1. 1 Set-off in the French Reform of the Law of Obligations: a Tale of Missed opportunities Matthias E. Storme Institute for commercial and insolvency law KU Leuven

2. 2 General characteristics New 1325: Qualification as “extinction of obligations”. Misses the role as enforcement mechanism & security right >< Insol-Reg (70): “If a set-off of claims is not permitted under the law of the State of the opening of proceedings, a creditor should nevertheless be entitled to the set-off if it is possible under the law applicable to the claim of the insolvent debtor. In this way, set-off would acquire a kind of guarantee function based on legal provisions on which the creditor concerned can rely at the time when the claim arises”. No reflection on its role in property law

3. 3 Terminology No terminology for the different rights, never a rule referring to either the active or the passive claim/obligation >< Rome-I-Reg Art. 17 : “Where the right to set-off is not agreed by the parties, set-off shall be governed by the law applicable to the claim against which the right to set-off is asserted”. Insol-Reg Art. 9: “ The opening of insolvency proceedings shall not affect the right of creditors to demand the set-off of their claims against the claims of a debtor, where such a set-off is permitted by the law applicable to the insolvent debtor's claim.”

4. 4 Ipso iure effect No longer expressly in the text, but implicit ? Does this still make sense ? If no party asserts set-off … Practical question is whether assertion/notice has retrospective effect or not. Whether retroactivity is a good rule depends on effects in case of insolvency etc.

5. 5 Requirements from the law of obligations 1325-1: same requirements for passive and active claim. But: -Only active claim should be due; passive claim merely payable -Only active claim should be ascertained* -Exception for restitutionary claims (1325-2: bailment, wrongful dispossession) only relevant for passive claim -Does not clarify whether a (passive) claim can be made not capable of set-off by agreement “Liquidity” required (or judicial set-off): too strict. Comp. DCFR III- 6:103

6. 6 Requirements under property law Text only contains the following: -1325-2 - set-off excluded where claim not capable of attachment (insaisissable): but only relevant for the passive claim -1325-8 - ‘not prejudiciable to the rights of third parties’: much too vague. Only third parties having acquired a proprietary right in the claim + Silent as to concursus.. Comp. DCFR: -III-6:102: Authority to dispose over the active claim (OK) and over the passive claim (more correctly: authority to collect -(but silent as to concursus) It’s time to accept insolveny set-off even without netting agreement

7. 7 Set-off & connected claims Relevant in case of: - Insolvency / concursus of owner of the passive claim -Acquisition by a third party of (rights in) the passive claim French CC is silent as well in the matter of set-off as in the matter of right to suspend (e.n.a.c.), or rather contradictory: -1325-8 : no prejudice to rights of third parties -1326-1: set-off possible after acquisition of rights by a third party

8. 8 Netting agreements Art. 1327: parties may … -Nothing about its effects in relation to third parties Art. 7 Collateral directive: “Member States shall ensure that a close-out netting provision can take effect in accordance with its terms: (a) notwithstanding the commencement or continuation of winding-up proceedings or reorganisation measures in respect of the collateral provider and/or the collateral taker; and/or (b) notwithstanding any purported assignment, judicial or other attachment or other disposition of or in respect of such rights”.