International Financial Transactions Take Place Between Varieties Of Jurisdictions

International Financial Transactions Take Place Between Varieties Of Jurisdictions

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International financial transactions take place between varieties of jurisdictions which may belong to any of the existing legal families. Each legal family emerging in their own ways, with their respective philosophies are bound to have differences. For the purpose of this essay we shall look at whether in the current legal environment, in the context of set-off and netting do these differences matter or not and in case of any differences, if they are only based on terminology.
To begin it is of use to identify main legal families. They include Anglo-American group, Roman-Germanic group, Napoleonic group, mixed civil law/common law group, Islamic group and new jurisdictions. Amongst these, most of the jurisdictions recognize the concept of set-off and netting. At the very least, some type of set-off is recognized.
Set-off may be described as ‘the discharge of reciprocal obligations to the extent of the smaller obligation.’ Set-off applies to debt cross claims regardless of their amount being fixed or not or they being unliquidated. Examples may include simple liquidated debts, damages for non-performance of a contract, claims for differences under contracts held by both parties etc.
Netting has various types which need to be distinguished. Most common being close-out netting which is regarded as ‘cancellation of a series of open executory contracts between parties on the default of the counterparty and set-off of the resulting gains and losses’ . It is usually done in three steps, cancellation, calculation and setting off. Another type is settlement netting that is an advance set-off of the obligations under contracts which are yet not due. ‘This type of netting is a classical case of novation.’

... middle of paper ...

...tter is a document specific to the nature of netting that needs to be incorporated into the contracts or has to have been adopted by the jurisdiction. There are various other issues as mentioned above that need to be catered to before the given statement could be held to be entirely true.
In understanding the entire area of set-off and netting it is important to understand the diversified jurisdictions with differing needs for their financial markets. Most jurisdictions have their own laws which mostly do stem from the legal family they come from. However, it indeed may be argued that with increased international financial transactions, the need for erosion of these differences arises. Currently, differences with regards to substance as well as formalities remain. Therefore, the given statement where does present an ideal view is not practically agreeable.

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