Whilst respondent states will often level various allegations against the investor as part of their defence strategy, it is very rare for states to frame those allegations by way of a formal counterclaim. Over the past few years, there have been a handful of decisions where tribunals have considered such counterclaims. However, given how exceptional such counterclaims are, there is still much uncertainty as to the complex jurisdictional issues they present.

The recent decision in Urbaser v. Argentina − in which the tribunal found that it had jurisdiction over Argentina’s counterclaim related to the investor’s alleged violation of international human rights obligations − is likely to reignite that debate while also providing some additional clarity as to the principles that tribunals generally consider in determining whether they have jurisdiction over respondent state counterclaims.

Counterclaims under the ICSID Convention and the UNCITRAL rules

In principle, both the ICSID Convention and the UNCITRAL Rules allow for the possibility of a respondent state bringing a counterclaim. Specifically, Article 46 of the ICSID Convention provides that: “[e]xcept as the parties otherwise agree, the tribunal shall, if requested by a party, determine any incidental or additional claims or counterclaims arising directly out of the subject-matter of the dispute provided that they are within the scope of the consent of the parties and are otherwise within the jurisdiction of the centre”. Similarly, Article 21(3) of the 2010 UNCITRAL Rules, as well as, to a more limited extent, Article 19(3) of the 1976 UNCITRAL Rules, provides for a counterclaim, “provided that the arbitral tribunal has jurisdiction over it”.

Apr-Jun 2017 issue

Kirkland & Ellis International LLP