Exploring the prospects of host-state counterclaims in corruption disputes

Abstract

Abstract While the regime of investment treaty arbitration has evolved manifold over the decades, has the position of the host-states as a Respondent improved? The authors argue that it has not. Bilateral Investment Treaties (hereinafter BIT(s)) are still asymmetrical in nature where the states are obliged to protect the rights of the foreign investors but are not provided with any remedy against the corrupt activities of the investors. While tribunals have denied jurisdiction over the investors’ claims tainted with corruption, they have provided states with no consequent remedy against such investors. Consequently, the states have to first bear the loss of a failed investment in its territory and then pay for the exorbitant costs of international arbitration as well. Where scholars are arguing for attribution of liability of corrupt activities of the public officials to the states, the authors here raise an important question of what if the liability cannot be attributed to the states due to lack of apparent authority? Should the states be then allowed to move forward from the jurisdictional stage to raise counterclaims to seek damages for the loss caused by the investors? In this article, the authors explore these questions and present arguments in favour of the inclusion of corruption-based counterclaims.