Counterclaim / Admissibility of a counterclaim asserted as a set-off claim in the Terms of Reference, yes / Increase of counterclaim, admissibility, yes / Arts. 4, 5(1) and 16

Admissibility of counterclaim

With its Statement of Defence of November 18, 1992, Respondent filed a counterclaim.

According to Article 5(1) of the ICC Rules, a defendant wishing to make a counterclaim shall file the same at the same time as the Answer to the Request for Arbitration provided for in Article 4 of the ICC Rules.

In its Answer to the Request, Respondent did not file a counterclaim but reserved the right to do so at a later stage of the proceedings.

At the meeting of March 5, 1992, during which the Terms of Reference were drawn up and signed, the representative of Respondent was asked whether he wished to file a counterclaim and was informed of the procedural rules regarding, and the possible consequences of, the filing of a counterclaim at a later stage. Respondent unequivocally declared not to file a counterclaim at that point in time. Therefore, the Parties and the Arbitrator incorporated into the text of the Terms of Reference the sentence: ". . . [Respondent] reclaims LE 165,104.86 to be returned by Claimant to Respondent. This is not yet a counterclaim" (emphasis added).

According to Art. 16 of the ICC Rules, new counterclaims may be made on condition that they are either specified in a rider to the Terms of Reference or that they remain within the limits of that document.

Claimant did not consent to the belated filing of the counterclaim and thus no rider was signed.

Therefore, it remains to be examined whether the counterclaim lies within the limits of the Terms of Reference.

The limits of the Terms of Reference are to be determined in accordance with the meaning and purpose of Art. 16 which aims at a sensible conciliation of conflicting interests. . . . Thus, the notion "limits [fixed by] the Terms of Reference" proves to be a notion of procedural efficiency to be construed on the basis of the parties' arguments presented so far, on the basis of the factual and legal issue relevant for the evaluation of the claims presented so far (Art. 13(1) letters c and d of the ICC Rules), and on the basis of the previous course of the proceedings. To the extent that new claims can be dealt with without necessitating a considerable expansion of the proceedings, it may be said that such new claims are within the limits of the Terms of Reference. (Translated from Reiner: ICC Schiedsgerichtsbarkeit, Vienna, 1989, p. 178).

This statement leads the author to the observation:

Although Art. 5 requires that the counterclaim be filed with the Answer to the Request for Arbitration . . ., a violation of this provision, as shown by Art. 16, entails no sanction. (Reiner, op. cit., p. 176).

According to Section 17(a) of the Terms of Reference, the Arbitrator is called to determine which exchange rate applies for what period of payment. This question, however, does not only form the basis of Claimant's principal claim but is at the same time at the core of Respondent's counterclaim. Once the applicable exchange rate is determined it remains a matter of pure arithmetics to determine the existence and extent of the counterclaim. Thus, the counterclaim does not add any significant additional issues to the dispute and does therefore not complicate and extend the arbitration proceedings.

Moreover, Respondent did indeed mention its claim for repayment at the meeting of March 5, 1992, and requested the incorporation of such claim in the Terms of Reference as a defence of set-off. By modifying its defence from a set-off into an independent counterclaim Respondent did not actually introduce a new claim but chose to assert and oppose its previous set-off claim in a different procedural manner.

Lastly, not admitting the counterclaim would put Respondent into the position of having to institute new arbitration proceedings for asserting a claim based on the exact same facts and arguments at issue in the present proceedings. This would amount to an unreasonable and unjustified procedural waste.

Therefore, the filing of Respondent's counterclaim is admitted.

Admissibility of the increase of the counterclaim

With respect to the set-off amount mentioned in Section 13 of the Terms of Reference, Respondent increased the amount of its counterclaim twice in the course of these proceedings.

The mere increase of the quantification of a claim due to new evidence or to a different method of calculation does not constitute a new claim (Craig/Park/Paulsson: International Chamber of Commerce Arbitration, 2nd edition, New York, London, Rome, Paris, 1990, p. 255; Reiner, op. cit., p. 177).

Therefore, the increase of the amount of the counterclaim is admitted.'