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Part II Consent in commercial arbitration, 7 Scope and Interpretation of Consent to Arbitration

From: Consent in International Arbitration

Andrea Marco Steingruber

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. Subscriber: null; date: 06 June 2023

Arbitral agreements — Counterclaims — Private international law — UNCITRAL Arbitration Rules

(p. 119) Scope and Interpretation of Consent to Arbitration

7.01  This chapter examines the scope and interpretation of consent to arbitration. The most frequent issue that arises in the interpretation of international arbitration agreements concerns the ‘scope’ of the parties’ agreement; ie what category of disputes, disagreements, or claims have the parties agreed to arbitrate.1 The importance of this question is given by the fact that the objective scope of the arbitration agreement delimits the arbitral tribunal’s jurisdiction ratione materiae.2 Whether the prayers for relief submitted to an arbitral tribunal are covered by the arbitration agreement depends on its objective scope, and is therefore a condition of admissibility.3 The New York Convention recognizes the necessity of interpreting the scope of an arbitration agreement, and provides for the non-recognition of awards that exceed the scope of the agreement to arbitrate.4 Like the New York Convention, national arbitration legislation recognizes the need for interpreting the scope of arbitration agreements, but generally without prescribing rules of construction. There are very few exceptions to this approach.5

7.02  The chapter begins by looking at which disputes are covered by the arbitration agreement (Section A). Insofar as the parties have reached mutual consent, the arbitration agreement is deemed to cover all disputes between the parties, provided that they are arbitrable and arise out of the relationship to which the arbitration agreement refers.6 In practice, disputes about the scope of an arbitration clause generally concern questions of whether the language of the parties’ agreement extends to all contractual claims under a particular contract (or, instead, only a specified sub-set of such claims) or whether non-contractual claims (ie tort, delict, breach of non-contractual or statutory protections) are subject to arbitration.7

(p. 120) 7.03  The chapter then analyzes set-off and counterclaims (Section B). For arbitration agreements language should be used which identifies the generic issues between the parties, eg ‘disputes arising out of or in connection with this contract, including any question regarding its existence, validity or termination’8—this may facilitate set-off and counterclaims being addressed in the same arbitration.9

7.04  The chapter concludes by discussing the interpretation of consent to arbitration (Section C). On the one hand by examining the application of the general principles of interpretation and, on the other hand, the question of whether interpretation has to occur with a particular inclination.

A.  Disputes Covered by the Arbitration Agreement

7.05  It is important to ensure that the wording adopted in an arbitration agreement is adequate to fulfil the intentions of the parties.10 Most arbitration agreements are broadly worded, and, usually, when parties agree to resolve any disputes between them by arbitration, they intend to resolve all disputes between them by this method (unless a specific exception is made).11 This is also the case when the model clauses of arbitration institutions are adopted by the parties.12

7.06  The various arbitration institutions recommend model clauses with broad wording by referring to ‘all’13 or ‘any dispute’,14 ‘all disputes, controversies, and differences’15 or just generally ‘disputes, controversies, or claims’.16 On the other hand, the reference to ‘each dispute’ or ‘a dispute’ could be interpreted to mean that each dispute should be the subject of a separate arbitration.17

7.07  In identifying the link between the dispute and the contract clauses such as ‘arising from/arising out of or in connection with’18 or ‘arising out of or relating to or in connection with’ are used.19 Clearly the terms ‘relating to’ and ‘in connection with’ are wider than ‘arising out of’ a particular contract and this wider language may allow a tribunal to deal with a peripheral agreement which relates to, but is separate from, the main agreement in which the arbitration agreement is contained—even though it is not expressly or directly covered in that main agreement.20 With regard to ‘arising under’, authorities have reached divergent conclusions: some national courts have concluded that arbitration clauses using the formulation ‘arising under’ are broad, whereas others have held that the formulation is ‘narrow’.21

7.08  Authorities have usually concluded that the wordings ‘all disputes’ or ‘any disputes’ extend to all disputes having any plausible factual or legal relation to the parties’ agreement or dealings.22 (p. 121) From the case law it has generally emerged that there are three categories of claim that are potentially within the scope of an arbitration agreement:

  • •  contractual claims (including claims incidental to the contract, such as quantum meruit);

  • •  claims in tort; and

  • •  statutory claims, ie claims that arise out of legislation which might bind the parties, such as securities and antitrust legislation.23

In all three categories of claim it is essential that a determination is made as to whether a particular claim or defence has sufficient connection with the contract to be covered by the arbitration agreement.24

7.09  The model clauses recommended by the various arbitration institutions have an expansive effect on parties’ consent to arbitration. Indeed, with the broad wording parties agree that a bigger number of disputes fall within the scope of the arbitration agreement. However, as consent is given before disputes break out, there is at the same time a reduction in the pure consensual character of arbitration. This leads to a phenomenon which could be highlighted as the ‘paradox of consent’: the expansion of parties’ consent to arbitration causes a reduction in the pure consensual character of arbitration itself.

7.10  On the other hand narrower language will result in certain disputes falling outside the scope of the arbitration clause, and, accordingly, claims in tort or other non-contractual claims have been held not to arise under ‘an agreement’ and are not covered by an arbitration clause.25 In a context where the selection of arbitration is no longer seen as the exclusion of a national forum, but rather the natural forum for international disputes,26 this should be avoided, as before the dispute breaks out the parties might have consented to submit future disputes to arbitration. Indeed, it can also be observed that the reduction of the pure consensual character of arbitration goes hand in hand with the growing acceptance of arbitration as a mechanism to solve international disputes.

7.11  Doubt has also been cast on whether arbitration (like court proceedings) needs to be contentious by pointing out that neither arbitrators nor courts are necessarily called upon to decide disputes in the strict sense, but to regulate relationships between parties, notably by adapting a contract or filling gaps therein.27 However, clear and express wording should be used if parties want to entrust the arbitral tribunal with the task of gap-filling and adaptation of the contract—particularly given the creative, as opposed to judicial, nature of this task.28

B.  Set-off and Counterclaims

7.12  Set-off is a complex institution giving rise to several questions of jurisdiction and applicable law in international relations.29 One of the difficulties of set-off in private international law is the result of the lack of uniformity of the national laws governing it, which concerns not only the (p. 122) manner in how it is regulated, but also its very nature.30 When claims of money are at stake, which is often the case in international commercial arbitration, set-off and counterclaim are ‘only a hair’s breadth away’31 from each other.32 Set-off in international commercial arbitration is therefore sometimes regarded as a ‘counterclaim in disguise’;33 the reason for this similarity is that both set-off and counterclaim are meant to avoid circuity of action.34 Moreover, in some jurisdictions, counterclaim and set-off are closely intertwined.35 However, in spite of these similarities, set-off and counterclaim have to be distinguished sharply from each other, as a number of general characteristics differentiate set-off from counterclaim.36 Set-off can be used merely ‘as a shield, not as a sword’.37 Conversely a counterclaim is an independent claim raised by the defending party in judicial proceedings.38

7.13  There are cases in which a respondent party will seek to introduce a counterclaim or raise a set-off against the claim. In general, this is possible provided the counterclaim or set-off relates to the same contract as the main claim.39 On the other hand, the problem arises where a respondent wishes to counterclaim or raise a set-off arising under a different contract between the same parties, because in this situation the counterclaim or set-off is not covered by the arbitration agreement, and, as a consequence, the arbitral tribunal does not have jurisdiction to deal with the counterclaims and set-off claims.40 Although the situation may be different if the contracts underlying the main claims and on which the counterclaims and set-off are based are closely related and form part of the same economic venture,41 the existence of a separate arbitration or choice of forum clause is, generally, considered to exclude the possibility of a set-off.42

7.14  With regard to the UNCITRAL Arbitration Rules the Working Group agreed that the original provision as contained in Article 19(3) of the UNCITRAL Arbitration Rules (1996) should be extended beyond the contract from which the principal claim arose and apply to a wider range of circumstances.43 Article 21(3) of the UNCITRAL Arbitration Rules (2010) now speaks of the possibility that the respondent ‘may make a counterclaim or rely on a claim for the purpose of set off provided that the tribunal has jurisdiction over it’.44

7.15  A set-off of a claim from a different contract is also possible if the chosen arbitration rules allow a set-off to be raised.45 However, while most arbitration rules contain provisions on (p. 123) counterclaims,46 only some of them deal with set-off47—even though both institutions have a striking resemblance.48

1.  Set-off

7.16  A set-off claim is a purely defensive claim which may not exceed the amount originally claimed.49 Issues of jurisdiction over set-off can arise both before an arbitral tribunal, where the set-off claim is not covered by the arbitration agreement, and, conversely, before a national court, where such a claim is validly submitted to arbitration.50 Both cases concern the scope of the arbitration agreement.51 In determining the procedural admissibility of a set-off defence international arbitrators may be confronted with two different situations.52

1.1  Cross-claim is not subject to a jurisdiction clause or a different arbitration clause

7.17  The basic procedural prerequisite53 of set-off in this scenario—the most commonly encountered form of set-off in practice54—is derived from the consensual character of arbitration: the cross-claim has to be within the scope of the arbitration agreement.55 This basic rule prevents the respondent from enlarging the arbitrators’ jurisdiction unilaterally by simply raising the defence of set-off.56 On the other hand, if the arbitration agreement does not cover the cross-claim, the parties may agree to extend the scope of the arbitration agreement.57 Such an agreement may also be effected impliedly if the claimant does not object to the setting off of a cross-claim that lies outside the scope of the arbitration agreement.58

7.18  There are precedents in international case law where the respondent has based his set-off defence on a cross-claim that arose out of a contract closely linked to the one in dispute.59 Although the extremely close connection between the contracts may make it easy for the tribunal to confirm the admissibility of the set-off, nevertheless, not infrequently the question arises in arbitral practice as to whether an arbitration agreement contained in one contract extends to related contracts.60 No general solution can be given for these cases and the answer always depends on the circumstances of the case, particularly on the wording of the arbitration (p. 124) agreement in the main contract and on the attitude of the applicable law towards the interpretation of arbitration agreements.61

1.2  Cross-claim is subject to a jurisdiction clause or a different arbitration clause

7.19  Although there is a growing tendency to assume that, as a rule, an international arbitral tribunal has jurisdiction to hear a set-off defence based on a cross-claim that is subject to a different arbitration agreement or jurisdiction clause, this view applies only to those set-offs that have a substantive nature.62 Indeed, being a substantive defence which denies the existence of the claim, set-off has the same quality as any other substantive defence.63 The tribunal should therefore be authorized to decide on all defences which are raised against the claim (‘le juge de l’action est le juge de l’exception64), and consequently also on the merits of the set-off.65 Referring the cross-claim to adjudication before the domestic court is regarded as ‘depriving the set-off of its efficiency, especially when regarded as an essentially dilatory means’.66 Therefore, conflicting arbitral or forum selection clauses relating to the cross-claim are not, per se, a bar to set-off.67

7.20  While the simultaneous adjudication of claim and cross-claim through the set-off defence is alleged to be in the presumed interest of the parties to the arbitration,68 taking a purely pragmatic approach to this problem neglects the will of the parties as expressed in the arbitration or other forum selection clause covering the cross-claim.69 Indeed, the arbitrators have to determine the will of the parties at the moment of conclusion of the arbitration agreement, covering the main claim on the one hand and the different forum clause covering the cross-claim on the other.70 From this ex ante perspective both the consensual nature of arbitration and the function and nature of forum selection clauses puts into question the admissibility of set-off in international arbitrations.71

7.21  When concluding the arbitration clause on which the arbitral proceedings are based, the parties intended to have those, and only those, claims decided by the arbitral tribunal which fall under the scope of the arbitration agreement.72 To extend the proceedings beyond the arbitration agreement without any indication as to the corresponding will of the parties would be against the parties’ original intentions.73 Moreover, when the cross-claim is not subject to another arbitration agreement but to a jurisdiction clause and the claimant opposes the tribunal’s competence to hear the set-off, one has to take account not only of the parties’ intentions that underlie the arbitration agreement but also of their will as expressed in the other forum selection clause.74

(p. 125) 7.22  An easy way to solve that problem is certainly to expand the parties’ consent to allow the arbitrators to deal with any counterclaim for the purposes of a set-off.75 That is the option taken by Article 21(5) of the Swiss Rules. However, as noted by Schöll, this provision does not mean that a set-off defence should be allowed regardless of the law applicable to it, but it has to be understood in the sense that, if the substantive law requirements for set-off are met, the arbitral tribunal can entertain the defence even if it would normally have no jurisdiction on the defendant’s claim, and even if the parties agreed, in respect of that claim, on another dispute settlement mechanism.76

7.23  Some scholars77 also establish a presumption according to which, by entering into an arbitration agreement, the claimant accepts that the arbitrators’ jurisdiction will be extended to any claim used by the defendant as a basis for a set-off defence.78 Poudret submits that the claimant should be considered as having implicitly accepted such an extension of the arbitral tribunal’s jurisdiction.79 Schöll posits that such a presumption should be based on an analysis of the contractual situation in the particular case, rather than on the general assumption that, by entering into arbitration, a party accepts that the arbitral tribunal will deal with any set-off defence that might come onto the table.80

2.  Counterclaims

7.24  A counterclaim is a separate claim which can remain valid even if the original claim has been dismissed.81 A counterclaim—primarily a measure of procedural economy—makes it possible for the parties to litigate all disputes existing at the time the main claim is brought forward in the same proceeding before the same tribunal.82 Despite its practical importance, the question of the admissibility of counterclaims before an arbitral tribunal is not mentioned in many national arbitration laws.83 However, it is generally accepted that Article 23 of the UNCITRAL Model Law with the heading ‘Statements of claim and defence’ applies by analogy to counterclaims and set-offs.84

7.25  Counterclaims (like set-off defences) do not give rise to any problems of jurisdiction as long as the counterclaim is subject to the same arbitration agreement as the main claim, whereas when the counterclaim is based on a legal relationship which is not within the objective scope of the arbitration agreement that covers the main claim, similar issues arise—as in the case of set-off defences.85

7.26  The arbitration rules do not usually contain restrictions on the admissibility of counterclaims raised in the statement of defence.86 In the absence of a particular rule in the national arbitration laws, the arbitration rules or the chosen procedural rules, the arbitral tribunal may freely determine the admissibility of counterclaims by virtue of its power to determine (p. 126) the arbitral proceedings.87 The counterclaims must fall under an arbitration agreement between the parties,88 although not necessarily that upon which the jurisdiction of the arbitral tribunal over the principal claims is based.89 In the latter case, however, the admissibility of the counterclaim presupposes that the modalities of arbitration pursuant to both agreements are compatible.90

C.  Interpretation of Consent to Arbitration

7.27  Where an issue arises concerning the validity, existence or scope of the arbitration agreement, courts and arbitral tribunals will have to interpret the parties’ intention.91 The arbitration agreement is a contract, and courts and arbitral tribunals will apply the general principles of contractual interpretation. However, due to the fact that arbitration agreements oust national courts but also because of the evolution of the acceptance of arbitration as a dispute resolution mechanism, courts and arbitral tribunals have not always interpreted them in a neutral way.

1.  Applying the general principles of contractual interpretation

7.28  Arbitration agreements are, in general, subject to the same type of rules of interpretation as all other contracts, and all relevant circumstances have to be taken into account.92 Several principles of interpretation might be applied for interpreting parties’ consent.

1.1  Interpretation in good faith

7.29  The first and most widely accepted principle of interpretation applied to arbitration agreements is the principle of interpretation in good faith; this rule of interpretation means that a party’s true intention should always prevail over its declared intention—where the two are not the same.93 Thus, declarations should be interpreted in good faith and the parties’ conduct considered, both at the time of contracting and subsequently.94

7.30  From this broad rule—that contracts must be interpreted in good faith—more specific rules of interpretation can be derived, all of which stem from the need to establish the actual intention of the parties:

  • •  first, the intention of the parties must be examined in context, that is to say, by taking into account the consequences which the parties reasonably and legitimately envisaged;

  • •  secondly, the attitude of the parties after the signature of the contract and up until the time when the dispute arose should be taken into account, as that attitude will indicate how the parties themselves actually perceived the agreements in dispute.95 This rule is sometimes referred to as ‘practical and quasi-authentic interpretation’ or ‘contemporary practical interpretation’ and is usually applied in arbitral case law.96 In particular, recognition of the existence of an arbitration agreement will frequently result from a party initially relying on (p. 127) the existence of that agreement to avoid the jurisdiction of the courts, but subsequently denying its existence or validity before an arbitral tribunal;97

  • •  thirdly, and finally, the agreement must be interpreted as a whole.98 The need for an interpretation of the agreement or of its various constituent parts as a whole, bound together by the true intention of the parties, is one of the factors to be taken into account in disputes involving the construction of arbitration agreements contained in related contracts.99

1.2  Effective interpretation

7.31  A second principle when interpreting of arbitration agreements is the principle of effective interpretation. This common-sense rule whereby, if in doubt, one should ‘prefer the interpretation which gives meaning to the words, rather than that which renders them useless or nonsensical’,100 is widely accepted not only by the courts but by arbitrators who readily acknowledge it to be a ‘universally recognized rule of interpretation’.101

7.32  The principle of effective interpretation has, for instance, been applied by the Swiss Federal Tribunal in its decision 130 III 66 where it held that, when it is clear that the parties wanted to oust national courts in favour of arbitration, the arbitration agreement should be interpreted in accordance with the principle of effective interpretation so as to uphold the arbitration agreement.102

7.33  Another example of the application of this principle can be seen in the following passage where an arbitral tribunal interpreting a pathological clause held that:

when inserting an arbitration clause in their contract the intention of the parties must be presumed to have been willing to establish an effective machinery for the settlement of disputes covered by the arbitration clause.103

1.3  Interpretation contra proferentem

7.34  The third major principle of interpretation, less frequently encountered in arbitral case law but widely recognized in comparative law, is the principle that the agreement should be interpreted contra proferentem, or against the party that drafted the clause in dispute.104 Indeed, it is not unusual to find that one party has simply signed contractual documents drafted by the other party,105 and that a question has subsequently arisen as to whether various provisions of that contract constitute an arbitration agreement or, more commonly, as to the scope of that arbitration agreement.106

7.35  If the arbitration agreement is based on the standard conditions of one party the other party can rely on existing uncertainties as to the scope of the arbitration agreement to resist (p. 128) applications for referral to arbitration or court proceedings.107 On the other hand, in such cases, it is perfectly reasonable that the party responsible for drafting the ambiguous or obscure text should not be entitled to rely on that ambiguity or obscurity (in claiming, for example, that a particular disputed matter is not covered) and the agreement should be interpreted contra proferentem.108

2.  Inclinations in interpreting?

7.36  Arbitration agreements oust national courts. Therefore in the past courts and arbitral tribunals have interpreted arbitration agreements in a restrictive way. Nowadays rather the opposite view prevails and courts and arbitral tribunals have adopted a pro-arbitration policy. However, it might be argued that arbitration agreements, like any other contract, should be interpreted in a neutral way.

2.1  Restrictive interpretation

7.37  In older awards the jurisdictional effect of arbitration agreements sometimes led to a restrictive interpretation, as they were seen as a renunciation of the constitutional right to have a dispute decided by the courts.109 The same position has also been adopted in courts’ judgments.110 A restrictive interpretation is, however, not justified in international arbitration, given that this mode of dispute resolution in many cases offers the parties better guarantees of neutrality and efficiency than proceedings before national courts.111

7.38  Interpretation must not be restrictive where it is the subject matter and ambit of arbitration agreement which is at issue, not the valid conclusion.112 In the Sonatrach case113 the Swiss Federal Tribunal held that while the existence of an arbitration agreement should not be assumed too lightly, once it has been established that an arbitration agreement has been concluded, there is no reason to interpret it restrictively. On the contrary the court should assume that, in deciding to arbitrate, the parties intended to confer wide powers upon the arbitral tribunal.114

2.2  Extensive interpretation

7.39  In today’s arbitration-friendly climate the opposite view prevails. While, in particular, the US courts have consistently held that arbitration agreements must be interpreted in favour of arbitration,115 comparable views can be found in most countries which have adopted a pro-arbitration policy.116 However, the other national arbitration regimes taking a pro-arbitration approach, usually do it without the same strong presumption in favour of arbitration that US courts apply.117

(p. 129) 7.40  Yet the ‘pro-arbitration’ rule of interpretation adopted in the United States118 and in Switzerland119 applies only to interpreting the scope of an existing arbitration agreement, and not to determining whether a valid arbitration agreement exists.120

7.41  English courts have recently abandoned traditional, sometimes restrictive, modes of construction. In the words of a 2007 English Court of Appeal decision in Fiona Trust & Holding Corp v Privalov, affirmed by the House of Lords, ‘any jurisdiction or arbitration clause in an international commercial contract should be liberally construed’.121

7.42  It has been observed that this rule can only apply once it has been ascertained that the parties actually agreed on arbitration, whilst, on the other hand, in cases where the main issue is whether the parties agreed to arbitration at all there is no justification for such an interpretive rule in favour of arbitration.122 Indeed, although it is the primary mode of dispute settlement in international business, every party has a legitimate and constitutional right to choose to have its rights determined by the national courts.123

2.3  Neutral interpretation

7.43  Arbitration agreements should be interpreted in a neutral way, (neither restrictively nor extensively), not only with regard to their validity, but also with respect to their scope. In fact, with regard to consent to arbitration, not only the question of whether the parties prefer arbitration over national courts as a dispute resolution mechanism is important, but also the extent of what is covered by the parties’ consent to arbitration. Both these aspects are equally important when considering the rather jurisdictional side of an arbitration agreement.

7.44  While English courts have more recently adopted a fundamentally different approach, embracing a pro-arbitration rule of interpretation of the scope of arbitration agreements in international commercial transactions,124 in the past English courts did not appear to rely on either ‘pro-arbitration’ or ‘anti-arbitration’ presumptions, but rather placed significant emphasis on the precise wording of arbitration clauses, drawing relatively fine distinctions between slightly different verbal formulae.125

7.45  A neutral interpretation acquires even more importance with the gradually diminishing significance of the formal requirements of arbitration agreements. However, national arbitration laws may clearly provide for in favorem validitatis provisions to, whenever possible, uphold the validity of the arbitration agreement.126

3.  Interpreting pathological clauses

7.46  The expression ‘pathological clause’127 denotes arbitration agreements, and particularly arbitration clauses, which contain a defect or defects liable to disrupt the smooth progress of (p. 130) the arbitration.128 Arbitration agreements can be pathological for a variety of reasons.129 One reason may be that it is not clear whether the parties have consented to arbitration or not.

7.47  Some arbitration clauses use permissive language, for instance only providing the parties with an option to choose arbitration.130 Moreover, although it is not necessary that the clause uses the term arbitration or expressly states that the decision rendered should be final and binding,131 ambiguity can also arise where it is not conclusive from the arbitration clause whether the parties actually agreed on arbitration or some other form of dispute resolution, such as expert determination.132

7.48  Pathological clauses will need to be interpreted by the arbitrators, and by the courts reviewing the existence of an arbitration agreement and ensuring that the arbitrators remained within the bounds of their jurisdiction.133 As a general rule national courts and arbitral tribunals seek to interpret arbitration clauses positively.134 Indeed, in most cases, the arbitrators or the courts—relying on the principle of effective interpretation more than on any rule in favorem validitatis135—will salvage the arbitration clause by restoring the true intention of the parties.136


3  ibid.

4  Article V(1)(c) of the New York Convention. See Born, p 1061.

7  Born, pp 1060 et seq.

8  LCIA standard clause.

12  See, eg the ICC Model clause which covers ‘all disputes arising out of or in connection with the present contract.’

13  See ICC recommended arbitration clause.

14  Found in the LCIA, ICSID, SIAC, and HKIAC recommended clauses.

15  See, eg standard clause of the Japanese Commercial Arbitration Association.

16  See similarly ‘dispute, controversy or claim’ in the AAA, ICDR, HKIAC, WIPO, SCC clauses.

18  See, eg standard clause of LCIA, SIAC, HKIAC.

19  See, eg standard clause of ICC.

20  Lew, Mistelis, and Kröll, para 8–14. See also Born, pp 1093 et seq with cited case law.

21  Born, pp 1095 et seq with cited case law.

22  Born, pp 1091 et seq.

24  ibid.

25  See Working Group on the ICC Standard Arbitration Clause, Final Report of 3 March 1992, Doc N1111o 420, 318. See also Fillite (Runcorn) Ltd v Aqua-Lift (a firm) [1989] 45 BLR 27; Empresa Exportadora de Azucar v Industria Azucaera Nacional SA (The Playa Larga) [1983] 2 Lloyd’s Rep 171.

28  That applies irrespective of the fact that under some laws standard arbitration agreements may also empower the courts to fill gaps and adapt contracts; see Kröll, Ergänzung, pp 104 et seq and 165 et seq.

30  For an overview, see Poudret and Besson, para 317. On set-off defences in international commercial arbitration see in particular Fountoulakis.

31  Wood, para 1–37 in fine.

35  This applies, eg to the ‘compensation judiciaire’ of French law. This institution is a procedural means provided for in Art 70 of the French CCP (Berger, Set-Off, p 59).

37  Stooke v Taylor [1880] 5 QB 569 at 575.

39  Berger, Set-Off, pp 64–65. See formerly UNCITRAL Arbitration Rules (1976), Art 19(3): ‘the respondent may make a counter-claim arising out of the same contract or rely on a claim arising out of the same contract for the purpose of a set-off.’

44  Emphasis added.

46  See, eg ICC Rules, Art 5(5); LCIA Rules, Art 2(1)(b); Swiss Rules, Art 3(9); UNCITRAL Arbitration Rules, Art 21(3); WIPO Rules, Art 11.

47  See, eg Art 21(3) of the UNCITRAL Arbitration Rules; Art 30(5) of the ICC Rules (1998); Art 36(7) of the ICC Rules (2012); Art 42(c) of the WIPO Arbitration Rules; Art 21(5) of the Swiss Rules.

48  Berger, Set-Off, pp 53 et seq, stating the reasons for such reluctance.

49  Van Haersolte-van Hof in Mistelis (ed), Concise, para 4 at Art 19 of the UNCITRAL Arbitration Rules (1976).

53  The question of the procedural admissibility of the set-off is independent of its characterization as an institute of procedural (as in Anglo-American law) or substantive law (as in Continental Europe), see Bucher, Verrechnung, p 710.

55  See Lebedev, pp 41 and 44; Rüede and Hadenfeldt, p 251; Mustill and Boyd, Arbitration, p 131; UN Doc A, CN.9, 264, Art 23, para 8. It is for this reason that Art 21(3) of the UNCITRAL Arbitration Rules provides that the respondent may rely on ‘a claim for the purpose of a set-off provided that the arbitral tribunal has jurisdiction over it’.

56  See Berger, Set-Off, pp 64 et seq.

57  This procedure was suggested by the arbitral tribunal but not followed by the parties in a partial award relating to the famous Sofidif case.

59  See, eg an award rendered under the auspices of the Court of Arbitration at the Chamber of Commerce and Industry in Sofia in 1980 (Award of 1 October 1980 in (1987) YBCA at p 84) (Berger, Set-Off, p 66).

60  See, eg the ICSID case SOABI v La République du Sénégal in (1991) ICSID Review, pp 124, 144; Nova (Jersey) Knit Ltd v Kammgarn Spinnerei GmbH [1977] 1 Lloyd’s Rep 463; Craig, Park, and Paulsson, pp 100 et seq.; Berger, Arbitration, p 123.

62  Eg the ‘Aufrechnung’ or ‘Verrechnung’ under German or Swiss law, the ‘compensation légale’ under French law and the equitable or ‘transaction’ set-off under English law.

64  This formula is used by the Swiss Federal Tribunal and the prevailing doctrine in Switzerland, see DFT 85 II 103; Poudret, Compensation, p 364.

66  Poudret, Compensation, p 372. This solution is also advocated for equitable or ‘transaction’ set-off raised in arbitrations having their seat in England (Mustill and Boyd, Arbitration, p 131).

69  See ICC Award No 5971 in (1995) 13 ASA Bulletin at pp 728, 738, stating that refusing to admit the set-off ‘would deny justice to the Parties (in particular, here, to Defendants)’.

70  See Basler Kommentar-Wenger, Art 186, No 28; Reiner, Aufrechnung, p 121 with reference to Berger, Wirtschaftsschiedsgerichtsbarkeit, pp 325 et seq.

71  See Schlosser, para 399; Wenger, ‘Die internationale Schiedsgerichtsbarkeit’ in (1989) BJM, pp 337, 351; Bucher, Schiedsgerichtsbarkeit, No 192; Bucher, Schiedsgerichtsbarkeit, pp 138 et seq.

73  ZK-IPRG-Vischer, Art 182, No 13.

77  See, eg Poudret or Schöll.

80  Schöll, pp 132 et seq.

81  Van Haersolte-van Hof in Mistelis (ed), Concise, para 4 at Art 19 of the UNCITRAL Arbitration Rules (1976).

83  See also Poudret and Besson, para 574. See, however, German ZPO, s 1046(3); Swedish Arbitration Act, s 23(2).

84  Brekoulakis and Shore in Mistelis (ed), Concise, para 4 at Art 23 of the UNCITRAL Model Law.

86  See ICC Rules, Art 5(5); LCIA Rules, Art 2(1)(b); UNCITRAL Arbitration Rules, Art 21(3); Swiss Rules, Art 3(9); WIPO Rules, Art 11.

89  Lalive, Poudret, and Reymond, No 7 at Art 186 of the Swiss PIL.

96  See, eg the 23 August 1958 ad hoc award by Messrs Sauser-Hall, referee, Hassan and Habachy, arbitrators, in Saudi Arabia v Arabian American Oil Co (ARAMCO), 27 ILR 117, 198 (1963).

97  For an example of the censure of such conduct (which was held to constitute the recognition of the arbitration agreement), see, in the United States, In re Petition of Transrol Navegacao SA v Redirekommanditselskaber Merc Scandia XXIX, 782 F Supp 848 (SDNY 1991); XVIII YBCA 499 (1993). See also the 1995 award on jurisdiction in ICC Cases No 7604 and 7610, Moroccan company v Algerian company, 125 Clunet 1027 (1998), observations by Hascher and 125 Clunet 1053 (1998), and observations by Arnaldez.

98  ICC Award No 8694 (1996), American company v Belgian company, 124 Clunet 1056 (1997), and observations by Derains.

100  See ICC Award No 1434 (1975), at 982.

101  See, eg ICC Award No 1434 (1975); ICC Award No 3380 (1980), Italian enterprise v Syrian enterprise, 108 Clunet 927 (1981), and observations by Derains (Fouchard, Gaillard, and Goldman, para 478).

102  See DFT 130 III 72. See also 4P.226, 2004, consid 4.2.

103  Preliminary award in ICC Case No 2321 (1974), Two Israeli companies v Government of an African State, I YBCA 133 (1976); for a French translation, see 102 Clunet 938 (1975), and observations by Derains.

104  See also Art 4.6 of the Unidroit PICC.

105  This is quite often the case, for instance, in arbitration clauses contained in articles of association. On arbitration clauses in articles of association see Section C of Chapter 8.

108  For a case where this principle was implicitly applied, see the 3 April 1987 award in ICC Case No 4727, Swiss Oil v Petrogab, enforced by CA Paris, 16 June 1988, 1989 Rev Arb 325. See also TGI Paris, 1 February 1979, Techniques de l’Ingénieur v Sofel, 1980 Rev Arb 97 (Fouchard, Gaillard, and Goldman, para 479).

109  See, eg ICC Case No 4392, 110 Clunet 907 (1983) 908 (Lew, Mistelis, and Kröll, para 7–61).

110  See, eg Paris CA, 11 March 1986, Gaz Pal 1986, I, p 298; or decision of the Italian Corte di cassazione, 10 March 2000, Krauss Maffei Verfahrenstechnik GmbH et al v Bristol Myers Squibb, XXVI YBCA 816 (2001) 821 para 11. See also Born, pp 1076 et seq.

113  DFT 116 Ia 56.

115  See, eg Mitsubishi Motors Corp v Soler Chrysler Plymouth Inc, 473 US 614, 105 S Ct 3346, 3355 et seq (1985); see also Remy Amerique Inc v Touzet Distribution, SARL, XIX YBCA 820 (1994) 823 (SDNY, 16 March 1993) or Moses H Cone Memorial Hospital v Mercury Constr Corp, 460 US 1, 24–25 (1983). See also Born, pp 1067 et seq.

118  See First Options, 514 US at 94–445.

119  See DFT 116 Ia 56.

120  Born, pp 1071 et seq.

121  Fiona Trust & Holding Corp v Privalov [2007] 1 All ER (Comm) 891 (English Court of Appeal), aff’d, [2007] UKHL 40 (House of Lords), cited by Born, pp 1073 et seq.

123  Generally critical to an in interpretation in favour of arbitration Fouchard, Gaillard, and Goldman, para 481; Schlosser, para 320 (Lew, Mistelis, and Kröll, para 7–62).

124  See Fiona Trust & Holding Corp v Privalov [2007] 1 All ER (Comm) 891 (English Court of Appeal), aff’d, [2007] UKHL 40 (House of Lords), cited by Born, p 1078 et seq.

125  Overseas Union Ltd v AA Mut Int’l Ins Co Ltd [1988] 1 FTLR 421, 425 (QB); Merkin, paras 5.39 et seq (2004 & Update 2007). See also Renusagar Power Co v Gen Elec Co & Int’l Chamber of Commerce, X YBCA 431, 433 (Indian S Ct 1984) (1985), cited by Born, p 1078 et seq.

126  See, eg Art 178(2) of the Swiss PIL or Art 9(6) of the Spanish Arbitration Act.

127  The notion goes back to a seminal article by Eisemann, pp 129 et seq; see also Schmitthoff.

129  For some examples see, eg Paulsson, Rawding, and Reed, pp 127 et seq.

130  See, eg Canadian National Railway Co v Lovat Tunnel Equipment Inc, 3 Int ALR N-5 (2000), 174 DLR (4th) 385 (Ontario Court of Appeal, 8 July 1999); for further examples, see Craig, Park, Paulsson, para 9–02 (see also Lew, Mistelis, and Kröll, para 7–72).

131  See, eg partial award in ICC Case No 9759 reported by Grigera Naón, ‘Choice of Law Problems in International Arbitration’, 289 RCADI 88 (2001).

132  Lew, Mistelis, and Kröll, para 7–73. See for an English case David Wilson Homes Ltd v Survey Services Ltd and Others [2001] 1 All ER 449.

135  This rule should rather be one of the provisions contained in the national laws, see, eg Art 178(2) of the Swiss PIL or Art 9(6) of the Spanish Arbitration Act.