Environmental Counterclaims in Investment Arbitration

Abstract

This article explores the possibility of environmental counterclaims in the context of investment arbitration and arbitral rules, focusing in particular on the UNCITRAL Arbitration Rules and ICSID Arbitration Rules. States have only rarely raised counterclaims against investors in investment arbitration. Yet, in disputes raising environmental issues, counterclaims could prove useful to States to obtain compensation for environmental damage caused by an investor’s economic activities. This article examines first the procedural and legal requirements for raising counterclaims in investment arbitration, including the provisions set out by the arbitral rules and relevant case law. It then proceeds to consider recent cases in which States have raised environmental counterclaims with varying degrees of success. Finally, the article considers the conclusions to be drawn for policy making and investment treaty negotiations.