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11 Insolvency Set-Off

From: Governing Law Risks in International Business Transactions

Philip R. Wood

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 02 June 2023

Contract — Insolvency clauses and damages

This chapter discusses the essentials of insolvency set-off and netting, the policies involved, carve-out statutes, and central counterparties. It reviews how to protect insolvency set-off by a choice of governing law and contains a comparative survey of insolvency set-off in the main families of jurisdictions. It also discusses set-off mutuality, the avoidance of build-ups of set-offs, and set-off against assignees and other third parties. It concludes that English law has a very strong policy in favour of insolvency set-off, but this is less true of insolvency set-off in Germany and its associated jurisdictions. Insolvency set-off was originally not permitted in France and related jurisdictions, but there has been a move away from this approach in France and more particularly in Belgium and Luxembourg. It is weak or absent in most of the new or transition group. Most developed countries have a carve-out statute authorising insolvency set-off and netting for eligible contracts and eligible parties, particularly for financial markets.

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