a Means of Economic Efficiency
9
B.
Set-off as an Equitable Instrument
10
C.
Set-off Providing Security
11
III.
Significance of Set-off in Modern Business Life
12
A.
Set-off Agreements in Banking Law
12
B.
Importance of Unilateral Set-off
13
IV.
Modern Problems with Set-off
14
A.
Jurisdictional Questions
14
B.
Choice-of-law Questions
18
V.
Terminology
19
A.
S̀et-off' Versus ̀Compensatio'
19
B.
S̀et-off' Versus ̀Counterclaim'
20
C.
̀Cross-claim', ̀Cross-demand', and ̀Counter-demand'
22
2.
Set-off in a Comparative Survey
23
I.
Incipiencies: Roman Law
23
A.
Introduction
23
B.
Development
23
C.
Operation of Set-off in Roman Law---The Various Stages
26
i.
Iudicia Bonae Fidei
26
ii.
Iudicia Stricti Iuris
28
iii.
Special Cases
29
iv.
Set-off Under Justinian
30
a.
Development of the Roman Post-classical Judicial System
30
b.
Ex officio Compensatio?
31
The Dispute over Ìpso Iure Compensatur'
31
The Significance of the Ipso Iure-Dispute in the 21st Century
32
c.
Allegation of Fact or Submission of Claim?
33
d.
The Requirement of Ascertained Claims (̀Liquidity') as a Tool of Discretion
34
e.
Connectivity and Similarity of Claim and Cross-claim?
34
D.
Observations and Comments
35
i.
Set-off as a Procedural Mechanism in (Pre-)Classic Roman Law
35
ii.
Set-off Asserted in Court: Assertion of a Countervailing Right or Assertion of a Fact?
36
iii.
Judicial Discretion
36
iv.
Summary and Outlook
37
II.
Set-off in the Romanic Legal Systems
37
A.
Historical Development
38
i.
Introduction
38
ii.
Customary Law
39
iii.
Canon Law
42
iv.
Written Law
43
v.
Summary
43
B.
Set-off Under the Code Civil (Compensation Legale)
45
i.
Operation Ipso Iure?
45
ii.
Requirements
47
a.
Ascertainment of Claims (Liquidity)
47
Uncertainties Regarding the Degree of Ascertainment
47
Uncertainties Regarding the Relevant Point in Time
49
b.
Reciprocity
50
c.
Similarity of Obligations
51
d.
Enforceability of Primary Claim and Cross-claim
52
e.
Set-off Must Not Be Excluded by Law or by Agreement
53
f.
The Role of Connectivity of Primary Claim and Cross-claim
54
iii.
Effect of Legal Set-off
55
iv.
Summary
55
C.
Set-off by Agreement (Compensation Conventionelle)
56
D.
Judicial Set-off (Compensation Judiciaire) = Counterclaim
56
E.
Set-off in the Avant-Projet Catala
58
F.
Set-off in Other Romanic Legal Systems
59
i.
Overview
59
ii.
Automatic Extinction of Concurring Debts
59
iii.
Ascertainment of Claims
61
G.
Summary
61
III.
Set-off in the Germanic Legal Systems
62
A.
Historical Development
63
B.
Set-off in the German Codification
65
i.
Operation by Extra-judicial Declaration
66
a.
Principal Rule
66
b.
Set-off Declaration in Court (Prozessaufrechnung)
66
Set-off Brought in Court as an Allegation of Fact
66
Set-off Brought in Court as an Assertion of a Right
67
ii.
Requirements of Set-off
69
a.
Reciprocity
69
b.
Similarity of Obligations
70
c.
Validity, Maturity, and Enforceability of Cross-claim
72
The Principle
72
Statute of Limitations
72
Enforceability of Cross-claim Only
73
d.
Obstacles to Set-off
74
e.
Ascertainment of the Cross-claim?
75
f.
Connectivity of Primary Claim and Cross-claim?
76
g.
Interplay of Ascertainment and Connectivity of Claims
77
iii.
Retroactive Effect of Set-off
78
C.
Set-off in Switzerland
79
i.
Historical Development
79
ii.
Operation by Extra-judicial Declaration
81
a.
Principal Rule
81
b.
Set-off Declaration in Judicial Proceedings (Prozessaufrechung)
81
iii.
Requirements
82
a.
Reciprocity
82
Principal Rule
82
Exceptions
83
b.
Similarity of Obligations
84
Money Debts
84
Other Obligations
85
c.
Validity, Maturity, and Enforceability of Cross-claim
85
d.
Obstacles to Set-off
87
e.
Not Required: Ascertainment and Connectivity of Claims
87
iv.
Retroactive Effect of Set-off
89
D.
Summary of German and Swiss Law of Set-off
89
E.
Set-off in Austria
90
i.
Introduction
90
ii.
Set-off ipso iure?
91
iii.
Requirements
92
a.
General Overview
92
b.
In Particular: Ascertainment of Cross-claim Required?
94
iv.
Effect of Set-off
95
v.
Summary
95
F.
Jurisdictions with Similar Set-off Concepts
97
G.
Set-off by Agreement
97
H.
Counterclaim
98
I.
Summary
99
IV.
Set-off in England and English-based Jurisdictions
100
A.
Statutory Set-off
101
i.
History
101
ii.
Operation
102
iii.
Requirements
103
a.
Mutuality
103
b.
Money Debts
104
c.
Ascertainment of Claims
105
d.
Maturity and Limitation
106
e.
Obstacles to Set-off
106
f.
Not Required: Connectivity
107
iv.
Effect of Statutory Set-off
108
v.
Summary
108
B.
Abatement
109
i.
Historical Development
109
ii.
Scope of Application
110
iii.
Connectivity
110
iv.
Ascertainment of Claims
111
v.
Operation
111
vi.
Summary and Practical Significance
111
C.
Equitable Set-off
112
i.
Introduction
112
ii.
Operation
113
iii.
Requirements
114
a.
General Prerequisites; Àrising Out of the Same Transaction'
114
b.
The Èquity' Element
115
c.
Ascertainment of Claims
116
d.
The Èquity Element' and Liquidity as Discretionary Instruments
116
iv.
Effect
117
D.
Relevance of Court Rules
117
i.
Mere Regulation of Practice and Procedure
117
ii.
Misunderstandings in Case Law
118
E.
Contractual Set-off
120
F.
Counterclaim
121
G.
Summary
121
V.
Comparative Analysis
123
A.
Set-off as a Mainly Substantive Instrument
123
B.
Broad Spectrum of Complex Rules
124
i.
Different Operation Mechanisms
124
a.
The ipso iure Operation
125
b.
The Self-help or Declaration Mechanism
125
c.
The Judicial Mechanism
126
ii.
Requirements of Set-off in Comparison
126
iii.
Possible Effects of Set-off
127
C.
Conclusions
127
3.
Set-off in the Conflict of Laws
129
I.
Determination of the Applicable Law in International Arbitration
129
A.
Development and Current Theories
129
i.
Application of the Lex Loci Arbitri
129
ii.
Application of the Conflict of Laws Rules Which the Tribunal Considers Appropriate
131
a.
Development
131
b.
Application of the Choice-of-law Rules at the Seat of Arbitration
132
c.
Cumulative Application of All Conflicts Rules Involved in the Dispute
133
d.
Application of ̀General Principles of Private International Law'
133
iii.
Application of the (Substantive) Law Which the Tribunal Considers Appropriate
134
a.
The Principle
134
b.
Application of a Specific National Law
135
c.
Application of More Than One National Law (tronc commun)
135
d.
Application of A-National Rules of Law
135
B.
Comparison of Law-determination Methods in Arbitration and State Court Proceedings
136
II.
Law-determination for Set-off in Classic Conflict of Laws
138
A.
Application of the Lex Fori
139
i.
England
140
ii.
United States
141
B.
Application of the Law of the Primary Claim
142
i.
Switzerland
142
a.
Principal Rule
142
b.
Primary Claim Arising Out of a Contract
143
c.
Primary Claim Not Arising Out of a Contract
143
ii.
EC-Regulation on the Law Applicable to Contracts (Rome I)
144
C.
Cumulative Approach
146
i.
Introduction
146
ii.
The Original Concept and Its Variations
148
D.
Other Models
150
i.
Application of the Law of the Claim Which Existed First
150
ii.
Application of the Law of the Claim Which Arose Second
150
iii.
Application of the Lex Loci Solutionis
151
iv.
Application of the More Set-off Friendly Law
151
III.
Criteria for a Suitable Rule to Determine the Law Applicable to a Set-off in International Arbitration
152
A.
Respecting Party Autonomy
153
B.
Ensuring Predictability
153
C.
Eliminating the Possibility of Manipulative Tactics
153
D.
Enhancing Practicability
154
E.
Providing Comprehensiveness
154
F.
Avouching Appropriateness
154
i.
Àppropriateness' in Classic International Contract Law---European Traditionalism and American Theories
154
ii.
Àppropriateness' of Choice-of-Law Rules in International Arbitration
157
iii.
Àppropriateness' with Regard to Choice-of-Law Rules for Set-off in International Arbitration
158
a.
Choice-of-law Fairness Considerations in the Traditional Conflicts Rules
158
b.
Possible Fairness Considerations When Determining the Law in International Arbitration
158
Introduction
158
Functions of Set-off
158
Implications
159
IV.
Discussion of Classic Choice-of-Law Rules With Regard to Set-off
160
A.
The Lex Fori/Lex Loci Arbitri Approach Under Scrutiny
161
i.
Practicability
161
a.
In State Court Proceedings
161
b.
In International Arbitration
162
ii.
Predictability
163
iii.
Avoidance of Using Tactics
163
iv.
Appropriateness?
164
v.
Summary
166
B.
The Primary Claim Approach Under Scrutiny
167
i.
Predictability and Practicability?
167
a.
Depending on Contingencies
167
b.
Appropriate for Other Set-off Concepts?
168
Judicially Operating Set-off
168
Ipso iure Set-off
169
c.
Aspects Governed by the Primary Claim's Law
170
d.
Foreign Law of Set-off Partially Settled in Substantive and Partially in Procedural Law
171
ii.
Elimination of Manipulation?
171
iii.
Appropriateness
172
iv.
Summary
173
C.
The Cumulative Approach Under Scrutiny
174
i.
Introduction
174
ii.
Practicability
175
iii.
Predictability and Elimination of Manipulative Tactics
175
iv.
Appropriateness
176
D.
The Theory of Applying the Law of the Claim Which Existed First Under Scrutiny
177
E.
The Doctrine of Applying the Law of the Claim Which Arose Second Under Scrutiny
177
F.
The Application of the Lex Loci Solutionis Under Scrutiny
178
G.
The Proposal to Apply the More Set-off Friendly Law Under Scrutiny
178
H.
Conclusions
179
V.
Other Choice-of-Law Solutions in International Arbitration
180
A.
The Cumulative Application of Conflicts Rules
180
B.
The Tronc Commun Approach
182
C.
Application of A-National Law
183
i.
Introduction
183
ii.
The ICC Case No 3540 of 1980
184
D.
Discussion of the Tronc Commun Approach and the Application of A-National Law
185
i.
Appropriateness
185
a.
Undisguised Consideration of Substantive Appropriateness Criteria
185
b.
Avoidance of Ǹationalisation' of the Dispute
186
ii.
Practicability, Predictability and Avoidance of Manipulation Tactics
188
a.
Àd Hoc Distillation' of Similarities Versus One Unvarying General Principle of Set-off as the Basic Question
188
b.
Advantages of Ad Hoc Distillation
188
ICC Case No 5971: an Illustrative Example
188
Temptation to Oversimplify
190
Temptation to Misinterpret
190
d.
Progressive Summary
191
e.
Advantages of Advanced Voie Directe
191
f.
Disadvantages of Advanced Voie Directe
192
g.
Summary
194
E.
Fleshing Out a Uniform Set-off Concept
194
i.
The ̀Creeping' Codification of General Principles
194
ii.
Overview of Laws and Sets of Rules Based on Comparative Analysis
198
a.
UNIDROIT Principles (PICC), Principles of European Contract Law (PECL), and Draft Common Frame of Reference (DCFR)
198
Introduction
198
Operation of Set-off
200
Requirements
201
Similarity
201
Reciprocity
201
Performability of the Primary Claim, Maturity of the Cross-claim
202
Exclusion and Waiver of the Right of Set-off
203
Liquidity and Connectivity
203
Effect
204
b.
The Principles of the Gandolfi Group
204
c.
The Netherlands NBW
205
iii.
Comparative Analysis
206
a.
Operation of Set-off
206
b.
Similarity, Reciprocity, Enforceability of the Claims
206
c.
Exclusion of Set-off
208
d.
Liquidity and Connectivity
209
e.
Effects of Set-off
211
f.
Results
213
VI.
Summary
214
4.
Conclusions
216
5.
Final Summary
219
Bibliography
229
Index
249