[CSS21] E.2:7. wording

What does "Otherwise" in Appendix E.2:7. "Otherwise: first for the
element" refer to?

Is it correct that "element" in this sentence means the element that
generates the present stacking context, that is, the same element that
is addressed in E.2:1. or in E.2:2.?

Thanks
-- 
Ingo Chao
http://www.satzansatz.de/