From Perpetual Respondent to Aspiring Counterclaimant? State Counterclaims in the New Wave of Investment Treaties

Abstract

Critics of investor-State arbitration often refer to the perception that it is a system in which the State must always play defense. State counterclaims against investors could counterbalance this perceived asymmetry. Yet, the majority of State counterclaims asserted to date have failed. The reason for this failure in several cases is not an inherent structural bias against States, but obstacles to jurisdiction over the counterclaim that derive from the terms of the underlying investment treaty that the State concluded. Despite the keen public focus on investor-State dispute settlement in the wake of the recent negotiation of several major trade agreements, State counterclaims have received little, if any, attention in recent treaty-making practice. Although some new investment agreements would expand investor-State dispute settlement to more amply encompass State claims against investors, many others restrict access to arbitration in a way that would significantly limit State counterclaims, or even preclude them altogether. This article examines some of the obstacles to State counterclaims that tribunals have discerned in existing investment treaties, before turning to consider the divergent trends that emerge from recent treaty-making initiatives and their implications for State counterclaims.