As the author, decades ago, of what is still the world’s longest work on the impenetrable law of “set-off”, I was intrigued to read Philip Gordon’s suggestion that Ukraine sets off its claim against Russia for reparations against Russia’s claim for the value of its assets forfeited in Europe (Opinion, March 6).
Unfortunately that plan will not work because the claims are not mutual, a problem that plagued that other massive crisis set-off — between western banks and Iran at the time of the Iranian revolution in 1979. The claims must be between the same two debtor-creditors.
All is not lost though. Ukraine and Europe could celebrate their close alliance by using one of the most devilish tricks known to the ancient lore of set-off — and make the claims mutual.
Draw a diagram on a piece of paper and the solution will leap out at you, namely Ukraine should transfer its claim for reparations to the European entities holding forfeited Russian assets, pro rata. This device is widely used to create mutuality for an insolvency set-off in domestic situations. A few other issues would have to be sorted out. One of those issues is that the frozen assets appear to belong to the Russian central bank as opposed to Russia, thereby questioning mutuality on the Russian side (Russia owes the reparations, not the central bank).
Exactly the same issue arose on Iran. That was sidestepped by the argument that Iran and its central bank were one “Big Mullah” in substance.
Here the west would argue that Russia and its central bank are one
Big Putin. Politically that worked in Iran in the Algiers Accords, settling the matter regardless of the legal technicalities.
If it worked in this case this would be the biggest set-off in history.
Philip R Wood
Former Head of Allen & Overy Global Law Intelligence Unit; and author of ‘English and International Set-Off’ (1989)
Shere, Surrey, UK
