Quick Answer: When an Israeli company starts arbitration against you, you do not have to respond passively. A respondent in Israeli arbitration has the right to file a counterclaim — an independent claim against the claimant in the same proceedings — provided the counterclaim falls within the scope of the arbitration agreement. Under ICCA Rules and ICC Rules, the counterclaim must be filed with the response, usually within 30 days of receiving the notice. A properly filed counterclaim survives even if the opposing party tries to withdraw the main claim to escape it. Failing to counterclaim in time can force you to start separate proceedings later, at greater cost and with weaker leverage.

Foreign companies and investors usually meet Israeli arbitration for the first time as respondents. Someone on the other side has already decided to file, served the notice, and framed the entire dispute their way. The instinct is to play defence. That is usually a mistake.

Most commercial disputes that reach arbitration are not one-directional. Invoices were not paid on both sides. A contract was breached by both parties. Goods delivered late came back defective. Israeli arbitration law — and the rules of the Israel Centre for Commercial Arbitration (ICCA) and the International Chamber of Commerce (ICC) — let a respondent bring all of those claims forward in the same proceeding instead of starting a separate case after the first one ends. Filing a counterclaim changes the entire dynamic of the proceedings, often more than any defensive argument does.

1. Your Right to Counterclaim Under Israeli Arbitration Law

The Arbitration Law 5728-1968 is Israel's primary domestic arbitration statute. It does not define "counterclaim" as a separate mechanism, but it gives an arbitrator broad authority to determine all disputes within the scope of the arbitration agreement. Its default procedural rules — the First Schedule — expressly allow a respondent to raise counter-claims in the statement of defence.

If both parties' claims arise from the same transaction or relationship the arbitration agreement covers, a single proceeding is the only sensible path. Splitting things — claimant's claim before one arbitrator, respondent's counterclaim before a second — produces conflicting awards, doubled costs, and a queue of enforcement arguments nobody wants. Israeli law treats the respondent's counterclaim as part of the same reference, not a separate case that needs its own filing.

For international disputes, the International Commercial Arbitration Law 5784-2024 (Israel's version of the UNCITRAL Model Law) applies. Article 23 of that law, which mirrors the Model Law, expressly provides that within the time agreed by the parties or set by the tribunal, the respondent shall state the facts supporting the defence and may also present a counter-claim within the jurisdiction of the arbitration agreement. The right is statutory, not something that needs to be specifically granted by the parties' agreement.

In Practice: The first thing to do when you receive an ICCA or ICC notice of arbitration is read the arbitration clause in your contract carefully. The clause defines the scope of what the arbitrator can hear — including your counterclaim. A clause that says "any dispute arising out of or in connection with this agreement" is broad enough to cover almost any counterclaim related to the same contract. A narrower clause — for example, one limited to "disputes about the price" — may restrict your ability to bring performance-based counterclaims. ICCA's Secretariat is based in Tel Aviv (Ha-Arba'a Street 28, Tel Aviv, 6473925) and can confirm whether a submitted counterclaim falls within its filed clause before the tribunal is constituted. Ask your Israeli counsel to request this preliminary check in the first week, before the 30-day response window closes.

2. Jurisdictional Scope: Which Counterclaims Can the Arbitrator Hear?

An arbitrator's jurisdiction over a counterclaim is not automatic. It depends on whether the counterclaim falls within the scope of the arbitration agreement — and that question generates more fighting than almost any other procedural issue at the outset of proceedings.

A counterclaim arising from the same contract as the main claim is almost always within scope. If an Israeli supplier sues a foreign buyer for non-payment under a supply agreement, the foreign buyer's counterclaim that the goods were defective and caused consequential losses clearly arises "out of or in connection with" the same agreement. The tribunal will hear it.

A counterclaim arising from a different contract between the same parties is more complicated. Suppose the same Israeli supplier also did a second deal — a maintenance contract — and the foreign buyer has a separate claim under that contract. Whether the tribunal can hear the counterclaim on the maintenance contract depends on:

  • Whether the arbitration clause in the supply agreement is broad enough to capture disputes under related agreements between the same parties
  • Whether the maintenance contract has its own arbitration clause, and if so, whether it designates a different forum or the same one
  • Whether the parties agree to consolidate (Israeli arbitration allows consolidation where the arbitrator finds it appropriate)
  • Whether the counterclaim is closely enough connected to the main claim that separating them would be artificial

A counterclaim that is entirely unrelated to the main contract — say, a tort claim about something that happened outside the commercial relationship — will almost always fall outside the arbitrator's jurisdiction. The respondent would need to bring that claim in a separate forum. Attempting to slip an out-of-scope counterclaim into arbitration proceedings is a common tactical error; when the tribunal strikes it out, the respondent has wasted filing fees and response time.

In Practice: The jurisdictional question is not always obvious from the face of the contract. Israel's District Courts have jurisdiction under Section 8 of the Arbitration Law 5728-1968 to rule on whether a dispute is arbitrable, and a party can ask the court to confirm (or deny) the tribunal's jurisdiction before or after the counterclaim is filed. For major disputes — any counterclaim above NIS 500,000 — getting a preliminary legal opinion on jurisdictional scope before filing is money well spent. A jurisdictional challenge by the claimant after you file a large counterclaim is a distraction; anticipate it in your response rather than letting it ambush the proceedings six months in.

3. The Filing Deadline You Cannot Miss

Timing is the single most important practical issue for a foreign respondent considering a counterclaim. Institutional rules impose strict deadlines, and missing them puts you in the position of either seeking the tribunal's leave to file late (with cost consequences) or starting entirely separate proceedings.

Under ICCA Rules, the respondent must file the Response to the Notice of Arbitration within 30 days of receiving the notice. The Response must include, among other things, any counterclaim the respondent intends to bring. ICCA will issue the notice on behalf of the claimant and communicate it to the respondent, who then has 30 days from that communication date.

Under ICC Rules, the Answer to the Request for Arbitration, which must include any counterclaim, is due within 30 days of the date on which the ICC Secretariat transmitted the Request to the respondent. The ICC Secretariat (based in Paris for international filings, with regional desks that communicate via email) can grant short extensions on request, but only for genuine logistical reasons and not to allow a respondent time to decide whether a counterclaim is worth bringing.

In ad hoc arbitrations governed by the default First Schedule to the Arbitration Law 1968, there is no pre-set 30-day deadline. The arbitrator typically sends both parties a procedural order setting out the timetable, including the deadline for the statement of defence and any counterclaim. These periods vary from 21 to 60 days depending on the complexity of the dispute and the arbitrator's standard practices.

In Practice: When you receive an ICCA notice, the 30-day clock starts from actual receipt — the date on which the email or courier delivery was received by your designated contact, not the date on which your internal team forwarded it to counsel. Israeli counsel should be instructed the same day the notice arrives. Allow at least three weeks for a proper analysis of potential counterclaims: reviewing the contract history, identifying invoices or damages, obtaining supporting documents from your records (which may be outside Israel), and preparing the counterclaim statement in Hebrew or in the agreed language of the arbitration. Thirty days sounds like enough time; with an international company that has document archives in multiple countries, it often is not. ICCA's extension policy is strict — extensions beyond 15 days require the claimant's consent or a showing of exceptional circumstances.

4. Counterclaim vs. Set-Off: Two Different Tools

Foreign respondents frequently confuse a counterclaim with a set-off (*qizuz* in Hebrew legal usage), or use them interchangeably. They are legally distinct and produce different outcomes.

A set-off is a defence. Under Section 53 of the Contracts (General Part) Law 5733-1973, a party who owes a liquidated debt to another party can reduce or extinguish that debt by setting off against it any liquidated debt that the other party owes to it, provided both debts are due and payable. In an arbitration context, a respondent who owes the claimant NIS 300,000 but is also owed NIS 200,000 by the claimant can invoke set-off to reduce the claimant's award to NIS 100,000. If the set-off exceeds the main claim — say the respondent is owed NIS 400,000 and the claimant is claiming NIS 300,000 — set-off reduces the award to zero but does not generate a positive award for the respondent for the surplus NIS 100,000. The surplus simply disappears from the proceedings.

A counterclaim is an independent claim for affirmative relief. It is not capped by the size of the main claim. A respondent who counterclaims for NIS 400,000 can obtain an award of NIS 400,000 even if the claimant's case for NIS 300,000 succeeds in full. The final award would then be NIS 400,000 to the respondent minus NIS 300,000 to the claimant, resulting in a net award of NIS 100,000 in the respondent's favour — precisely what set-off could not achieve.

When your potential claim exceeds what the other side is suing for, a set-off defence alone leaves money behind. Many foreign respondents go that route because it feels more defensive — less aggressive, easier to explain to management. Israeli-facing counsel will always check whether the facts support a full counterclaim for positive relief, because the numbers often do.

5. Counterclaims Under ICCA and ICC Rules

The two most common institutional frameworks for Israeli-seated arbitrations are the ICCA Rules (for primarily domestic or Israel-focused disputes) and the ICC Rules (for international commercial disputes). Their counterclaim provisions differ in several practical ways.

Under ICCA Rules, a counterclaim must be included in the Response to the Notice of Arbitration. If the counterclaim raises issues significantly different from the main claim or seeks substantially higher amounts, ICCA may require an additional registration fee (currently calculated on a sliding scale from NIS 2,000 for claims below NIS 100,000 to NIS 30,000 for claims above NIS 10,000,000 — confirm current rates with ICCA, as they are revised periodically). ICCA also requires the counterclaim statement to be complete at filing, not a placeholder. Filing a bare "respondent intends to counterclaim" without setting out the facts and relief sought will not satisfy the rule.

Under ICC Rules, a counterclaim filed in the Answer carries its own advance on costs — the ICC determines the amount based on the aggregate of the claim and counterclaim values. For a dispute where the main claim is €500,000 and the counterclaim is €800,000, the ICC calculates its total fees on the €1,300,000 combined amount, and the advance is shared proportionally. The respondent pays its share of the advance at the time of filing the Answer.

Both sets of rules allow the tribunal, at its discretion, to permit a respondent to file an amended or supplemental counterclaim after the initial response, but only with good reason — new facts discovered in document production, for example. A respondent who holds back claims strategically and then attempts to introduce them mid-proceedings will generally face a costs sanction and may have the late counterclaim struck out.

In Practice: Under both ICCA and ICC procedures, the claimant gets a right to reply to the counterclaim — typically 30 days under ICCA, 30 days under ICC. After the exchange of initial pleadings, the tribunal issues a first procedural order (often called a Terms of Reference under ICC practice) that sets the full timetable for the proceedings. The Israeli Ministry of Justice oversees domestic arbitration registration; ICCA operates under a charter recognised by the Israeli government and its awards are enforceable through the Israeli Execution Office (Lishkat HaHotzaa LaPoal) under Section 23 of the Arbitration Law. This enforcement mechanism is the same whether the final award is in favour of the claimant or the respondent on a counterclaim.

6. Protection If the Claimant Tries to Withdraw the Main Claim

A common tactical move by an Israeli claimant who realises the respondent has a strong counterclaim is to attempt to withdraw the main claim. In court proceedings, an Israeli plaintiff can usually withdraw a claim without prejudice to refiling, subject to paying the defendant's costs. In arbitration, the position is different once a counterclaim has been filed.

Under ICCA Rules, a claimant cannot unilaterally withdraw or discontinue the proceedings once a counterclaim has been submitted, without the respondent's written consent. If the respondent refuses to consent — which a respondent with a strong counterclaim almost always should — the proceedings continue on the counterclaim alone. The claimant effectively becomes a respondent on the counterclaim and must defend it to final award.

ICC Rules take the same position. Article 5 of the ICC Rules provides that a request for withdrawal of the claim does not terminate the proceedings once a counterclaim is on record. The tribunal decides whether to permit the withdrawal, and it will only do so on conditions that protect the respondent's right to proceed on the counterclaim.

This is one of the most practically powerful aspects of a properly filed counterclaim. It eliminates the claimant's exit option. An Israeli company that starts arbitration expecting a quick default or an easy settlement may not anticipate that the foreign respondent will lock it into proceedings by filing a counterclaim. The counterclaim changes the dynamics of every settlement conversation that follows.

7. Strategic Considerations for Foreign Respondents

The decision to file a counterclaim is not purely legal; it has commercial and tactical dimensions that often matter more than the legal analysis alone.

A substantial counterclaim resets the settlement conversation. The claimant came in expecting to press a respondent into paying; now the claimant has an award risk of its own. Many Israeli arbitrations resolve at this stage — before the first substantive hearing — because the claimant had not priced in the possibility of being on the receiving end of a claim and takes a more realistic position once it sees one.

Arbitrators notice too. A respondent with specific, documented counterclaims reads as a party with genuine grievances, not someone making defensive noise. That perception matters when the arbitrator reaches disputed factual questions where neither side has clean evidence.

Cost is a real consideration. Filing a counterclaim raises the total amount in dispute, which increases institutional fees and typically broadens document production. A foreign respondent with a NIS 50,000 counterclaim against a NIS 2,000,000 main claim should think carefully about whether to pursue it in the arbitration or raise it as a set-off defence and bring the remaining amount separately in small-claims court after the arbitration concludes. Running a small counterclaim through a large arbitration is rarely efficient.

In Practice: The statute of limitations for a counterclaim in Israeli arbitration is the same as it would be in court — generally seven years under the Limitation Law 5718-1958 for most civil claims. But the limitation period for the counterclaim claim is measured from when that cause of action arose, not from when the claimant filed its arbitration notice. A foreign respondent who was owed money by the Israeli claimant five years ago still has a valid counterclaim if less than seven years have passed since that breach or non-payment date. The filing of the arbitration notice does not restart the clock for counterclaims, and there is no extension granted by virtue of being made a respondent. Check the limitation position on every potential counterclaim head immediately — before the 30-day response window runs.

8. Late Counterclaims: Getting Leave to File After the Deadline

Foreign respondents sometimes miss the counterclaim deadline because they did not understand the rules, because documents establishing the counterclaim were discovered only after the initial response, or because they initially chose not to counterclaim and then changed their minds. Recovering from a missed deadline is possible but costly.

An arbitrator or tribunal has discretion under both ICCA and ICC rules to allow a late counterclaim, but the respondent must show good cause. Acceptable reasons typically include: new facts or documents that could not have been known at the time of the original response; a significant change in the nature of the claimant's case that makes a counterclaim newly necessary to answer it; or a procedural error by the institution in communicating the initial notice that shortened the response window.

Unacceptable reasons include: the respondent's counsel was busy; the respondent did not obtain Israeli legal advice until after the deadline; the respondent wanted to see how the claimant's case developed before deciding to counterclaim; or the respondent simply forgot. Tribunals are unsympathetic to sophistication arguments from commercial parties with access to legal resources.

When leave is granted for a late counterclaim, it almost always comes with a costs sanction: the respondent pays the claimant's costs of responding to the late filing, regardless of how the substantive claim resolves. A late counterclaim that succeeds at final award will still carry a costs penalty that reduces the net recovery. The better outcome is always to file on time.

Frequently Asked Questions

Yes, provided the counterclaim falls within the scope of the same arbitration agreement. Under the Arbitration Law 5728-1968 and the default rules in its First Schedule, a respondent has a right to file a counter-claim as part of the statement of defence. The arbitrator's authority to hear the counterclaim depends on whether the underlying dispute falls within what the arbitration clause covers. A counterclaim on a different contract between the same parties may not be covered unless the clause is worded broadly enough to encompass all disputes between the parties.

The deadline depends on the applicable rules. Under ICCA Rules, a respondent must file the Response to the Notice of Arbitration, including any counterclaim, within 30 days of receiving the notice. Under ICC Rules, the Answer including a counterclaim must be filed within 30 days of the date on which the Secretariat transmitted the Request for Arbitration. In ad hoc arbitrations under the default First Schedule rules, the arbitrator sets the timetable. Missing the deadline does not automatically bar a late counterclaim, but the arbitrator has discretion to refuse it or impose costs consequences, so acting immediately on receiving the notice is essential.

A counterclaim is an independent claim by the respondent against the claimant — it can exceed the main claim and generates a positive award if it succeeds. A set-off under Section 53 of the Contracts (General Part) Law 5733-1973 is a defence that reduces or extinguishes the claimant's claim, but it does not generate a net award if the set-off exceeds the main claim; the surplus is lost. Both can be raised simultaneously. When your potential claim exceeds what the other side is claiming, a counterclaim is essential — set-off alone leaves money on the table.

No. Under ICCA Rules and ICC Rules, once a counterclaim has been filed the claimant cannot withdraw the main claim without the respondent's written consent or a tribunal order. The tribunal retains jurisdiction to proceed on the counterclaim even if it grants the claimant's withdrawal request for the original claim. This protection is one of the most powerful aspects of filing a counterclaim promptly — it eliminates the claimant's ability to exit the proceedings unilaterally once it sees the strength of your position.

The arbitrator can award any amount found due on the counterclaim, regardless of the size of the main claim. If the tribunal rejects the main claim and upholds the counterclaim, the final award will be a net award in the respondent's favour. There is no cap on a counterclaim based on the size of the original claim. The respondent should be aware that a larger counterclaim will attract higher institutional fees calculated on the combined total of both claims, and that the burden of proof falls on the respondent to establish the counterclaim on the balance of probabilities.

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