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The Assessment of the Connection Requirement for Environmental Counterclaims
Abstract
This chapter critically assesses the requisite connection between the main claim and an environmental counterclaim. As such, it firstly explores the justifications for the requirement of connection and the proper characterisation of this requirement. The chapter then delves into the analysis of the connection requirement and posits that a balancing exercise of connecting factors should be undertaken, which should render environmental counterclaims more viable in both contract-based and treaty-based investment arbitration.
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Recently, environmental and human rights (EHR) counterclaims in investment arbitration have attracted much attention as a vehicle to recalibrate the investor–state relationship. However, until now, successful instances of EHR counterclaims have been admittedly rare. As explained in this paper, some of the major barriers to EHR counterclaims in investment arbitration, and some of the concerns associated with them, are rooted in the domestic law basis of such counterclaims. Contrary to the position of several commentators, this paper argues that the grounding of EHR counterclaims on international law is neither practical nor beneficial, and EHR counterclaims are necessarily based on domestic law. Therefore, when investment arbitral tribunals adjudicate EHR counterclaims, they essentially act as an alternative to domestic courts. This has several implications. First, on questions of jurisdiction and admissibility of EHR counterclaims, decisions of states and arbitral tribunals essentially turn on the pros and cons of having these claims adjudicated by investment arbitral tribunals as opposed to domestic courts. Second, weaknesses in domestic rules, including the difficulty of holding shareholders accountable, would carry over to EHR counterclaims. Such problems can only be efficiently tackled at the level of domestic law. Third, as revealed from the inconsistent decisions in Perenco and Burlington on the merits of the environmental counterclaims, having investment arbitral tribunals adjudicate domestic law-based EHR counterclaims may cause certain concerns. For EHR counterclaims to play a more beneficial role, decision-makers must bear in mind these factors and concerns when taking their policy choices.
In international disputes between investors and host-States, the traditionally asymmetric nature of international investment agreements (IIAs) may prevent States from bringing claims against investors for harm caused, including environmental damage. At the same time, allowing host-State counterclaims for environmental damage is a potentially useful tool for rebalancing the asymmetric nature of IIAs. Yet, in the highly fragmented area of international investment law, the availability of host-State counterclaims is not always clear. This article analyses the procedural and legal bases available for host-State counterclaims for environmental damage, including newly developing human rights and transnational public policy approaches to such claims. The question that this article seeks to evaluate is to what extent host-State counterclaims are available to rebalance the asymmetric relationship between host-States and investors, specifically concerning environmental damage. To answer this question, the article takes a qualitative approach by examining case law, commentary, and the work of international organizations, and applying the results of the research to the specific context of host-State counterclaims for environmental damage. Future developments are also discussed in the context of ongoing multilateral investor-State dispute settlement reform efforts at the United Nations Commission on International Trade Law. There currently exists a window of opportunity for States to seek cooperative, effective multilateral strategies for partially rebalancing the relationship between investment and the environment. The article posits that harmonization of State approaches towards counterclaims for environmental damage is desirable and States should take a permissive approach towards host-State counterclaims for environmental damage in their IIA treaty negotiation practice.
The purpose of the handbook is to provide practitioners and legal scholars with a comprehensive overview and a systematic assessment of the relevant cases and issues in the field of international investment law. The handbook thus aims at giving both a first overview as well as a detailed insight into all aspects of investment law. The handbook provides a thorough legal analysis of arbitral jurisprudence and identifies emerging trends and developments. This book will be of crucial importance to investors, legal practitioners, and scholars. Further, it will answer the call for a comprehensive academic study of crucial developments, such as the increasing role of European Union Law or the rising impact of multilateral approaches on the system of international investment law.
REFLECTING BACK on the cases in which I have been involved as an arbitrator, and certainly forgetting some of them, I realized that I have resolved disputes under German, French, English, Polish, Hungarian, Portuguese, Greek, Turkish, Lebanese, Egyptian, Tunisian, Moroccan, Sudanese, Liberian, Korean, Thai, Argentinean, Colombian, Venezuelan, Illinois, New York … and Swiss law. Do I know these laws? Except for New York law, which I learned many years ago and would not pretend to know now, and Swiss law, which I practise, although not that often as you see, the answer is clearly no. So how did I apply a law unknown to me? By ignoring it? By focusing on the facts and the equities? How did I become educated in the law? How did counsel teach me?
These are the questions that I would like to address with you now. I would like to do it in four steps:
The topic is the status of the substantive law governing the dispute before the arbitrators.1 Is it a fact to be proven by the parties or is it law to be investigated by the arbitrators? The topic is not about the law that governs the arbitration procedure, nor about the law that governs the arbitration agreement, nor is it about which substantive law applies. We assume that this choice has been made by the parties or the arbitrators. …
This chapter explores the possibility for host States to present counter-claims in arbitration proceedings with foreign investors when the parties’ arbitration agreement is based on a unilateral offer by those States in their investment legislation or in a bi- or multilateral
investment treaty (“arbitration without privity”). As will be demonstrated, the focus in these instruments on the investor’s substantive rights may constitute an obstacle in this regard, as the counter-claim, by virtue of the consensual nature of arbitration, must fall within the arbitration agreement’s definition of arbitrable claims (the tribunal’s jurisdiction ratione materiae). A further potential hurdle is the locus standi of the host State, and more precisely, the extent to which the
offer in question envisages claims being presented by either party to the dispute or whether it reserves this procedural right for the investor (jurisdiction ratione personae). Other issues include the requirement of connexity between the claim and the counter-claim ; for instance, whether a host State may present a counter-claim based in national law against an investor’s claim founded in international law. It will be concluded that these obstacles may be overcome depending on the wording of the respective instruments and the facts of each particular case. Further, the investor may at all times choose to consent to the admissibility of the host State’s counter-claim; which it may be advised to do, considering the time and money that can be saved by consolidating the parties’ claims in one set of proceedings. In the interest of legal certainty,
and an efficient and consistent settlement of investment disputes, States are still urged to consider including specific provisions in their legislation and/or treaties to facilitate the admissibility of counter-claims.
This book examines the law, national and/or international, that arbitral tribunals apply on the merits to settle disputes between foreign investors and host states. In light of the freedom that the disputing parties and the arbitrators have when designating the applicable law, and because of the hybrid nature of legal relationship between investors and states, there is significant interplay between the national and the international legal order in investor-state arbitration.
The book contains a comprehensive analysis of the relevant jurisprudence, legal instruments, and scholarship surrounding arbitral practice with respect to the application of national law and international law. It investigates the awards in which tribunals referred to consistency between the legal orders, and suggests alternatives to the traditional doctrines of monism and dualism to explain the relationship between the national and the international legal order. The book also addresses the territorialized or internationalized nature of the tribunals; relevant choice-of-law rules and methodologies; and the scope of the arbitration agreement, including the possibility of host states presenting counterclaims in investment treaty arbitration. Ultimately, it argues that in investor-state arbitration, national and international law do not only coexist but may be applied simultaneously; they are also interdependent, each complementing and informing the other both indirectly and directly for a larger common good: enforcement of rights and obligations regardless of their national or international origin.
The open access version of this publication made available by OUP as part of the OAPEN-UK project: http://www.oapen.org/search?identifier=453473
The notion of counterclaims has recently become a hotly debated topic in the context of investment treaty arbitration as the scholarship and case law have questioned the limits traditionally associated with counterclaims in international dispute settlement. This article critically examines this new approach, together with competing views, and presents a general legal framework and methodology for assessing counterclaims in investment treaty arbitration. We submit that the recent views, spearheaded by Prof Reisman´s dissenting opinion in Roussalis v. Romania , must be rejected. The present article starts with an introduction of the concept of counterclaims in international dispute settlement and investment treaty arbitration in particular, and sketches out the legal bases for their admission in different dispute settlement mechanisms in order to emphasize similarities and differences among them for comparative arguments used in the main thrust of the article. In turn, it critically analyses the three general requirements for admitting counterclaims: parties' consent, close connection with the primary claim, and the issue of party identity. We conclude with an outline of our legal framework where we posit that the availability of host states' counterclaims depends largely on the wording of the applicable legal sources and universal approaches that brush away important differences among them must not be encouraged.
The Oxford Handbook of International Adjudication offers a comprehensive study into the development, proliferation, and functions of international adjudicative bodies. The Handbook is divided into six parts. Part 1provides an overview of the origins and evolution of international adjudicatory bodies. Part 2 analyses the orders and families of international adjudicators. Part 3 discusses the theoretical approaches to the study of international adjudication, including those from the fields of political science, sociology, and philosophy. Part 4 examines crucial issues in contemporary international adjudication, including the behavior, role, and effectiveness of international judges; the political constraints restricting their function; and lawmaking by international courts and tribunals. Part 5 focuses on key actors in international adjudication, including international judges and litigators, the international bar, and registrars. Finally, Part 6 discusses selected legal and procedural issues of international adjudication, such as the judicial ethics, jurisdiction and admissibility, and inherent powers of international courts.
This unique compendium offers an article-by-article commentary to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Providing a comprehensive explanation of the functioning of this important mechanism for the settlement of investor–host State disputes, it incorporates the preparatory work, the Convention's text, various rules and regulations adopted under the Convention, the practice of arbitral tribunals under the Convention and academic writings on the subject. The first edition of this work has been relied upon by numerous arbitral tribunals. This second edition follows the same system and approach, but extensive updates reflect the vast increase in arbitral practice since the publication of the first edition. A number of novel issues that have emerged through this practice are now addressed, making this practice-oriented guide an indispensable tool for anyone dealing with the ICSID Convention.
Through design of international investment agreements, foreign investors may bring international claims against the States in which they invest, challenging domestic executive and regulatory measures, including those related to the environment and sustainable development. In contrast, host States are usually limited to defending claims brought against them. The capacity for a host State to bring an independent counterclaim has been tested in only a handful of cases, some of which involved environmental considerations. This article considers those cases and the potential for counterclaims to help enforce national and international objectives related to the environment. It does so by setting out the legal framework for counterclaims by host States, analyzing how jurisdiction, admissibility and causes of action involving environmental obligations under domestic and international law may be satisfied, and the attendant consequences for liability and compensation. It then considers the implications of counterclaims for future investment disputes, given the rapid development of international and domestic environmental law and policy, especially in the context of corporate governance, climate change and the United Nations Sustainable Development Goals.
The concept of “admissibility of claims” in investment treaty arbitration is far from settled. Its very existence (and if so, its scope) has given rise to voluminous divergence of views amongst tribunals and scholars. Under the debatable assumption that admissibility is more discretionary than jurisdiction, various requirements, such as the requirement to have recourse to the local courts of the host State for twelve or eighteen months, have sometimes been characterized as referring to “admissibility” rather than as jurisdictional requirements. By contrast, other arbitrators and scholars contest the very existence of “admissibility” in investment treaty arbitration, and criticize any “downgrading” of jurisdictional requirement in order to “bypass” it. This article is focused on four particular issues, in light of recent cases decided since 2017, and in view of Söderlund and Burova's detailed contribution: waiting/negotiations and prior local recourse periods; shareholder's claims; exclusive contractual forum selection clause; and denial of benefits. It argues that the while the recourse to the concept of “admissibility” of claims in investment treaty arbitration should be limited and cautious, it is still indispensable.
This article addresses the complex topic of counterclaims in investment arbitration by critically assessing and commenting Article 6 of the 2019 The Hague Resolution of the Institut de Droit International (IDI) on the ‘Equality of Parties before International Investment Tribunals’ paragraph by paragraph.
Foreign investors benefit from rights to the protection of their foreign investments under a web of thousands of international investment agreements (IIA S). Those IIA s traditionally, however, contain no corresponding duties. The presence of rights without corresponding obligations in the global system of investment protection has attracted significant criticism. This is particularly true in the field of environmental protection (including the fight against climate change), where the concern is that the promotion and protection of investment may unduly restrict a State’s ability to take measures that promote environmental objectives. This article analyses what IIA S do or could do to contribute to the goal of environmental protection, in three parts: first, it identifies provisions of “old generation” IIA S (i.e., those concluded prior to 2010) that provide scope for environmental considerations to be taken into account; second, it analyses the trend in recent IIA S and model bilateral investment treaties (BIT S) to incorporate mechanisms aimed at promoting environmental protection in relation to the regulation of foreign investment; and third, it analyses various possibilities for reform of international investment law to further promote the protection of the environment in the field of foreign investment. It concludes that while the texts of the vast majority of IIA S currently in force appear to do little directly to promote environmental objectives, some contain certain mechanisms that are capable of allowing tribunals to give environmental concerns the weight they deserve. In relation to new and renegotiated IIA S, there are a wide variety of mechanisms that can be used to enhance the contribution they make to promoting sustainable investment and investment in green industries.
The concepts of jurisdiction and admissibility regularly figure in the reasoning of investment tribunals. Most often, the concept of admissibility is accepted without further reflection and occasionally a delimitation of the concept – particularly in relation to jurisdiction – is attempted. However, only in a few instances have arbitrators questioned the usefulness or even the legitimacy of a concept of “admissibility” in investment arbitration. This also holds true for legal writings where admissibility – e.g. in relation to jurisdiction and tribunal competence – is discussed without the very existence of this concept in treaty-based investment arbitration being questioned. This paper posits that the concept of admissibility has no role to play in investment arbitration. There is no need to make any inquiry into whether a certain objection concerns the “admissibility” of a claim. If admissibility is discussed at all it must proceed further to a decision on jurisdiction or – alternatively and exceptionally – a finding that the “admissibility” objection is relevant for the merits.
There have been several cases involving counterclaims in recent investment arbitration practice. Though counterclaims are well-known in international litigation, they raise special issues when it comes to investor-State arbitration, especially when it is based on treaties that recognize only rights and not obligations of private parties; thus, a counterclaim may be a way of rebalancing investment law, by allowing States to file claims against investors. However, certain conditions must be fulfilled which are not always easy to combine with the special features of investment arbitration. That is what this article explores, in order to determine whether counterclaims could be a way of addressing the critique that has been recently formulated against investment arbitration.
Cambridge Core - Arbitration, Dispute Resolution and Mediation - Arbitrating the Conduct of International Investors - by Jose Daniel Amado
The distinction between jurisdictional and admissibility issues in investment arbitration is becoming more and more relevant. This results from an emerging jurisprudence emphasizing that a tribunal that lacks jurisdiction will have to dismiss a case brought before it, while it has discretion whether to dismiss a claim for reasons of inadmissibility, in particular, because the latter defects may be curable. Conceptually this difference is rooted in the idea that “jurisdiction is an attribute of a tribunal and not of a claim, whereas admissibility is an attribute of a claim but not of a tribunal”,1 with the consequence that “[t]he concept of ‘admissibility’ refers to the varied reasons that a tribunal, although it has jurisdiction, may decline to hear a case or a claim.”2
This overview article will briefly outline a number of issues in regard to which investment tribunals have disagreed whether to qualify them as jurisdictional or admissibility-related. These range from so-called waiting periods, requiring investors to first seek amicable dispute settlement or to litigate before national courts, to express or implied “in accordance with host state law”-clauses. This article argues that the outcomes of many of these cases, which often appear to be inconsistent, may be explained on the basis of different conceptual qualifications as jurisdictional or admissibility-related issues.
The International Law of Investment Claims considers the distinct principles governing the prosecution of a claim in investment treaty arbitration. The principles are codified as 54 'rules' of general application on the juridical foundations of investment treaty arbitration, the jurisdiction of the tribunal, the admissibility of claims and the laws applicable to different aspects of the investment dispute. The commentary to each proposed rule contains a critical analysis of the investment treaty jurisprudence and makes extensive reference to the decisions of other international courts and tribunals, as well as to the relevant experience of municipal legal orders. Solutions are elaborated in respect of the most intractable problems that have arisen in the cases, including: the effect of an exclusive jurisdiction clause in an investment agreement with the host state; reliance on the MFN clause in relation to jurisdictional provisions; and, the legitimate scope of derivative claims by shareholders.
This article discusses the scope of the jurisdictional reach of the International Centre for Settlement of Investment Disputes (ICSID) and the three main jurisdictional requirements to be met under the ICSID Convention. It addresses solely jurisdiction ratione personae and ratione materiae and their interrelation. It proceeds further with the discussion of the jurisdictional requirements as to the nature of the dispute, namely, that there is dispute; that the dispute is of a legal nature; that there is an investment; and that the dispute arises directly out of that investment. It deals briefly with investment treaty disputes, which are arbitrated under the UNCITRAL Rules, the Rules of the International Chamber of Commerce, Paris ('ICC') or the London Court of International Arbitration ('LCIA'). Finally, it examines the issue of denial of benefit clauses that arises in the context of various Bilateral Investment Treaties (BITs). © P Muchlinski, F Ortino, C Schreuer, 2008. All rights reserved.
Harnessing Foreign Investment to Promote Environmental Protection investigates the main challenges facing the implementation of environmental protection and the synergies between foreign investment and environmental protection. Adopting legal, economic and political perspectives, the contributing authors analyse the various incentives which encourage foreign investment into pro-environment projects (such as funds, project-finance, market mechanisms, payments-for-ecosystem services and insurance) and the safeguards against its potentially harmful effects (investment regulation, CSR and accountability mechanisms, contracts and codes of conduct).
While the distinction between the concepts of jurisdiction and admissibility in investment arbitration did not appear particularly significant to the first tribunals faced with the question, a review of several recent awards reveals that in the past few years, certain investment tribunals have referred to and acknowledged the importance of the distinction. In this context, this article aims to analyse whether a consistent approach to the application of the distinction has been adopted, and discusses the practical implications that the distinction (and any inconsistencies in its application) may have.
Urbaser SA and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v The Argentine Republic, ICSID Case No. ARB/07/26, Decision on Jurisdiction (2012)
Antoine Goetz & Others and SA Affinage des Metaux v Republic of Burundi, ICSID Case No. ARB/01/2, Award (2012)
Hochtief AG v The Argentine Republic, ICSID Case No. ARB/07/31, Decision on Jurisdiction (2011)
Abaclat and Others v Argentine Republic, ICSID Case No. ARB/07/5, Decision on Jurisdiction and Admissibility (2011)
SGS Société Générale de Surveillance SA v The Republic of Paraguay, ICSID Case ARB/07/29, Decision on Jurisdiction (2010)
SGS Société Générale de Surveillance SA v Republic of the Philippines, ICSID Case No. ARB/02/6, Decision of the Tribunal on Objections to Jurisdiction (2004)
Enron Corporation and Ponderosa Assets LP v Argentine Republic, ICSID Case No. ARB/01/3, Decision on Jurisdiction (2004)
SGS Société Générale de Surveillance SA v Islamic Republic of Pakistan, ICSID Case No. ARB/01/13, Decision of the Tribunal on Objections to Jurisdiction (2003)
Methanex Corporation v United States of America, UNCITRAL, Partial Award (2002)
Although the Washington Convention, as well as other arbitration rules used in investor-state arbitration, anticipates and provides for counterclaims by host States, such counterclaims have been a rare feature of practice in this area. Infrequently brought, the success of such counterclaims is rarer still, and the two-stage test of jurisdiction on the one hand and admissibility on the other has generally been applied narrowly. The recent decision in Goetz v Burundi appears to have taken a more relaxed approach to these restrictions, and could suggest an increased willingness by arbitral tribunals to find jurisdiction over counterclaims and rule on their merits. This case could be considered as a welcome step by states, particularly in the context of an apparent growing dissatisfaction with the current application of investor protection.1
Arbitration occupies a privileged place among the dispute resolution methods in the North American Free Trade Agreement (NAFTA).1 At the public level, arbitration plays an important role in the general dispute resolution provisions for disputes between State Parties contained in Chapter 20 of the NAFTA.2 With respect to private commercial disputes within the Free Trade Area, the Agreement imposes an obligation on NAFTA Parties to encourage and facilitate, to the maximum extent possible, the use of arbitration and other means of alternative dispute resolution of international commercial disputes between private parties.3 However, it is in its Chapter 11 on investment that the NAFTA creates the most important and far-reaching role for arbitration.
Chapter 11 of the NAFTA creates an innovative regime for the resolution of a broad scope of investment disputes between Parties to the Agreement and investors of another Party. While many details regarding its breadth of application, operation and effectiveness are yet to be explored and determined, Chapter 11 represents a remarkable tool for private investors. It provides for guaranteed access to international commercial arbitration, which, despite a number of modifications and exceptions to harmonize procedures and protect certain interests of the State Parties, offers many advantages to investors and enhances the security of their investments. Early experience indicates that this new arbitral regime may offer some surprises and its application and effects may extend beyond original expectations. Although this regime is still in its early days, it appears likely to be used frequently and to contribute substantially to the development of arbitration in investor-state disputes.
In this article, we shall provide a general overview of the complex provisions of Chapter 11 of the NAFTA. This will be followed by an examination of issues of particular interest which arise from the interplay between the provisions …
The present article explores the relationship between investment and environmental law by examining the use of counterclaims and jurisdictional and applicable law clauses in IIAs. Environmental issues arising contextually to investment disputes have given rise to sustained debates on the legitimacy deficit of the system; one possible way forward for the debates is through the incorporation of environmental law in the investment regime, and many substantive avenues have been explored, including the reconceptualisation of certain provisions, the adoption of proportionality and balancing by tribunals, and the adjustment of the quantum of compensation. This article focuses on the procedural means of incorporation as the first, inevitable step towards any of the above solutions. Additionally, the article deals in detail with the possibility of asserting counterclaims as a little explored avenue potentially allowing for international and domestic environmental obligations to enter the investment dispute.
To distinguish between these two concepts is a matter of considerable concrete importance. Decisions of tribunals which do not respect jurisdictional limits may be invalidated by a controlling authority. But if parties have consented to the jurisdiction of a given tribunal, its determinations as to the admissibility of claims should be final. Mistakenly classifying issues of admissibility as jurisdictional may therefore result in an unjustified extensiion of the scope for challenging awards, and frustrate the parties expectation that their dispute be decided by the chosen neutral tribunal. Of course, national laws may explicitly provide that arbitral disposition of issues of admissibility are not final. But then again, national laws may explicitly provide that all decisions by arbitrators are subject to full appeals, including findings of fact or conclusions of law. Indeed, national laws may forbid arbitration altogether. Yet that is emphatically not the modern trend. This essay proposes an approach consistent with an international consensus that decisions of arbitrators having jurisdication are final.
’arbitrage Transnational Unilatéral: Réflexions sur une Procédure résérvée à l’initiative d’une Personne Privée contre une Personne Publique. Dissertation
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Can human rights counterclaims succeed in investment treaty arbitration?
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Encountering counterclaims
- A D Renteln
Judicial review of investor arbitration awards: proposals to navigate the twilight zone between jurisdiction and admissibility
- Velarde Saffer
- L M Lim
Balancing IIA arbitration through the use of counterclaims
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Counterclaims admissibility in investment arbitration: the case of environmental disputes
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The chimera of admissibility in international arbitration
- M Hwang
- S C Lim
The arbitration agreement and Arbitrability - contemplations on set-off and counterclaim in international commercial arbitration
- C Koller
- C Klausegger
- P Klein
- F Kremslehner
- A Petsche
- N Pitkowitz
- J Power
- I Welser
- G Zeiler
On the availability of counterclaims in investment treaty arbitration
- P Lalive
- L Halonen
The ICSID convention, regulations and rules: a practical commentary
- E Kalnina
- A Godbole
Counterclaims in investment arbitration: key threshold issues for claimants, respondents and tribunals
- V Sinha
- G Fusea
The Oxford handbook of international investment law
- Dar Williams