Counterclaims and legitimacy in investment treaty arbitration

Abstract

Investor-State dispute resolution (ISDS) is currently facing a crisis of legitimacy, notably because of its perceived asymmetry as well as the difficulties it is faced with when trying to reconcile investor rights with human rights. This article wishes to explore the possibility for respondent States to present counterclaims to investment arbitral tribunals as a way of dealing with these criticisms. Even though some rare awards have entertained them favourably, the majority of arbitral tribunals have declined to hear counterclaims. The author, therefore, examines the obstacles existing in investment case law to the admissibility of counterclaims, both from a procedural as well as from a substantive point of view. The analysis then focuses on the beneficial and adverse consequences that would stem from the hypothetical adoption of a set of rules more favorable to the filing of counterclaims by respondent States in investment arbitration. The essay concludes that such an adoption would be warranted and reinstitute a measure of procedural fairness in a framework that has been suffering from a perception of imbalance and a lack of legitimacy.