Investment Arbitration Reporter has a piece on a recent award involving a counterclaim by a state against an investor. Jarrod Hepburn explains:
As discussed in a companion article, a tribunal at the International Centre for Settlement of Investment Disputes (ICSID) has found one discrete breach of the Spain-Argentina bilateral investment treaty, but awarded no damages, in the case of Urbaser SA and Consorcio de Aguas Bilbao Bizkaia v. Argentina.
Notably, as we describe below, Argentina filed a counterclaim in the case, alleging that the investors had violated their obligations in relation to the human right to water, and claiming compensation of US$191 million.
The tribunal of Andreas Bucher (chair), Pedro Martinez-Fraga (claimants’ nominee) and Campbell McLachlan (respondent’s nominee) deemed that the BIT was worded in a fashion that afforded jurisdiction over the counterclaim. However, the tribunal dismissed the counterclaim on its merits.
There's a lot going on in this case, so read the whole thing at the IAReporter website (or the IAReporter summaries anyway). I'm just going to mention two quick things.
First, as summarized by the tribunal, the claimaint made the following statement about the object and purpose of investment treaty arbitration:
1120. Turning to the BIT involved in the instant case and the matter of consent to submit an investment dispute to ICSID arbitration, Claimants assert in the first place that the asymmetric nature of BITs prevents a State from invoking any right based on such a treaty, not even a right to submit a counterclaim against an investor. The main aim of such treaties is, indeed, to protect the investor’s rights. BITs neither provide for the procedure for submission of State’s counterclaims nor even mention the right of an investor to submit counterclaims. This means that investment Treaties do not impose obligations upon investors and, accordingly, that host States cannot rely on the violation of the provision of any such Treaty as basis to sue an investor. Such a right to claim would run counter to the object and purpose of treaty arbitration, which is to grant the investors a one-sided right of quasi-judicial review of national regulatory action. (emphasis added)
Here's my question. The description of investment treaty arbitration as a "one-sided right of quasi-judicial review of national regulatory action" comes from the investor, but it kinds of sounds like an NGO critique of the system. Do ISDS supporters agree with this characterization, or do they have a different spin they would put on the object and purpose?
Second, on the issue of whether the state could bring a counterclaim, the tribunal said yes, based on the specific language of the treaty at issue:
1143. The Tribunal observes that Claimants explain their basic position by the asymmetric nature of BITs, which in their view prevents a host State from invoking any right based on such a treaty, including through the submission of a counterclaim. The Tribunal finds that this submission conflicts with the simple wording of the dispute resolution provisions of Article X of the BIT invoked in the instant case. Indeed, Article X(1) provides:
“1. Disputes arising between a Party and an investor of the other Party in connection with investments within the meaning of this Agreement shall, as far as possible, be settled amicably between the parties to the dispute.”
This provision is completely neutral as to the identity of the claimant or respondent in an investment dispute arising “between the parties.” It does not indicate that a State Party could not sue an investor in relation to a dispute concerning an investment. Article X(2) further states that when no settlement had been reached within six months from the date “on which one of the parties to the dispute” instigated it, “it shall, at the request of either party,” be submitted to the competent tribunals of the host State – again without making any distinction depending on whether the investor or the host State may be “one of the parties” or “either party.” This view is confirmed in Article X(3), stating that in certain circumstances the dispute may be submitted to an international arbitral tribunal “at the request of either party to the dispute.” It results clearly from these provisions that either the investor or the host State can be a party submitting a dispute in connection with an investment to arbitration. Arbitral decisions invoked by Claimants when arguing that counterclaims are generally dismissed in actual practice are all based either on more narrowly drafted arbitration clauses424 or on a lack of close connection of counterclaims based on domestic law.425
424 It follows from the text of Article X(1) that Claimants’ reliance on the Roussalis Award is mistaken. This Award admits that “the investor’s consent to the BIT’s arbitration clause can only exist in relation to counterclaims if such counterclaims come within the consent of the host State as expressed in the BIT” (para. 866). The Award then quotes Article 9 of the applicable BIT that refers to “disputes between an investor of a Contracting Party and the other Contracting Party concerning an obligation of the latter under this Agreement, in relation to an investment of the former” (para. 868). Clearly, the Spain-Argentina BIT does not contain restrictive terms as “disputes … concerning an obligation of the latter.” In the Roussalis case, the counterclaim was based on domestic law; the Tribunal therefore observed that in order to extend the Tribunal’s competence to a State counterclaim, the arbitration agreement should refer to disputes brought under domestic law (para. 871). This is equally irrelevant in the instant case to the extent the Counterclaim is not based on domestic law but on alleged obligations of Claimants under international law. In the Amco II case, the counterclaim was considered outside the second Tribunal’s jurisdiction for reasons related to the res judicata effects of a preceding annulment decision, entirely different to the reasons invoked by Claimants in the instant case.
Can we assume that the powers that be have learned their lesson, and future treaties will be drafted in a way that prevents these counterclaims?
