THE AUTHOR:
Ignacio Tasende, LL.M. Candidate at Georgetown University Law Center
It is difficult to find a topic in the world of arbitration that has not already been extensively explored in doctrine and jurisprudence. This holds true for the so-called “cross-claims” as well.
However, it is also true that when examining the main arbitral instruments (institutional rules or local laws), one can observe that the regulation of cross-claims is generally not extensive. Similarly, it is not one of the most frequently addressed topics by scholars nor widely covered in jurisprudence.
This may be because, naturally, cross-claims were relatively rare in arbitration. A cross-claim, as its name suggests, refers to a claim that can be made between two parties on the same side of the arbitration (for example, between two respondents). One typical case is that of a subcontractor wanting to file a claim against another subcontractor to seek damages.
This article will address the admissibility of these claims considering the scarce regulation in international arbitration.
Cross-Claims Regulation From an Institutional Standpoint
Within the framework of arbitrations administered by the International Chamber of Commerce (“ICC”), its Arbitration Rules effective from 2021 (“ICC Rules”) do not explicitly refer to cross-claims. However, ICC Rules allow them. Unlike earlier versions that remained silent, the current version states in Article 8(1) that in arbitrations involving multiple parties, “claims may be made by any party against any other party.”
This choice was not foreseen in previous versions of the ICC Rules, such as the 1988 edition. In arbitrations under said rules and in the absence of an express provision, the International Court of Arbitration (“Court”) concluded that cross-claims were inadmissible—unless consented to by the parties in the arbitration agreement or afterwards—and thus had to be pursued in a separate proceeding. Consequently, this new arbitration, if it existed, could not be consolidated with the main one unless all parties consented.
In this regard, in the ICC Case No. 7986, Final Award, 1999, the arbitral tribunal reached an interesting conclusion: according to general procedural principles that also apply to arbitrations, if a dispute is “indivisible” or there is a “compulsory joinder,” a claim directed by the claimant against only one of the contractual parties is destined to fail. But if the dispute is divisible (cases of “joint liability”), that choice may succeed, and in such a case, the respondent may promote a cross-claim against the co-debtor.
With the new ICC Rules, the issue seems to be resolved, though respecting the limit of Article 8(1) that no new claims be introduced after the Terms of Reference have been signed or approved by the Court unless authorized by the arbitral tribunal, considering “the nature of such new claims, the stage of the arbitration, and other relevant circumstances,” as established by Article 23(4).
Other arbitral institutions, such as the London Court of International Arbitration (“LCIA”) and its LCIA Arbitration Rules 2020 including Schedule of Costs 2023 (“LCIA Rules”), also refer to cross-claims. Specifically, the LCIA Rules foresee the possibility of cross-claims between respondents under Article 2.1(iii), which must be indicated in the “Response” to the Request for Arbitration. In fact, Article 22.1(viii) grants the arbitral tribunal express power to—at the request of a party or on its own initiative but in both cases after hearing parties’ positions—decide that a cross-claim and/or a defense to a cross-claim is manifestly outside its jurisdiction or inadmissible or manifestly without merit, and it may do so by procedural orders or partial awards (an “Early Determination” under LCIA’s terms).
This comprehensive regulation is commendable, as previous versions of the LCIA Rules only contemplated “cross-claims” generically, as also contemplating counterclaims, which tended to cause confusion.
References to cross-claims can also be found in other instruments, such as:
- HKIAC (Hong Kong International Arbitration Centre) Administered Arbitration Rules (2024) (Article 5.3),
- AAA-ICDR (International Centre for Dispute Resolution) Arbitration Rules (2021) (Article 3.7), or
- CEPANI (Belgian Centre for Arbitration and Mediation) Arbitration Rules (2023) (Articles 9.2 and 10.2).
However, many other relevant instruments remain silent on the matter, such as:
- SIAC (Singapore International Arbitration Centre) Arbitration Rules (2016), or
- UNCITRAL (United Nations Commission on International Trade Law’s) Model Law (2010).
Finally, in the case of ad hoc arbitrations, it ultimately depends on the wording of the arbitration clause and the consent of the parties to bring cross-claims.
Some Thorny Issues Arising from Cross-claims
Cross-claims often involve complex issues related to multiple contracts. For example, a typical case might involve a contractor hired by a project owner to perform a specific activity, which then subcontracts another party to carry out a related task on-site. The three parties may then enter into an additional contract to regulate their rights and duties regarding the project. In such a scenario, it is not unusual for a dispute to arise under the contracts where the project owner submits a claim against the other two parties, and then the contractor files a cross-claim against the subcontractor.
Naturally, in these cases involving multiple contracts with similar or different arbitration clauses, problems may arise and lead to concerns about sensitive due process issues that might justify requests for setting aside an award, such as an undue constitution of the tribunal.
For instance, two parties on one side of the arbitration might share a common interest regarding the lack of merit of the main claim, but they are likely to have opposing interests if a cross-claim is involved, making joint appointment of an arbitrator seem unlikely. In such scenarios, under Article 12(8) of the ICC Rules, it is probable that the Court will “appoint each member of the arbitral tribunal and shall designate one of them to act as president.” However, the situation is not as clear under other institutional rules.
Similarly, how are costs regulated in cases of cross-claims? Previously, the 1998 ICC Rules only provided that the Court could set separate advance payments for “claims” and “counterclaims,” without mentioning cross-claims. Fortunately, Article 37(4) now also refers to cases of cross-claims (by referring to Article 8) and joinder (by referring to Article 7). In such cases, the Court may set one or more advances (which, if previously set by the Court, will be replaced by the new advances under Article 37(4), and any payments already made will be applied to the new advance). But what if a respondent introduces a cross-claim but does not pay the advance? While some rules do not explicitly address this, the fairest solution might be to allow the cross-claimed party to still defend itself against the claimant.
Another cumbersome case is a cross-claim by a respondent against a party not involved in the main arbitration. Fortunately, the LCIA Rules explicitly address this situation, allowing the respondent to request that the arbitral tribunal, once constituted, bring the third party into the arbitration if the third-party consents in writing or, with the consent of all parties, requests the consolidation of that arbitration. A similar solution might be achieved under the joinder and consolidation provisions of the ICC Rules.
What about disclosure in the case of third-party funding (a topic with direct impact on issues such as conflicts of interest and security for costs)? If a respondent is funded solely for the cross-claim against another respondent and does not have a funding agreement for the dispute with the main claimant, should this situation be disclosed to all parties? This issue is not explicitly addressed by the main institutional rules either.
Concluding Remarks
The growth of complex disputes involving different parties and contracts has led to cross-claims being viewed less and less like a utopia, though it is true that they are not something seen every day.
Cross-claims come with implications for joinder and consolidation. Issues such as the possibility of cross-claims involving arbitration agreements that are either similar or different but compatible or incompatible are of pivotal importance.
Consequently, the issues described previously, along with others related to the jurisdiction of the arbitral tribunal, due process, the efficient and expedited conduct of arbitrations, and the issuance of enforceable awards, demand that arbitral institutions address the scenarios of cross-claims in their rules expressly and in a coherent manner. Similarly, in projects where similar situations commonly arise, parties should be meticulous when crafting their arbitration agreements.
In any case, the principle of consent to arbitrate remains fundamental and cannot be overlooked, being equally relevant in scenarios involving cross-claims.
ABOUT THE AUTHOR
Ignacio Tasende is an LL.M. Candidate at Georgetown University. He has 4 years of experience in international commercial and investor-State arbitrations within the arbitration department at FERRERE Abogados (Uruguay), under the ICC, ICSID, and UNCITRAL rules, in the industries of oil & gas, energy, construction, port, and chlorine. He holds a J.D. degree from the University of the Republic (Uruguay) and is admitted to the Uruguayan Bar.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
