The dispute centres around the outcome of the May election in the Waterside area, part of the Derry City and Strabane District.
An election petition in respect of the count was lodged by the Alliance Party in June.
It came after the party lost both its sitting councillors – Rachael Ferguson and Philip McKinney – with the latter losing out by fewer than 50 votes to SDLP councillor Martin Reilly.
It is understood a significant number of uncounted votes could have affected the outcome in the close-run contest.
Votes are set to be recounted from Stage 7 of the count until its conclusion, it has been reported.
Sealed ballot papers will be opened on Wednesday, with the recount beginning at 10am in Foyle Arena.
As well as representatives of the affected candidates, two representatives of the other original candidates may also enter the counting room if desired, with extra attendees subject to the discretion of Deputy Returning Officer John Kelpie.
Following the conclusion of the count process, a report will be provided by the Deputy Returning Officer to the election court which will sit again on Thursday, August 17.
Sinn Féin’s Caitlin Deeney topped the poll in the Waterside with 1,949 votes and was elected, along with the UUP’s Darren Guy on the first count.
Ms Deeney’s surplus then brought party colleague Christopher Jackson over the line, with Chelsea Cooke (DUP), Niree McMorris (DUP) then deemed elected on Stage 6 of the count.
Sean Mooney and Martin Reilly (both SDLP) were the final two candidates elected after their total was in excess of McKinney’s 1,105.05.
Reilly was elected with 1,154.21 votes.
Alliance believes there should have been a further count to allow for the surplus of the two elected DUP councillors to be distributed.
Around 150 votes had yet to be transferred.
Prior to losing both its council seats, Alliance had opened a new North-West office in the city in March, the first of two offices planned for the west.
Former councillor Rachael Ferguson said the office – officially opened by former Alliance leader David Forde – would act as a “satellite office of Alliance Party HQ in Belfast”.
“It will be a great resource for the public, a place for constituents to meet Alliance councillors; a place where we can hold clinics for local people; and where we can hold our own party meetings,” she said.
But the May result appeared to throw a spanner in the works of Alliance’s ambitions, with the loss of the party’s only two candidates in Derry an anomaly in an election of otherwise good results.
In a statement, the Electoral Office said: “An election petition was lodged in respect of the outcome of the Local Council elections in the Waterside DEA within Derry City & Strabane District Council.
“An initial hearing of the election court took place today (Monday 7 August) and the court directed that the sealed ballot papers should be opened and the Waterside DEA count continue from stage 7 until conclusion.
“This will take place on Wednesday, August 9, at 10 am in Foyle Arena.
“No other statement can be made at this time due to the ongoing election court process.”
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