Counterclaims in Investment Arbitration: Towards an Integrated Approach

It is widely accepted that counterclaims may not be used as a means to exceed the limits of a tribunal’s jurisdiction, while they must at the same time be closely connected to the other party’s claim. However, in the particular context of investment arbitration, these two propositions create a tension that has led to a problematic and unfair construction of the investor-State dispute settlement mechanism. This article explores the foundations for a better, more integrated approach. It argues that jurisdiction over counterclaims should be seen as incidental to the one already established over the original claim, allowing tribunals to hear a wider range of counterclaims. This is inherent to the exercise of a tribunal’s adjudicative function, and rests on a foundation not only of implied consent, but also on one of principle. The approach presented here has the potential to protect counterclaims as a matter of procedural fairness and to address some of the reasons for the backlash against international investment arbitration law.