This counterguard is located in front of Orange Bastion and faces the present Queensway. The purpose of a counterguard was to serve as an outwork in a bastioned fortification, comprising a relatively low rampart, situated in front of the existing bastion behind it. The counterguard was so constructed to be wide enough to enable the positioning of artillery and this was the case with the Chatham Counterguard which could mount a total of ten guns. The Rock Model in the Gibraltar National Museum shows three embrasures on the left, five on the right flank and two the right flank. Its purpose was to act as an outer line of defence and as a cover against bombardment of the bastion behind, whose shape it mirrored. Drawings were prepared on 6th March 1790 showing the state of the proposed work on improving the Waterport Front and all the surrounding area. They showed a considerable development from earlier plans submitted by the Chief Engineer, Lt. Col. Robert Pringle, in January 1787. Montagu Bastion would be enlarged into a pentagonal bastion and this would also be the case with Orange Bastion which would project its right flank and shoulder well forward. Beyond these bastions, new counterguards (site of the present Montagu and Chatham Counterguards), were to be raised a foot and a half above high-water mark, so as to replace the earlier proposal for a covered way and places of arms. Beyond them, a reef of dry rubble walling would be erected in the sea to bar the approach of any amphibious assault. Work on the counterguard were completed by 1804 and its original name of Orange Counterguard was later changed to Chatham Counterguard after the Governor of Gibraltar, John Pitt, 2nd Earl of Chatham.

In a report of 1841, General Sir John Thomas Jones pointed out that Chatham Counterguard was only slightly lower than the ramparts of the curtain and bastions it covered, so it obscured the line of fire of the guns in the rear. He also noted that the space between its counterscarp walls and those behind was too narrow to be defended properly. The decision was then taken to mount guns in casemates to cover the ditch. The Chatham Counterguard came in for considerable criticism in January 1856 by the outgoing Governor of Gibraltar, General Sir Robert Gardiner, in his ‘Report on Gibraltar as a Fortress and Colony. He wrote that ‘the original cost of the Chatham Counter-guard is stated to have been £12,012.3.5d [almost pound;1.3 million in the present day]. The casemates of this work, being unoccupied was appropriated by Government for storing whatever was landed subject to revenue duty. From the completion of this Chatham-guard to the close of 1849, we have paid not less than £9,160.10s for store rent in yearly sums of from £220 to £300; or, in other words, have been actually paying off the cost of part of this fortifications of this Fortress, causing an accumulation of debt to be paid from our overburdened revenue.’