Investor Presentaiton
116
INVESTOR-STATE DISPUTE SETTLEMENT: A SEQUEL
would be to face the same claims in the host State's national courts
which they often try to avoid.
While the idea of permitting ISDS tribunals to hear
counterclaims is appealing in many ways, its practical realization
has turned out to be fraught with difficulties. In fact, in no IIA
dispute to date has a State's counterclaim been accepted on the
merits. In most cases, tribunals while recognizing that in
principle arbitral rules permit counterclaims for various reasons
have decided that they were without jurisdiction to entertain them.
The ICSID Convention and other sets of arbitral rules used in
investment treaty arbitration (such as UNCITRAL) generally allow
counterclaims. 122
Notwithstanding the different wording of the
relevant rules, in practice two fundamental requirements for the
admission of counterclaims by an arbitral tribunal have emerged: (1)
The counterclaim must be within the jurisdiction of the tribunal; and
(2) the counterclaim must be connected to the primary claim.
Important obstacles for the effective use of counterclaims in
ISDS proceedings find their roots in the design of investment
treaties. IIAs were conceived as instruments regulating the
behaviour of host States towards investors. The obligations of
investors do not stem from IIAs but usually from the domestic law
of the host State and from investment contracts (when such a
contract is concluded with a State or State agency). For example, in
Paushok v. Mongolia, which concerned mineral extraction,
Mongolia's counterclaims contained, amongst others, allegations of
tax evasion on the part of the investor, violation of the license
agreement which lead to a loss in tax revenue and loss of
employment of Mongolian nationals, violation of Mongolian
environmental law and claims for damages relating to gold
122 See Article 46 of the ICSID Convention; Article 21(3) of the
UNCITRAL 2010 Rules, Article 19(3) of the UNCITRAL 1976 Rules.
UNCTAD Series on International Investment Agreements IIView entire presentation