Counterclaims in Arbitration Arbitration without consent? Moritz Schmitt, LL.M. (NYU) Hannover, 19 February 2015
Overview Counterclaims in two-party and multi-party scenarios Claimants, Respondents, Third Parties Claimant Respondent 3 rd Party 2
Overview Counterclaims in multiparty scenarios The 2015 Vis Moot Problem Vulcan Coltan Med. Mining Global Minerals 3
Two-Party Scenario: Claim and Counterclaim Interests, prerequisites, strategic considerations 1 Section
Two-party scenario Should Respondent be entitled to counterclaim? Claimant and Respondent will likely have conflicting views Respondent would like to efficiently resolve its entire dispute with Claimant (rather than having to pursue claims in parallel proceedings); and benefit from costs reduction for higher value claims. Claimant would like to maintain its control of the proceedings; efficiently resolve its claim; avoid costs increases; and avoid delays. 5
Two-party scenario What are the prerequisites for bringing a counterclaim? Most arbitration laws provide little guidance/restrictions or are silent Art. 2(f) UNCITRAL Model Law f) where a provision of this Law, [ ], refers to a claim, it also applies to a counter-claim, and where it refers to a defence, it also applies to a defence to such counter-claim. Parties agreements? - Individual agreements. - Agreements on institutional rules. 6
Two-party scenario Under which circumstances is a counterclaim admissible? Could the counterclaim arise from a different contract? A Claimant Respondent B Both contracts A and B contain the following clause: 7
Two-party scenario Consent and Jurisdiction of the Arbitral Tribunal Separate contracts with compatible arbitration agreements? Art. 9 ICC Rules 2012 Subject to the provisions of Articles 6(3)-6(7) [ ], claims arising out of or in connection with more than one contract may be made in a single arbitration irrespective of whether such claims are made under one or more arbitration agreement under the Rules. More than one contract; More than one arbitration agreement under the ICC Rules; Requirements of Art. 6(3)-6(7). 8
Two-party scenario Consent and Jurisdiction of the Arbitral Tribunal Separate contracts with compatible arbitration agreements? Art. 9 in connection with Art. 6(4)(ii) ICC Rules 2012 - Art. 6(4)(ii) ICC Rules 2012 where claims pursuant to Article 9 are made under more than one arbitration agreement, the arbitration shall proceed as to those claims with respect to which the Court is prima facie satisfied (a) that the arbitration agreements under which those claims are made may be compatible, and (b) that all parties to the arbitration may have agreed that those claims can be determined together in a single arbitration. Compatible arbitration agreements; All parties have agreed to a single arbitration. 9
Two-party scenario Under which circumstances is a counterclaim admissible? Separate contracts, but incompatible/no arbitration agreements? A Claimant Respondent B Contract A contains a non-icc arbitration clause. Contract B - concerns additional obligations to refine the rare earths bought. - contains [a] a different arbitration clause or [b] no arbitration clause. 10
Two-party scenario Timing of the Counterclaim What is the earliest or latest time to raise a counterclaim? Art. 5(5) ICC Rules 2012 Any counterclaims made by the respondent shall be submitted with the Answer [ ] Art 23(4) ICC Rules 2012 After the Terms of Reference have been signed or approved by the Court, no party shall make new claims which fall outside the limits of the Terms of Reference unless it has been authorized to do so by the arbitral tribunal, which shall consider the nature of such new claims, the stage of the arbitration and other relevant circumstances. 11
Two-party scenario Takeaways Even if you already dozed off, you should still remember The counterclaim may arise out of a different contract That contract needs to contain a compatible arbitration agreement. The parties must have consented to arbitrate the claims in a single arbitration. Counterclaims from separate contracts with incompatible or no arbitration agreements may not be considered. 12
Three-Party Scenario: Claim and Counterclaim Interests, prerequisites, strategic considerations 2 Section
Three-party scenario Under which circumstances is a counterclaim admissible? What are the additional considerations in the three party context? A Claimant Respondent B Suppose 3 separate contracts all containing ICC arbitration clauses 3 rd Party 14
Three-party scenario Should the Tribunal consider Respondent s counterclaim? Parties will likely have conflicting views Respondent additionally seeks to minimise risks of conflicting decisions. Claimant still seeks to protect his control of the proceedings, in particular as to who are the involved parties. Third party would like to protect its procedural rights. benefit from the lower costs of combined adjudication. possibly share liability with another party. 15
Three-party scenario Consent and Jurisdiction of the Arbitral Tribunal Art. 9 and 6(4)(ii) ICC Rules 2012: compatibility and consent Art. 9 in connection with Art. 6(4)(ii) ICC Rules 2012 More than one contract; More than one arbitration agreement under the ICC Rules; Requirements of Art. 6(4)(ii) ICC Rules: compatibility and consent. 16
Three-party scenario Parties agreements and institutional rules ICC approach to multi-contract, multi-party counterclaims Art. 7(1) ICC Rules 2012 [ ] Any such joinder shall be subject to the provisions of Articles 6(3) 6(7) and 9. [ ] Art. 6(4)(i) ICC Rules 2012 [ ] where there are more than two parties to the arbitration, [ ] with respect to which the Court is prima facie satisfied that an arbitration agreement under the Rules that binds them all may exist; [ ] More than two parties; one arbitration agreement that binds them all. 17
Three-party scenario Parties agreements and institutional rules ICC approach to timing of a third-party counterclaim Art. 7(1) ICC Rules 2012 No additional party may be joined after the confirmation or appointment of any arbitrator, unless all parties, including the additional party, otherwise agree. [ ] Article 18 UNCITRAL Model Law 2006 The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case. Article 12(7) ICC Rules 2012 Where an additional party has been joined, and where the dispute is to be referred to three arbitrators, the additional party may, jointly with the claimant(s) [ ], nominate an arbitrator [ ]. 18
Three-party scenario Parties agreements and institutional rules ICC approach to timing of a third-party counterclaim Art. 7(1) ICC Rules 2012 No additional party may be joined after the confirmation or appointment of any arbitrator, unless all parties, including the additional party, otherwise agree. [ ] Article 18 UNCITRAL Model Law 2006 The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case. Article 12(7) ICC Rules 2012 Where an additional party has been joined, and where the dispute is to be referred to three arbitrators, the additional party may, jointly with the claimant(s) [ ], nominate an arbitrator [ ]. 19
Strategic Considerations Advantages and Disadvantages of bringing counterclaims Issues involve costs; impression; sequence of submissions; delays Increase the costs for the other party? - Art. 36(3) ICC Rules 2012 Where counterclaims are submitted by the respondent [ ], the Court may fix separate advances on costs for the claims and the counterclaims. [ ] Balance the impression? Ensure having the last word? Delay the proceedings? 20
Summary Takeaways Even if you slept through this, you should still remember In a two-party scenario - The counterclaim may arise out of a different contract. - That contract needs to contain a compatible arbitration agreement. - The parties must have consented to arbitrate the claims in a single arbitration. In a multi-party scenario - The counterclaim may arise out of different contracts. - Such contracts need to contain compatible arbitration agreements. - At least one of the arbitration agreements must be binding on all parties to the arbitration. 21
Thank you Questions &answers moritz.schmitt@freshfields.com 22