Originally from Handbook on International Commercial Arbitration - Second Edition

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One of the most complex areas of arbitrability and one that arises often in practice is the question of set-off. In very many cases the claims advanced in the reference (whether by claim or counterclaim) will be plainly within the scope of the arbitration agreement, especially in light of the wide interpretation of the arbitration agreement. Situations will arise, however, when claims may (at least arguably) not be within the scope of the arbitration agreement.

In considering this area, it is important to have in mind two key factors:

1. What has been referred to arbitration and hence what jurisdiction the tribunal has, and;
2. Whether any cross- or counter-claim amounts to a true set-off in law.

Most arbitration agreements and institutional rules make no comment on this area. Broadly, the parties are entitled to bring whatever claims they wish provided they are within the scope of the broad arbitration clause. The notable exception to this is the UNCITRAL Rules. Article 21(3) provides:

In his statement of defence … the respondent may make a counterclaim or rely upon a claim for the purpose of a set-off provided that the arbitral tribunal has jurisdiction over it.

This previous version of this Article (Article 19(3)) has been considered by the English courts in Econet Satellite Services v. Vee Networks in which the court held that:

. . . the plain and ordinary meaning of article 19(3) is that a respondent may raise a set-off . . . only if it is founded on a claim arising out of the same contract as that on which the claimant’s claim is based . . . this meaning is not contrary to commercial common sense, for, as in this case, the contract relied upon for