Skip to main content
SpringerLink
Log in

State Counterclaims and the “Legitimacy Crisis” in Investment Treaty Arbitration

  • Chapter
  • First Online:
European Yearbook of International Economic Law 2021

Part of the book series: European Yearbook of International Economic Law ((EUROYEAR,volume 12))

  • 493 Accesses

Abstract

Historically, State counterclaims in investor-State dispute settlement (ISDS) have generally failed. ISDS’s procedural and substantive asymmetry, by which investors enjoy unilateral rights to initiate arbitration against States and enjoy protections without reciprocal obligations, has greatly limited States’ ability to pursue counterclaims against investors under investment treaties. State counterclaims’ lack of success has been identified as a factor contributing to the so-called “legitimacy crisis” of ISDS, giving rise to a myriad of concerns, including concerns about regulatory chill, inconsistent decisions, and even pro-investor bias. In the last decade, some tribunals have shown greater openness towards States’ counterclaims. This article focuses on six such cases—Roussalis v. Romania, Goetz v. Burundi, Burlington v. Ecuador, Urbaser v. Argentina, Perenco v. Ecuador, and Aven v. Costa Rica—which exemplify a more permissive interpretation of the jurisdictional requirements for counterclaims and a novel approach to the imposition of substantive obligations on investors. If future arbitral awards adopt and expand these cases’ openness towards counterclaims, they could trigger a trend of increased receptiveness to and success of State counterclaims, potentially mitigating some of the concerns that fuel the backlash against ISDS. Through the lens of these cases, this article evaluates counterclaims’ potential to address the legitimacy crisis. This article suggests that increased access to and greater success of counterclaims can reduce concerns about the system’s asymmetry, but at the same time may give rise to new concerns that might be best addressed through other mechanisms, such as treaty drafting and binding interpretations.

I am grateful to the participants in the 8th Conference of the Postgraduate and Early Professionals/Academics Network of the Society of International Economic Law (PEPA/SIEL) for their helpful and thoughtful feedback on this paper. I am especially grateful to Lise Johnson and Simon Weber for their detailed comments.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 139.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 179.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 179.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    Vohryzek-Griest (2009), p. 83.

  2. 2.

    Vohryzek-Griest (2009), Abstract.

  3. 3.

    Langford and Behn (2018), p. 552.

  4. 4.

    Langford and Behn (2018), pp. 552–553; Franck (2005), pp. 1586–1587; Brower and Schill (2009), pp. 474–475.

  5. 5.

    Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award (7 December 2011).

  6. 6.

    Antoine Goetz & Consorts et S.A. Affinage des Métaux c. République du Burundi, Affaire CIRDI No. ARB/01/2, Sentence (21 juin 2012).

  7. 7.

    Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Counterclaims (7 February 2017).

  8. 8.

    Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. Argentine Republic, ICSID Case No. ARB/07/26, Award (8 December 2016).

  9. 9.

    Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015).

  10. 10.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018).

  11. 11.

    See e.g., International Centre for Settlement of Investment Disputes, The ICSID caseload—statistics 2020-2, 13 August 2020, https://icsid.worldbank.org/sites/default/files/publications/The%20ICSID%20Caseload%20Statistics%20%282020-2%20Edition%29%20ENG.pdf, p. 11 (showing that contracts serve as the basis of consent to ICSID jurisdiction in only 16% of cases, while BITs, multilateral, and other treaties serve as the basis in 76% of cases).

  12. 12.

    Franck (2005), p. 1584, n. 309 [citing Willard Hurst (1971), p. 224].

  13. 13.

    Franck (2005), p. 1584, n. 309 [citing Kornhauser (2002), pp. 830–831] (explaining that legitimacy justifies the moral authority of the existing order and any substantial challenge to legitimacy threatens the capacity to govern).

  14. 14.

    Franck (2005), p. 1584, n. 311 [citing Caron (1993), pp. 560–561; Junne (2001), pp. 189, 191, 195].

  15. 15.

    UNGA, “Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its thirty-fourth session (Vienna, 27 November–1 December 2017) Part II” (26 February 2018), A/CN.9/930/Add.1/Rev.1, para. 5; UNGA, “Possible reform of Investor-State dispute settlement (ISDS) - Submission from the Government of South Africa” (17 July 2019), A/CN.9/WG.III/WP.176, para. 64 (“The State is always defendant and cannot bring counter-claims against investors for any breach of their obligations. The system is asymmetrical and should allow counterclaims to address the imbalance in the existing ISDS mechanism.”).

  16. 16.

    UNGA, “Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its thirty-seventh session (New York, 1–5 April 2019)” (9 April 2019), A/CN.9/970, paras. 34–35, 39.

  17. 17.

    Bjorklund (2013), p. 462.

  18. 18.

    Langford and Behn (2018), pp. 555–556; see also Brower and Schill (2009), pp. 473–474 (describing the strands within the general critique of ISDS: concerns about unpredictability, inconsistency, and the protection of investment without sufficient regard to non-investment interests of States).

  19. 19.

    Brower and Schill (2009), pp. 474–475.

  20. 20.

    UNGA, “Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its thirty-fourth session (Vienna, 27 November–1 December 2017) Part II” (26 February 2018), A/CN.9/930/Add.1/Rev.1, para. 4.

  21. 21.

    Brower and Schill (2009), pp. 474–475.

  22. 22.

    Brower and Schill (2009), pp. 474–475.

  23. 23.

    Letter from the Working Group on the issue of human rights and transnational corporations and other business enterprises, et al. to UNCITRAL Working Group III (7 March 2019), https://uncitral.un.org/sites/uncitral.un.org/files/public_-_ol_arm_07.03.19_1.2019_0.pdf.

  24. 24.

    Paulsson (1995), p. 232.

  25. 25.

    Paulsson (1995), p. 232.

  26. 26.

    See UNGA, “Possible reform of investor-State dispute settlement (ISDS) Multiple proceedings and counterclaims” (22 January 2020), A/CN.9/WG.III/WP.193, para. 35.

  27. 27.

    Bjorklund (2013), p. 464.

  28. 28.

    Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Venezuela for the Promotion and Reciprocal Protection of Investments (signed 15 March 1995, entered into force 1 August 1996) (“United Kingdom—Venezuela BIT”), Article 8.

  29. 29.

    Bjorklund (2013), p. 463.

  30. 30.

    Gathii and Puig (2019), p. 1.

  31. 31.

    Ho (2019), p. 10.

  32. 32.

    Ho (2019), p. 10.

  33. 33.

    As mentioned in Sect. 5, some treaties might include investor obligations through treaty provisions other than the applicable law clause, but this is uncommon.

  34. 34.

    Compare Agreement Between Canada and ----------------------- for the Promotion and Protection of Investments (“Canada Model FIPA”) (2004), Article 40(1) (“A Tribunal established under this section shall decide the issues in dispute in accordance with this Agreement and applicable rules of international law”) with Fra La Repubblica Italiana E La Repubblica Argentina Sulla Promozione E Protezione Degli Investimenti (“Argentina-Italy BIT”), Article 8(7) (“The arbitration tribunal will decide on the basis of the laws of the Contracting Party involved in the dispute – including its rules on the conflict of laws – and of the provisions of the Agreement, of clauses of any particular agreements relating to the investment, as well as on the basis of the applicable principles of international law.”) (unofficial translation from the original Italian).

  35. 35.

    Schreuer (2014), p. 12.

  36. 36.

    International Centre for Settlement of Investment Disputes, ICSID Convention (April 2006), Article 42(1) (“The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.”).

  37. 37.

    Bjorklund (2013), pp. 477–478.

  38. 38.

    Bjorklund (2013), p. 478.

  39. 39.

    Spyridon Roussalis v. Romania, ICSID Case No ARB/06/1, Award (7 December 2011).

  40. 40.

    Antoine Goetz & Consorts et S.A. Affinage des Métaux c. République du Burundi, Affaire CIRDI No. ARB/01/2, Sentence (21 juin 2012).

  41. 41.

    Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015).

  42. 42.

    Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Counterclaims (7 February 2017).

  43. 43.

    Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. Argentine Republic, ICSID Case No. ARB/07/26, Award (8 December 2016).

  44. 44.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018).

  45. 45.

    International Centre for Settlement of Investment Disputes, ICSID Convention (April 2006), Article 46 (“Except as the parties otherwise agree, the Tribunal shall, if requested by a party, determine any incidental or additional claims or counterclaims arising directly out of the subject-matter of the dispute provided that they are within the scope of the consent of the parties and are otherwise within the jurisdiction of the Centre.”).

  46. 46.

    International Centre for Settlement of Investment Disputes, ICSID Arbitration Rules (April 2006), Rule 40(1) (“Except as the parties otherwise agree, a party may present an incidental or additional claim or counter-claim arising directly out of the subject-matter of the dispute, provided that such ancillary claim is within the scope of the consent of the parties and is otherwise within the jurisdiction of the Centre.”).

  47. 47.

    Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award (7 December 2011), paras. 864–871. The BIT’s arbitration clause stipulated that: “1. Disputes between an investor of a Contracting Party and the other Contracting Party concerning an obligation of the latter under this Agreement, in relation to an investment of the former, shall, if possible, be settled by the disrupting parties in an amicable way. 2. If such disputes cannot be settled within six months from the date either party requested amicable settlement, the investor concerned may submit the dispute either to the competent courts of the Contracting Party in the territory of which the investment has been made or to international arbitration.” Agreement between the Government of the Hellenic Republic and the Government of Romania for the Promotion and Reciprocal Protection of Investments, (signed 23 May 1997, entered into force 11 June 1998), Article 9.

  48. 48.

    Reisman WM, Declaration (signed 28 November 2011).

  49. 49.

    Reisman WM, Declaration (signed 28 November 2011) (“It is important to bear in mind that such counterclaim jurisdiction is not only a concession to the State Party: Article 46 works to the benefit of both respondent state and investor. In rejecting ICSID jurisdiction over counterclaims, a neutral tribunal – which was, in fact, selected by the claimant – perforce directs the respondent State to pursue its claims in its own courts where the very investor who had sought a forum outside the state apparatus is now constrained to become the defendant. (And if an adverse judgment ensues, that erstwhile defendant might well transform to claimant again, bringing another BIT claim.) Aside from duplication and inefficiency, the sorts of transaction costs which counter-claim and set-off procedures work to avoid, it is an ironic, if not absurd, outcome, at odds, in my view, with the objectives of international investment law.”).

  50. 50.

    Antoine Goetz & Consorts et S.A. Affinage des Métaux c. République du Burundi, Affaire CIRDI No. ARB/01/2, Sentence (21 juin 2012), paras. 278–279.

  51. 51.

    Antoine Goetz & Consorts et S.A. Affinage des Métaux c. République du Burundi, Affaire CIRDI No. ARB/01/2, Sentence (21 juin 2012), para. 287.

  52. 52.

    The underlying BIT stipulated: “1. For the purposes of this article, a dispute relating to an investment is defined as a dispute concerning: (a) The interpretation or application of a specific investment agreement between a Contracting Party and an investor of the other Contracting Party; (b) The interpretation or application of any investment authorization granted by the authorities of the State where the investment is made in respect of foreign investments; (c) The alleged violation of any right conferred or established by this convention with regard to investments. […]”

    Agreement between the Belgo-Luxembourg Economic Union and the Republic of Burundi Concerning the Encouragement and Reciprocal Protection of Investments (signed 13 April 1989, entered into force 12 September 1993) (“BLEU-Burundi BIT”), Article 8.

  53. 53.

    See e.g., Karkey Karadeniz Elektrik Uretim A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/13/1, Award (22 August 2017), para. 1015 (“The Goetz v. Burundi II award relied on by Pakistan is the only ICSID award that has ever adopted the ipso facto consent theory advanced by Pakistan in this case. Like this Tribunal, most ICSID tribunals have not found the theory of ipso facto consent to be sufficient to conclude that an investor’s consent to ICSID counterclaims is automatic.”); Iberdrola Energía, S.A. v. The Republic of Guatemala, PCA Case No. 2017-41, Award (24 August 2020), paras. 389, 391 (“While the Tribunal agrees that arbitration rules referred to in a treaty are incorporated by reference, this is only to the extent that they are not contradicting the treaty. […] [T]he Tribunal comes to the conclusion that the Treaty wording showing that only the investor is entitled to file claims must prevail over any contrary meaning that the arbitration rules to which the Treaty refers may suggest. As a result, the Tribunal lacks jurisdiction over the counterclaim […].”).

  54. 54.

    Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. Argentine Republic, ICSID Case No. ARB/07/26, Award (8 December 2016), para. 1185.

  55. 55.

    Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. Argentine Republic, ICSID Case No. ARB/07/26, Award (8 December 2016), paras. 1187–1192.

  56. 56.

    Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. Argentine Republic, ICSID Case No. ARB/07/26, Award (8 December 2016), para. 1194.

  57. 57.

    Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. Argentine Republic, ICSID Case No. ARB/07/26, Award (8 December 2016), paras. 1195–1210.

  58. 58.

    Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Counterclaims (7 February 2017), paras. 60–62.

  59. 59.

    International Centre for Settlement of Investment Disputes, ICSID Convention (April 2006), Article 42.

  60. 60.

    Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Counterclaims (7 February 2017), paras. 73, 75.

  61. 61.

    Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Counterclaims (7 February 2017), para. 74.

  62. 62.

    Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Counterclaims (7 February 2017), para. 1099(b). Ten months after the award was issued, Ecuador and Burlington reached a settlement. See ConocoPhillips to receive $337 million in accord with Ecuador. Reuters, 4 December 2017, https://www.reuters.com/article/us-conocophillips-ecuador/conocophillips-to-receive-337-million-in-accord-with-ecuador-idUSKBN1DY1KP.

  63. 63.

    Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Counterclaims (7 February 2017), para. 73 (emphasis added).

  64. 64.

    Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Decision on Claimant’s Application for Dismissal of Respondent’s Counterclaims (18 August 2017), para. 35 (“The Tribunal further observes that Perenco never in the past challenged its jurisdiction to hear Ecuador’s counterclaims nor their admissibility.”). Though Perenco did object to the counterclaims’ admissibility, the tribunal held that this objection was presented belatedly, “after more than five years of arbitrating before this Tribunal, and after the Tribunal had issued its Interim Decision [on the Environmental Counterclaim].” Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Decision on Claimant’s Application for Dismissal of Respondent’s Counterclaims (18 August 2017), para. 44. The tribunal added that the rulings in this August 2015 interim decision were res judicata and could not be reconsidered. Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Decision on Claimant’s Application for Dismissal of Respondent’s Counterclaims (18 August 2017), para. 41.

  65. 65.

    Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015), paras. 36, 44.

  66. 66.

    Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015), para. 322.

  67. 67.

    Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015), para. 364.

  68. 68.

    Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015), para. 495.

  69. 69.

    Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015), para. 899.

  70. 70.

    Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015), para. 35.

  71. 71.

    Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015), paras. 34, 322.

  72. 72.

    Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim (11 August 2015), n. 133.

  73. 73.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 740.

  74. 74.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 741.

  75. 75.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 739.

  76. 76.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 731.

  77. 77.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 732.

  78. 78.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 732.

  79. 79.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 734.

  80. 80.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 734.

  81. 81.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 737 (“environmental law is integrated in many ways to international law, including DR-CAFTA. It is true that the enforcement of environmental law is primarily to the States, but it cannot be admitted that that a foreign investor could not be subject to international law obligations in this field, particularly in the light of Articles 10.9.3, 10.11 and 17 of DR-CAFTA.”).

  82. 82.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 738.

  83. 83.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 738.

  84. 84.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 743.

  85. 85.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 743.

  86. 86.

    David Aven et al. v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award (18 September 2018), para. 745–747.

  87. 87.

    This is not to say that a majority of tribunals have shown greater openness to counterclaims; they have not. In fact, some tribunals have recently made even more restrictive interpretations of the admissibility and viability of counterclaims than is typical. See, e.g., Tethyan Copper Company Pty Limited v. Islamic Republic of Pakistan, ICSID Case No. ARB/12/1, Decision on Jurisdiction and Liability (10 November 2017), para. 1445 (“an agreement between the Contracting Parties on a liability of the investor would constitute an impermissible agreement at the expense of a third party to the Treaty, i.e., the investor in the present case.”). The cases discussed in this article nonetheless mark a departure from counterclaims’ near universal and decisive failure over the past several decades, making these tribunals’ reasoning worthy of attention.

  88. 88.

    See UNGA, “Possible reform of investor-State dispute settlement (ISDS) Multiple proceedings and counterclaims” (22 January 2020), A/CN.9/WG.III/WP.193, para. 38.

  89. 89.

    Roberts and Bouraoui (2018).

  90. 90.

    See e.g., Europe Cement Investment & Trade SA v. Republic of Turkey, ICSID Case No ARB(AF)/07/2, Award (13 August 2009) (where the claimant presented fraudulent documents in an attempt to establish jurisdiction); Pac Rim Cayman LLC v. Republic of El Salvador, ICSID Case No ARB/09/12, Decision on the Respondent’s Jurisdictional Objections (1 June 2012) (where the claimant’s corporate structure was modified after the dispute arose to artificially create the required nationality for jurisdiction purposes).

  91. 91.

    See Franck (2005), p. 1584, n. 309 [citing Willard Hurst (1971), p. 224] (explaining that legitimacy reflects people’s willingness to use the legal system because of a perception that it serves them justly); UNGA, “Possible reform of investor-State dispute settlement (ISDS) Multiple proceedings and counterclaims” (22 January 2020), A/CN.9/WG.III/WP.193, para. 38 (“The Working Group may wish to consider devising a framework in which States could raise counterclaims in ISDS, which would reduce uncertainty, promote fairness and rule of law, and ultimately ensure a balance between respondent States and claimant investors. Such a framework could also have a positive impact on the duration and cost of the proceedings as well as on a number of other procedural issues.”).

  92. 92.

    Reisman WM, Declaration (signed 28 November 2011); see also Kalicki and Silberman (2012), p. 14 (“Commentators have likewise noted the irony in a State’s moving so far towards trust in international arbitration that it is willing to forgo using its own national courts to pursue claims against an investor, only to be sent back to those courts by the very arbitral tribunal the investor convened to resolve other aspects of a related dispute.”).

  93. 93.

    Bjorklund (2013), p. 480 (“While the arbitral rules most likely to govern investment treaty disputes envision counterclaims, reference to them is a slim reed on which to base an investor’s consent”); (“Given the centrality of consent to tribunal authority, the argument that consent can be found in the applicable arbitration rules is tenuous. Explicit reference to counterclaims in the investment treaty itself would eliminate time consuming and inefficient arguments about tribunal authority.”).

  94. 94.

    Roberts and Bouraoui (2018). Germany expressed a similar sentiment: “Counterclaims very often are subject to local laws or domestic laws and in investment arbitration the usual applicable law is public international law and investment treaty rules. So we have to consider whether it’s actually appropriate and possible for a tribunal to substantially look into claims that are either based on domestic public law or domestic private law, and whether arbitrators or judges have the competence to do so and if it can be assured that their rulings will then also be enforceable in the domestic legal systems accordingly and there will not be any conference towards national jurisdiction.” Roberts and Bouraoui (2018).

  95. 95.

    Franck (2005), p. 1585, n. 313 [citing Franck (1995), pp. 30 and 31].

  96. 96.

    See supra note 38 and accompanying text.

  97. 97.

    Langford and Behn (2018), p. 556.

  98. 98.

    Reisman WM, Declaration (signed 28 November 2011).

  99. 99.

    See e.g., Bjorklund (2013), pp. 452 and 466 [citing Douglas (2010), p. 256].

  100. 100.

    Roberts and Bouraoui (2018).

  101. 101.

    Roberts and Bouraoui (2018). Note, however, that these submissions only reflect the positions of the States making the submissions. Whether the expressed opinions are shared by a critical mass of States remains an open question.

  102. 102.

    See UNGA, “Possible reform of investor-State dispute settlement (ISDS) Multiple proceedings and counterclaims” (22 January 2020), A/CN.9/WG.III/WP.193, para. 41.

  103. 103.

    Bilateral Investment Treaty Between the Government of the Republic of India and—“Model Text for the Indian Bilateral Investment Treaty” (2015) (“Indian Model BIT 2015”), Article 9.

  104. 104.

    Agreement Between the Government of Canada and the Government of Burkina Faso for the Promotion and Protection of Investments (signed 20 April 2015, entered into force 11 October 2017) (“Canada—Burkina Faso BIT”), Article 16.

  105. 105.

    Southern African Development Community Model Bilateral Investment Treaty Template with Commentary (July 2012), Article 15.1.

  106. 106.

    Agreement on Promotion, Protection and Guarantee of Investments Among Member States of the Organisation of the Islamic Conference (signed 6 May 1987, entered into force February 1988) (“OIC Agreement”), Article 9.

  107. 107.

    Accord entre le Royaume du Maroc et ------------------ pour la promotion et la protection réciproques des investissements (June 2019) (“Moroccan Model BIT”), Articles 18–19.

  108. 108.

    Agreement on Reciprocal Promotion and Protection of Investments Between ------------------ and the Kingdom of the Netherlands (19 October 2018) (“Netherlands Draft Model BIT”), Article 23.

  109. 109.

    Investment Agreement for the COMESA Common Investment Area (signed 23 May 2007) (“COMESA Investment Agreement”), Article 28(9).

  110. 110.

    See generally Johnson L and Razbaeva M, State Control over Interpretation of Investment Treaties. Vale Columbia Center on Sustainable International Investment, April 2014, http://ccsi.columbia.edu/files/2014/04/State_control_over_treaty_interpretation_FINAL-April-5_2014.pdf.

  111. 111.

    See e.g., Ioan Micula et al. v. Romania, ICSID Case No ARB/05/20, Award (11 December 2013), para. 926.

  112. 112.

    MTD Equity Sdn. Bhd. and MTD Chile SA v. Chile, ICSID Case No ARB/01/7, Award (25 May 2004); Occidental Petroleum Corporation, Occidental Exploration and Production Company v. Republic of Ecuador, ICSID Case No ARB/06/11, Award (5 October 2012).

  113. 113.

    See e.g., Glamis Gold, Ltd. v. United States of America, UNCITRAL, Award (8 June 2009), para. 8 (remarking on the environmental and indigenous rights involved in the dispute); Philip Morris Brands SÀRL, Philip Morris Products SA and Abal Hermanos SA et al. v. Oriental Republic of Uruguay, ICSID Case No ARB/10/7, Award (8 July 2016), para. 418 (showing “substantial deference” to the State’s decisions regarding measures taken to address the public health effects of tobacco); Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID Case No ARB(AF)/09/1, Award (22 September 2014), para. 595 (acknowledging the State’s responsibility to protect the environment and the population).

References

  • Bjorklund AK (2013) The role of counterclaims in rebalancing investment law. Lewis Clark Law Rev 17(2):461–480

    Google Scholar 

  • Brower CN, Schill SW (2009) Is arbitration a threat or a boon to the legitimacy of international investment law? Chic J Int Law 9(2):471–498

    Google Scholar 

  • Caron DC (1993) The legitimacy of the collective authority of the Security Council. Am J Int Law 87:552–588

    Article  Google Scholar 

  • Douglas Z (2010) The international law of investment claims. Cambridge University Press, Cambridge, p 256

    Google Scholar 

  • Franck T (1995) Fairness in international law and institutions. Oxford University Press, Oxford, pp 30, 31

    Google Scholar 

  • Franck SD (2005) The legitimacy crisis in investment treaty arbitration: privatizing public international law through inconsistent decisions. Fordham Law Rev 73(4):1521–1625

    Google Scholar 

  • Gathii J, Puig S (2019) Introduction to the symposium on investor responsibility: the next frontier in international investment law. Am J Int Law Unbound 113:1–3

    Article  Google Scholar 

  • Ho J (2019) The creation of elusive investor responsibility. Am J Int Law Unbound 113:10–15

    Google Scholar 

  • Junne GCA (2001) International organizations in a period of globalization: new (problems of) legitimacy. In: Coicaud JM, Heiskanen V (eds) The legitimacy of international organisations. United Nations University Press, Tokyo, pp 189–220

    Google Scholar 

  • Kalicki JE, Silberman MB (2012) Case comment: Spyridon Roussalis v Romania. ICSID Rev 27(1):9–15

    Article  Google Scholar 

  • Kornhauser ME (2002) Legitimacy and the right of revolution: the role of tax protests and anti-tax rhetoric in America. Buffalo Law Rev 50(3):819–930

    Google Scholar 

  • Langford M, Behn D (2018) Managing backlash: the evolving investment treaty arbitrator? Eur J Int Law 29(2):551–580

    Article  Google Scholar 

  • Paulsson J (1995) Arbitration without privity. ICSID Rev 10(2):232–257

    Article  Google Scholar 

  • Roberts A, Bouraoui Z (2018) UNCITRAL and ISDS Reforms: Concerns about Costs, Transparency, Third Party Funding and Counterclaims. Blog of the European Journal of International Law, 6 June 2018. https://www.ejiltalk.org/uncitral-and-isds-reforms-concerns-about-costs-transparency-third-party-funding-and-counterclaims/

  • Schreuer C (2014) Jurisdiction and applicable law in investment treaty arbitration. McGill J Disput Resolut 1(1):1–25

    Google Scholar 

  • Vohryzek-Griest A (2009) State counterclaims in investor-state disputes: a history of 30 years of failure. Int Law Revista Colombiana De Derecho Internacional 15:83–123

    Google Scholar 

  • Willard Hurst J (1971) Problems of legitimacy in the contemporary legal order. Oklahoma Law Rev 24:224–238

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Washington, DC, USA

    Patricia Cruz Trabanino

Authors
  1. Patricia Cruz Trabanino
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. Leuphana University of Lüneburg, Lüneburg, Germany

    Jelena Bäumler

  2. Bundeswehr University Munich, Neubiberg, Germany

    Christina Binder

  3. Saarland University, Saarbrücken, Germany

    Marc Bungenberg

  4. University of Erlangen-Nuremberg, Erlangen, Germany

    Markus Krajewski

  5. Humboldt-Universität zu Berlin, Berlin, Germany

    Giesela Rühl

  6. University of Glasgow, Glasgow, UK

    Christian J. Tams

  7. Leuphana University of Lüneburg, Lüneburg, Germany

    Jörg Philipp Terhechte

  8. Université de Lausanne, Lausanne, Switzerland

    Andreas R. Ziegler

Rights and permissions

Reprints and permissions

Copyright information

© 2022 The Author(s), under exclusive license to Springer Nature Switzerland AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Cruz Trabanino, P. (2022). State Counterclaims and the “Legitimacy Crisis” in Investment Treaty Arbitration. In: Bäumler, J., et al. European Yearbook of International Economic Law 2021. European Yearbook of International Economic Law, vol 12. Springer, Cham. https://doi.org/10.1007/8165_2022_84

Download citation

Publish with us

Policies and ethics

Search

Navigation