(1) General remarks
The article on statements of claim in the Preliminary Draft of the UNCITRAL Rules contained a provision that “the claim may, with the permission of the arbitrators, be supplemented or altered provided the respondent is given opportunity to express his opinion concerning the change.”2 In the course of the drafting process, the provision in question was not only converted into a separate article,3 but also modified in two basic respects.
First, in accordance with the principle of equality,4 the right to make amendments was extended in the final version of Article 20 to include defences. Although counter–claims are not specifically mentioned in Article 20, there can be no doubt that the amendments to counter–claims must also
be treated according to principles enunciated in this provision.5 Accordingly, the Iran-US Claims Tribunal has without any apparent hesitation applied Article 20 to both claims and counter–claims.6
Second, instead of stating that amendments are possible with “the permission of the arbitrators” (the wording of the Preliminary Draft), the final version of Article 20 stipulates that “either party may amend or supplement his claim or defence unless the arbitral tribunal considers it inappropriate …” This shift in emphasis is significant because it makes clear that the acceptance of amendments by the arbitral tribunal is not entirely discretionary.7 Rather, a party has a right to make amendments which should be accepted by the tribunal, provided they remain within the limits defined by Article 20.8 As noted by the Iran-US Claims Tribunal, the UNCITRAL Rules have thereby adopted a “liberal approach” towards the question of a party's right to make amendments.9 This holding of the UNCITRAL Rules accords with a “widely recognized arbitral principle” concerning the subject matter of amendments.10 In arbitration, unlike judicial proceedings, the arbitration agreement sets limits to the jurisdiction of the tribunal. Within these limits, the scope of the proceedings, and, correspondingly, the scope of any amendments are foreseeable to the parties. A “liberal approach” towards amendments is therefore appropriate.
(p. 468) (2) The amendment must not fall outside the scope of the arbitration clause or agreement
As the preceding discussion implies, there must be limits to the right to amend a claim or defence. A prima facie absolute limitation is set by the arbitral tribunal's jurisdiction as defined in the arbitration clause or agreement. As the second sentence of Article 20 states, “a claim may not be amended in such a manner that the amended claim falls outside the arbitration clause or separate arbitration agreement.”11 Such a claim cannot be characterized as an “amendment” of the original; it is rather a new claim over which the arbitral tribunal lacks jurisdiction.12 This is the case where, for example, the amendment seeks to bring into the proceedings an entity which was not a party to the agreement forming the basis of the arbitration, though it might somehow have been involved in the subject matter (for example, a turnkey project with many parties) of the arbitration. Borderline cases are, however, conceivable. For example, depending on the construction of the contract and its arbitration clause, or the arbitration agreement, the specification of a wholly–owned daughter company of the original claimant/respondent as the proper party (instead of, or in addition to, the mother company) could be viewed as an acceptable clarification of the claim, rather than as a new claim falling outside the tribunal's jurisdiction.13 It is possible to
bring an entirely new party into the proceedings by way of an amendment, provided that the amendment keeps within the limits of the arbitration agreement (i.e., the new party is bound by the agreement) and meets the other conditions set forth in Article 20.14
On the other hand, where the arbitral tribunal has doubts about the compatibility of the purported amendment with the arbitration clause or agreement, it should proceed with caution before accepting amendments, despite the generally liberal spirit of Article 20. A court challenge on the ground of lack of jurisdiction is a concrete risk which may affect the validity and enforceability of an international arbitral award.15 Of course, the parties may conclude a new arbitration agreement and thereby extend the
jurisdiction of the arbitral tribunal. In principle, an amendment proposed by one party, if acceptable to the other, may constitute such an agreement.16
(3) Grounds for rejecting an amendment: delay, prejudice or other circumstances
Whereas the second sentence of Article 20 discussed above concerns proposed amendments which fall outside the arbitration clause or separate arbitration agreement, the first sentence of Article 20 regulates situations where the amendment alters the subject matter of the original claim as defined in the statement of claim.17 Compatibility of the amendment with the second sentence is a precondition for its consideration under the criteria enunciated in the first sentence.
An amendment found to fall under the arbitration clause or agreement should be accepted unless it is inappropriate to do so on the grounds of: (1) delay, (2) prejudice to the other party, or (3) any other circumstances. In the words of the Iran-US Claims Tribunal, “the Tribunal must consider whether the other Party would be prejudiced by the proposed amendment, whether the other party has had an opportunity to respond to the newly–added or amended claim, and whether the proposed amendment would needlessly disrupt or delay the arbitral process.”18 The amendment may be inappropriate on a single ground, although in practice more often than not a combination of various interrelated grounds will lead to its rejection.
Under Article 20, the amendment should be rejected if there has been an inordinate delay in making it.19 Whether the delay can be accepted depends, in part, on the reasons why the amendment was not submitted earlier. Delay may be due to circumstances beyond the control of the party seeking the amendment, or excusable for corresponding reasons–for example, the documentary evidence on which the amendment is based has become accessible to the party during the arbitral proceedings through a “discovery” procedure.20 Delays in these cases will be more readily accepted than in those
cases where the party could at the outset have raised the arguments put forward in the proposed amendment.21
The acceptance or rejection of the amendment will seldom be based on delay alone;22 rather the acceptability of the delay will normally be assessed by weighing it against the criterion of “appropriateness” listed in Article 20, i.e., possible prejudice to the other party.23 An amendment prejudices the other party where it is raised so late as to deprive that party of the opportunity to defend itself properly.24 An amendment made after the case has been heard on the merits or after the scheduled exchange of written pleadings will therefore only rarely be accepted.25 The reaction of the party potentially prejudiced by the amendment is of considerable–if not decisive–importance in assessing that prejudice. The Iran-US Claims Tribunal, in some cases, cited the absence of any objection alleging prejudice as a factor for accepting an amendment.26
Where such objections are raised, the tribunal must assess their merit in light of all the circumstances. In addition to timeliness, the nature of the proposed amendment must be considered. The tribunal should not
immediately disregard as inappropriate amendments that change or modify arguments opposed to those that change or modify the factual circumstances as presented in the statement of claim or the relief sought. The presentation of “unjust enrichment” as an alternative legal theory for what originally has been put forward as a contract or expropriation claim in our view is acceptable, provided the other party has an opportunity to respond to it.27 An amendment seeking an increase in the amount of relief sought should not automatically be barred either, provided that relief is sought on the basis of the original allegations.28 Hence, where a claim for warehousing charges is added to an original claim based on alleged costs of repairs of equipment held in the warehouse, the factual basis of the claim is not changed so as to warrant the rejection of an amendment.29 Amendments concerning increases in interest and costs are least likely to cause undue prejudice.30 Indeed, there is seldom reason not to accept the presentation of such ancillary claims at a late stage of the proceedings.
On the other hand, prejudice may more easily be established when the amendment contains a claim that is truly new in the sense of being based on a new contract or on factual circumstances different from those relied on in the original claim (though not in the sense of exceeding the arbitration clause or agreement). Such is the case where the claimant “seeks an amendment adding a different kind of relief, which raises new factual and legal issues.”31 Although the liberal main tenet of Article 20 accepts even such fundamental amendments if they are raised soon after submission of the statement of claim, rejection may be quite appropriate if the amendment is not sought until a relatively late stage of the proceedings. The Cal––Maine case decided by the Iran-US Claims Tribunal is illustrative. On the basis of Article 20, the Tribunal rejected a new claim that was raised in the Memorial submitted one and a half years after the filing of the statement of claim and four months
before the Hearing, while it accepted a simultaneous amendment which sought to modify the legal theory behind the original portion of the Claimant's claim.32 The amendment rejected in Cal–Maine can also be compared with that accepted in McCollough33 against the respondent's objection. Whereas in the former case the new claim concerned a legal relationship between the parties which differed from that of the original claim, in the latter case the new claim was based on the very same factual circumstances and alleged infractions which formed the basis of the statement of claim.
According to Article 20, “other circumstances” in addition to delay and prejudice may render an amendment inappropriate. It is somewhat difficult to conceive of additional circumstances that could independently, i.e., apart from delay and prejudice, have this effect. The provision can perhaps be interpreted as giving the arbitral tribunal discretion to reject an amendment, even where there is neither inexcusable delay nor any allegation of prejudice, if accepting the amendment (with the consequent opportunity for the other party to respond) would be per se prejudicial to orderly proceedings.34 Such discretion, however, should be applied restrictively. A disruption of orderly proceedings so severe as to justify the rejection of an amendment would thus seem to be a rare possibility
An authoritative source has suggested that the second sentence of Article 20 prohibiting amendments falling outside the scope of the arbitration agreement might “be regarded as one of the ‘other circumstances’ … under which the arbitral tribunal will consider the amendment as inappropriate.”35 This does not on its face appear persuasive, as the second sentence contains in principle an absolute limit to amendments, whereas the grounds of inappropriateness mentioned in the first sentence (including “other circumstances”) are relative and subject to the discretion of the arbitral tribunal.36 As
already noted, however, there may be borderline cases where it is hard to determine whether the purported amendment falls outside the agreed–upon scope of arbitration. In such cases, the “other circumstances” ground gives the tribunal the opportunity to reject an amendment in order to protect the award from possible attacks before courts,37 even where the arbitrators find that the amendment more likely than not falls within the limits of the arbitration clause or agreement. In general, the reference to “other circumstances” implies that the decision on amendment should always be based on an assessment of the situation as a whole, keeping in mind that the UNCITRAL Rules have intentionally adopted a liberal approach towards the acceptability of amendments. In keeping with this spirit, the Iran-US Claims Tribunal has emphasized that circumstances which would preclude the acceptance of an amendment should be concrete.38 Parties that are not satisfied with the liberal approach of the Rules can, of course, modify Article 20 to preclude any amendments to the claims and defences.39
(4) Procedural questions
The Iran-US Claims Tribunal has sometimes determined the acceptability of an amendment as a preliminary issue, and sometimes as joined to the merits. Although both approaches are possible, amendments sought at a relatively early stage of the proceedings should be decided quickly, to remove any uncertainty as to which points the parties have to concentrate on in their subsequent pleadings. Since Article 20 acknowledges the party's right to amend his claim or defence, the arbitral tribunal cannot be required in every case to get the other party's comments on the acceptability of concrete amendments. If, however, there are any prima facie reasons that the amendment might be prejudicial to the other party, it should not be accepted without providing that party an opportunity to comment on the acceptability of the amendment.40 If the amendment ultimately proves to be inappropriate or frivolous, the amending party may be required to compensate the other party for any costs incurred in responding to the amendment.41
(p. 475) Determining the acceptability of an amendment is arguably a procedural matter for the presiding arbitrator to decide according to the conditions set by Article 31(2) of the UNCITRAL Rules.42 It is, however, advisable that the tribunal in its final award ratify any such decision which may have been made by the chairman of the arbitral tribunal.43
C Extracts from the practice of the Iran-US Claims Tribunal
In the absence of any objection by the Parties concerned the Tribunal decides that the Supplementary Statement of Claim and the Supplementary Statement of Counter–claim have been timely filed under Article 20 of the Tribunal Rules.
Sylvania Technical Systems, Inc. and The Islamic Republic of Iran, Case No. 64, Chamber One, Order of 10 May 1983.
In response to the Tribunal's order of 19 December 1983, the First Boston Corporation, named as new Respondent in the Claimant's Amendment to the Statement of Claim filed 25 July 1983, has filed objections thereto. The Tribunal sustains those objections and cannot permit a new, unrelated respondent to be named at this stage of the Proceedings.
Bank Markazi Iran and Bank of Boston International, New York, Case No. 733, Chamber Two, Order of 8 Dec 1983.
In this case, the Statement of Claim on its face showed that it concerned a claim of a non–United States company, but it also indicated clearly that this company was a wholly owned subsidiary. Later papers allege that the parent company is a United States national.
In view of circumstances of this case, the Tribunal considers the 22 June Petition to be a clarification of who is the proper Claimant, and not an amendment whereby a new Claimant is named; thus the Tribunal need not address the question whether such an amendment could be permitted under Article 20 of the Tribunal Rules. In view of the foregoing, the claim should now be regarded as claim of AMF Incorporated on behalf
of AMF Overseas Corporation. The Statement of Claim is therefore eligible for filing.
Refusal to File Claim of AMF Corporation, Decision No. DEC 17–REF20–FT (8 Dec 1982), reprinted in 1 Iran-US CTR 392, 393 (1981–1982).
Article 20 of the Provisionally Adopted Tribunal Rules provides that a party during the course of the arbitral proceedings [including the refusal proceedings] may amend or supplement his claim unless the Tribunal considers it inappropriate.…However, to substitute a new Claimant for the original one is tantamount to the filing of a new claim and cannot be regarded simply as an amendment to the existing claim, timely received by the Registry.
Refusal to Accept the Claim of Raymond International (UK) Ltd, Decision No. DEC18–REF21–FT (8 Dec 1982) (square brackets in the original), reprinted in 1 Iran-US CTR 394, 395 (1981–1982).
With respect to the argument that Novzohour could not be named a respondent after 19 January 1982 because Article III, paragraph 4 of the Claims Settlement Declaration said that no claim may be filed after that date, the Tribunal notes that it decided to accept that amendment on 4 June 1982. In explanation, we point out that the original Statement of Claim identified Novzohour as the other party to the License and asserted that the Government of the Islamic Republic of Iran “has nationalized Novzohour and is responsible for the control and debt obligations of Novzohour.” In its Statement of Defence filed on 12 March 1982 the Government, which said it was representing Novzohour, presented a counter–claim on Novzohour's behalf. In these circumstances, the Tribunal concluded that acceptance of the amendment pursuant to Article 20 of our Provisional Rules of Procedure would violate neither that Article nor the Claims Settlement Declaration.
Kimberly–Clark Corporation and Bank Markazi Iran et al., Award No. 46–57–2 (25 May 1983) at 8–9, reprinted in 2 Iran-US CTR 334, 338 (1983–I).
Furthermore, in a post–hearing brief Mr. Dallal has argued that if the Respondents' defence were to be sustained, the bank would be unjustly enriched from its own culpable act, i.e. it would be the beneficiary of the US $400,000 worth of Rials which it undertook to pay and which it has not.
Since this additional basis for the claim was first presented in a post–hearing brief, the Tribunal holds, in accordance with Article 20 of the
Tribunal Rules, that it would be inappropriate to allow this amendment to the claim. Bank Mellat has declared that the Rials could be recovered directly from the bank by the person entitled to them.
Dallal and The Islamic Republic of Iran, Award No. 53–149–1 (10 Jun 1983) at 3–4, reprinted in 3 Iran-US CTR 10, 11 (1983–III).
This provision affords wide latitude to a party who seeks to amend a claim, and the Tribunal's practice is in accord with this liberal approach. As Article 20 directs, the Tribunal will permit an amendment unless delay, prejudice or other concrete circumstances make it inappropriate to do so. No such circumstances appear here.
First, the Claimant did not unduly delay before making the Amendment.…Claimant tried as long as possible to limit the proceedings to the implementation of the MOU [Memorandum of Understanding], and it was NDIO's refusal to join in a Request for an Award on agreed terms that caused any “delay” in the making of the amendment.
Likewise, the Amendment did not cause prejudice to the Respondents. Again it was NDIO's own refusal, on two separate occasions, to implement the terms of the MOU that prompted the Claimant to return to the claim arising out of the 1976 agreement. While the relief sought was increased, the factual circumstances on which the amendment is based had been presented in the original Statement of Claim. The Respondents can point to no “prejudice” which does not ensue from NDIO's own conduct, and thus the MOU presents no bar to the proffered amendment.
Finally, there are no “other circumstances” which make inappropriate to permit the Claimant to amend its original Statement of Claim. Accordingly, the Amendment submitted on 24 February 1983 is allowed.
International Schools Services, Inc. and The Islamic Republic of Iran, National Defence Industrial Organization, Award No. ITL 57–123–1 (30 Jan 1986) at 10–11, reprinted in 10 Iran-US CTR 6, 12 (1986–I).
Claimant Sedco has also filed indirect claims relating to Sediran under Article VII(2) of the Claims Settlement Declaration. Respondents present additional objections to these indirect claims. Alternatively, Claimant presents a direct claim for its shareholding interest in SEDIRAN.
Respondents object to the Tribunal's jurisdiction over a direct claim by Sedco for its shareholding interest in Sediran on the ground that it
involves “the presentation of a new statement of claim.” The Tribunal finds that the claims of Sedco, whether considered jurisdictionally as direct or indirect claims, rest essentially on the same facts, allegations and legal theories. It is also noted that the Tribunal accepted a change from an indirect to direct claim in a similar pleading context in Tippetts, Abbett, McCarthy, Stratton and The Islamic Republic of Iran, Award No. 4 1–7–2 (29 June 1984). Respondents' objection is therefore denied.
Sedco Inc. and National Iranian Oil Company and the Islamic Republic of Iran, Award No. ITL 55–129–3 (28 Oct 1985) at 13–14, 25, reprinted in 9 Iran-US CTR 248, 257, 265–66 (1985–II).
Although Claimant noted in its 18 January 1982 Statement of Claim that its participation in the running of Sea–Cal included “among other activities, sending its employees to Iran to help in the running of Sea–Cal”, Cal–Maine made then no specific claim on the basis of such activities. In its initial Statement of Claim, Cal–Maine sought relief only for its investment in Sea–Cal, interest thereon for two years, and costs of arbitration. A claim for accounts receivable was not raised at the 7 February 1983 Pre–Hearing Conference and was not in any of Cal–Maine's pleadings until its Memorial of 14 July 1983. It did not seek a formal amendment of its claim. Even assuming that the claim for accounts receivable could be deemed a request for amendment, in this case, the delay in asserting such a claim and the likely prejudice to Respondents of such a delay would preclude the acceptance of such an amendment under Article 20 of the Tribunal Rules. In view of this fact and the fact that no such amendment was proposed, the Tribunal does not consider Cal–Maine's claim for accounts receivable.
Cal–Maine's claim for its investment interest in Sea–Cal was asserted in the Statement of Claim. Claimant, however, later altered its theory for recovery of its investment interest. Claimant's Memorial in which the new legal theory was presented was filed three months prior to the hearing. Seamourgh did not object in its October 1983 Memorial to the argument put forward by Cal–Maine in July. Seamourgh had four months in which to prepare its defence for the Hearing. Accordingly, the Tribunal does not believe that Respondents have been prejudiced by any change of theory so as to make such a change inappropriate. Moreover, Respondents were given the opportunity and did in fact file post–hearing memorials.
Cal–Maine in its Statement of Claim stated that it sought “damages in the amount of US $600,000.00 (US $500,000.00 plus 20% interest)”.
In the light of Claimant's subsequent submissions this has to be understood as a claim for 10% annual interest for a period of two years which Cal–Maine was entitled to receive on its investment according to the terms of the Letter on Intent. In its July 1983 Memorial Claimant alternatively sought interest from the date of each of its capital contributions until full payment on the basis of general principles concerning contract breaches. The Tribunal does not consider this amendment of the claim inappropriate in the light of Article 20 of the Tribunal Rules.
Cal–Maine Food Inc. and The Islamic Republic of Iran, Award No. 133–340–3 (11 Jun 1984) at 11–12, 15–16, reprinted in 6 Iran-US CTR 52, 59–60, 62–63 (1984–II).
The Tribunal admits the Claimant's request to increase the rate of interest initially sought by it as well as to update the amount of its claim for costs, since both these requests affect only the amounts of calculations and as such do not prejudice the defence by the Respondents.
Pepsico Inc. and The Islamic Republic of Iran et al., Award No. 260–18–1 (11 Oct 1986) at 20, reprinted in 13 Iran-US CTR 3, 17 (1986–IV).
Aeronutronic Overseas Services, Inc. and The Islamic Republic of Iran et al., Case No. 158, Chamber One, Order of 9 Mar 1984.
McCollough Company, Inc. and The Ministry of Post, Telegraph and Telephone, Award No. 225–89–3 (22 Apr 1986), reprinted in 11 Iran-US CTR 3, 17–18 (1986–II).
Thomas Earl Payne and The Islamic Republic of Iran, Award No. 245–335–2 (8 Aug 1986), reprinted in 11 Iran-US CTR 3, 6 (1986–III).
The Claimant is requested to file by 31 October 1986 further clarification and supporting documentation concerning the basis of its proposed amendment increasing its claim for invoiced amounts to US $162,472.30. By the same date the Respondent NIOC is requested to file comments on the procedural issue of whether the proposed amendment should be admitted.
Tai, Inc. and The Islamic Republic of Iran, Case No. 421, Chamber One, Order of 12 Aug 1986.
Litton has sought leave to amend its claim to include the costs of warehousing of the 91 retained LN–33 items of equipment. In the view of
the Tribunal, no prejudice would be occasioned to the Respondents by the admission of this amendment, and it is therefore allowed in accordance with Article 20 of the Tribunal Rules.
Litton Systems, Inc. and The Islamic Republic of Iran, Award No. 249–769–1 (25 Aug 1986) at 8, reprinted in 12 Iran-US CTR 126, 131 (1986–III).
As regards NIO's status, Article 20 of the Tribunal Rules states that a party may amend its claim, unless delay, prejudice or loss of jurisdiction would result. Claimant's amendment adding NIO as a Respondent was requested after the Claimant discovered that NIO was the entity directly involved in the alleged expropriation. Therefore such a request cannot be considered as untimely filed. Since NIO acted allegedly as an agent of Iran, also a Respondent in this Case, the amendment cannot be said to prejudice Iran or any other Respondent. Finally, there is no suggestion that the amendment may deprive the Tribunal of jurisdiction over the claim.
In view of the foregoing, the Tribunal finds no reason to disallow such an amendment, and it is accordingly accepted.
Fedders Corporation and Loristan Refrigeration Industries, Decision No. DEC 51–250–3 (28 Oct 1986) at 2, reprinted in 13 Iran-US CTR 97, 98 (1986–IV).
Fereydoon Ghaffari (a claim less than US $250,000 presented by The United States of America) and The Islamic Republic of Iran, Case No. 10792, Chamber Two, Order of 15 Sep 1987, reprinted in 18 Iran-US CTR 64 (1988–I).
Harris International Telecommunications, Inc. and The Islamic Republic of Iran, Award No. 323–409–1 (2 Nov 1987) (footnotes omitted), reprinted in 17 Iran-US CTR 31, 55–57 (1987–IV).
Arthur Young & Company and The Islamic Republic of Iran, Award No. 338–484–1 (1 Dec 1987), reprinted in 17 Iran-US CTR 245, 253–54 (1987–IV).
Reza Said Malek and The Islamic Republic of Iran, Award No. ITL 68–193–3 (23 Jun 1988), reprinted in 19 Iran-US CTR 48, 52–53 (1988–II).
Jack Buckamier and The Islamic Republic of Iran, Award No. 528–941–3 (6 Mar 1992), reprinted in 28 Iran-US CTR 53, 60 (1992).
Harold Birnbaum and The Islamic Republic of Iran, Award No. 549–967–2 (6 Jul 1993), reprinted in 29 Iran-US CTR 260, 265 (1993).
Mohsen Asgari Nazari and The Government of the Islamic Republic of Iran,
Award No. 559–221–1 (24 Aug 1994), reprinted in 30 Iran-US CTR 123, 126 (1994).
Shahin Shaine Ebrahimi, et al. and The Government of the Islamic Republic of Iran, Award No. 560–44/46/47–3 (12 Oct 1994), reprinted in 30 Iran-US CTR 170, 204 (1994).
Westinghouse Electric Corporation and The Islamic Republic of Iran Air Force, Award No. 579–389–2 (20 Mar 1997) (citations omitted), reprinted in 33 Iran-US CTR 60, 75–76 (1997).
Westinghouse Electric Corporation and The Islamic Republic of Iran Air Force,
Award No. 579–389–2 (20 Mar 1997), Separate Opinion of George H Aldrich (20 Mar 1997), reprinted in 33 Iran-US CTR 195, 198–200 (1997).
Vivian Mai Tavakoli et al. and The Government of the Islamic Republic of Iran, Award No. 580–832–3 (23 Apr 1997), reprinted in 33 Iran-US CTR 206, 210 (1997).
Frederica Lincoln Riahi and The Government of the Islamic Republic of Iran, Award No. 600–485–1 (27 Feb 2003).