This article is partly based on a speech the author held on 31 May 2017 during the University of Zurich Europe Institute's third seminar on arbitration ("Hot Topics"). The presentation was given as an introduction to the panel discussion on the topic Die Forderung der Beklagten – Strategien und Hindernisse rund um die Widerklage.
In 2015 and 2016, the Swiss Chambers' Arbitration Institution ("SCAI") registered a total of 172 new arbitration proceedings. In roughly one fourth of these cases, the respondents filed a counterclaim. This figure alone underpins the practical relevance of counterclaims in arbitration proceedings conducted before arbitral tribunals seated in Switzerland.
There are a variety of different provisions, rules and opinions that need to be considered when arbitral tribunals deal with the admissibility of counterclaims. However, in various cases, it is still unclear under what specific conditions counterclaims may be admitted in pending arbitration proceedings.
This issue will be addressed in the following paragraphs.
2. The arbitral tribunal's general jurisdiction over counterclaims
a. Domestic arbitration (Swiss Code of Civil Procedure; "CCP") Statutory provisions on the admissibility of counterclaims exist in Switzerland only in relation to domestic arbitration. Art. 377(2) CCP stipulates that counterclaims are admissible if they are covered by an arbitration agreement which is compatible ("übereinstimmend") with the arbitration agreement of the main claim. Whether or not such arbitration clause is compatible, is to be determined on the basis of the arbitration agreement's essentialia. To be considered compatible, the arbitration agreements at stake therefore need to provide for an identical seat of the arbitration, the same number of arbitrators and, as the case may be, the application of the same institutional arbitration rules.
b. ICC Rules A provision similar to Art. 377(2) CCP is incorporated in the Rules of Arbitration of the International Chamber of Commerce (2017) ("ICC Rules"). Pursuant to Art. 9 ICC Rules, several claims, including counterclaims, arising out of or in connection with more than one contract may be raised in a single arbitration, regardless of whether such claims are made under one or more than one arbitration agreement under the ICC Rules. According to Art. 6(4) ICC Rules, any pending arbitration shall further proceed as to those claims with respect to which the International Court of Arbitration ("ICC Court") is prima facie satisfied that (i) the concerned arbitration agreements may be compatible and that (ii) all parties to the arbitration may have agreed that the claims can be determined together in a single arbitration. Arbitral tribunals are not bound by the ICC Court's admission of a counterclaim. However, when using their power of discretion to decide upon the issue, they will regularly take into account the criteria as provided for in Art. 6(4) ICC Rules.
c. Swiss Rules The Swiss Rules of International Arbitration (2012) ("Swiss Rules") do not include any specific rule on the admissibility of counterclaims. Therefore, under the Swiss Rules, arbitral tribunals have little guidance to make their assessment on their jurisdiction over a specific counterclaim. When doing so, arbitral tribunals should be aware of the different views expressed by legal scholars on the general admissibility of counterclaims.
There are three prevailing streams of thought on this issue in Swiss legal doctrine:
1. At one end, the principle of party autonomy is considered to be paramount. Its strict application requires that counterclaims are to be admitted only if they are based on the very same arbitration agreement as the main claim (cf. G. von Segesser/A. George, in Concise International Arbitration, 2015, p. 1222).
2. In contrast to this restrictive approach, other authors attach preponderant importance to procedural efficiency. They advocate – by analogy to what is broadly accepted for set-off defences – the general admissibility of counterclaims for all matters that are objectively arbitrable. As a consequence, these scholars affirm an arbitral tribunal's jurisdiction over a counterclaim irrespective of whether or not it falls under a compatible arbitration clause or is even subject to the jurisdiction of the state courts (cf. P.A. Karrer, in Festschrift für Franz Kellerhals, 2005, p. 53).
3. Between these two opinions, some authors hold the view reflected in the above-mentioned Art. 377(2) CCP and Art. 6(4) ICC Rules. These scholars claim that counterclaims should be admitted if they are based on an arbitration clause which is at least compatible with the arbitration agreement of the main claim (cf. B. Berger/F. Kellerhals, International and Domestic Arbitration in Switzerland, 2015, no. 534).
For their decision on the admissibility of a counterclaim, arbitral tribunals should not confine themselves to the mere choice of one of the ideas developed in legal doctrine. Rather, they should opt for one of the concepts only after having duly enquired about the (putative) common intention of the parties.
3. Limitations of time
After having accepted jurisdiction over a counterclaim as a matter of principle, an arbitral tribunal, prior to addressing the merits of a counterclaim, still has to examine whether such claim has been filed in a timely manner by the respondent.
1. The CCP does not contain any provision on this issue. However, legal scholars have expressed the view that, in the absence of a pertinent party agreement, counterclaims in domestic arbitration should principally be submitted together with the statement of defence at the latest (cf. Ph. Habegger, Basler Kommentar ZPO, no. 21 in relation to Art. 377 CCP).
2. Under the ICC Rules, the respondent is on the safe side if he raises the counterclaim together with the Answer to the Request for Arbitration (Art. 5(5) ICC Rules). However, arbitral tribunals may accept counterclaims at a later point in time if it is considered appropriate given the nature of such claims, the stage of the arbitration and other relevant circumstances (Art. 23(4) ICC Rules).
3. Under the Swiss Rules, the respondent is equally required to file his counterclaim together with the Answer to the Notice of Arbitration as a matter of principle (Art. 3(10) Swiss Rules). However, some authors accept that counterclaims are raised in the statement of defence and, in case of "very sound reasons", even later (B. Berger/St. Pfisterer, Commentary Swiss Rules of International Arbitration, no. 9 in relation to Art. 19). Under the Swiss Rules, it is therefore not excluded that a counterclaim, which is submitted as late as with the rejoinder, is admitted by the arbitral tribunal (cf. the case reported in the ASA Bulletin 2008/4, p. 731 et seqq.).
4. Exposure to annulment and lack of enforceability
It arises from the points made above that, for various aspects on the admissibility of counterclaims before arbitral tribunals seated in Switzerland, specific rules are often missing. This is remarkable since an arbitral tribunal's decision on the matter may affect the validity and enforceability of the subsequent arbitral award.
Such risk may materialise if, for instance, an arbitral tribunal takes a liberal approach and accepts jurisdiction over a counterclaim even though it does not fall under a compatible arbitration agreement. In such a case, the award rendered by the arbitral tribunal may be annulled on the basis of Art. 190(2)(b) of the Swiss Private International Law Act ("PILA") or may be denied enforcement by way of Art. V(b) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("NYC").
Yet, the effectiveness of an arbitral award may also be at stake if, in terms of timing, counterclaims are, by contrast, dealt with too restrictively. There may be valid grounds for arbitral tribunals not to accept belated counterclaims. In such a case, however, the absence of clear guidelines on the issue may prompt disappointed respondents to raise the plea of a violation of the right to be heard (Art. 190(2)(d) PILA; Art. V(b) NYC).
5. Concluding remarks
Where specific rules on the admissibility of counterclaims are lacking, arbitral tribunals are required to render a respective decision by using their power of discretion. When doing so, arbitral tribunals should always bear in mind the pitfalls which may affect the effectiveness of their arbitral awards.
However, if arbitral tribunals overly focus on the potential risk of seeing their awards challenged, this may doubly affect another feature of international arbitration: The aim of ensuring procedural efficiency. On one hand, a potentially time and cost consuming multiplication of parallel proceedings cannot be avoided if counterclaims falling outside the formal scope of the arbitration agreement of the main claim are generally excluded from pending proceedings. On the other hand, the arbitration proceedings may be sensibly disrupted if arbitral tribunals, by fear of violating the parties' right to be heard, are too generous in accepting the late submission of counterclaims.
Hence, even though the subject-matter may be relevant for the validity and enforceability of arbitral awards, arbitral tribunals should endeavour to keep a sense of proportion when deciding upon the admissibility of counterclaims. As long as such decision is guided by the (putative) common intention of the parties, it will rarely give rise to a successful challenge against the arbitral award.