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Author

Ms Elise Ruggeri Abonnat

Ph.D candidate - University of Paris II/University of Geneva

Editor

Ms Anastasiya Ugale

International Lawyer - Solo International Law Practice

Counterclaims

I. Definition

1.

A counterclaim is a claim for relief asserted against an opposing party after an original claim has been made. Counterclaims have both defensive and offensive qualities1. The counterclaimant, usually the respondent, seeks to defeat the primary claim (defensive quality) pursuing objectives other than the mere dismissal of the primary claim by filing a counter-claim relating to (“directly connected with” or “arising directly out of”) the subject-matter of the dispute (offensive quality). Initially, counterclaims were perceived to be incompatible with the consensual nature of arbitration agreements in which the parties determine the scope of a dispute and, in case of a compromis, are deprived of the formal qualities of “claimant” and “respondent”.2 Nowadays however, whereas few investment agreements set forth investors’ obligations3 or foresee the possibility to file a counterclaim,4 the majority of Arbitration Rules in the fields of international commercial and investment law contain provisions to that effect.6 The ICSID Convention is the only instrument expressly permitting counterclaims at the treaty level (article 467).

II. Distinction from other related arbitration or litigation techniques

2.

The main distinguishing characteristic of a counterclaim is its potential to result in an additional advantage other than the mere defence on the merits8 (i.e. an action within the original claim deprived of the offensive character). In international commercial arbitration counterclaims are also to be distinguished from set-off claims9.

III. Practice in investment arbitration

3.

The use of counterclaims in investment arbitration has proven more problematic in treaty claims than in contract claims because of the asymmetrical character10 of an investment treaty whose main focus is to protect the investors’ rights. An increasing resort to counterclaims by States evidences the growing demand for recognition of investors’ misconduct based on non-compliance with domestic or international law.11 To some extent, some authors consider that that counterclaims may serve the principles of judicial economy and good administration of justice as well as the principle of equality of the parties.12 On the contrary, some tribunals are of the opinion that counterclaims are not within their jurisdiction.13

IV. Jurisdiction

4.

Whether investment tribunals can entertain jurisdiction over a State’s counterclaim in proceedings that are initiated under a treaty is contingent upon the treaty’s arbitration clause, the scope of the parties’ consent, and the relationship between the counterclaim and the arbitration claim14 (i.e. the “close connexion”15 test). It was argued, and some tribunals agreed, that the general consent to ICSID arbitration could be ipso facto interpreted as consent to counterclaim16. Other tribunals have disagreed with this interpretation.17 Tribunals’ jurisdiction is more complex when the parties are bound by a mandatory arbitration provision included in a related contract18 or when the treaty contains an umbrella clause.19

V. Merits

5.

In practice, States have ascertained counterclaims against investors based on violations of domestic law20 and public international law.21 Within the latter category, States have used a variety of sources against investors, such as multilateral treaties on human rights22, corporate social responsibility standards23, the international principles of good faith,24 or the prohibition of corruption or fraud25.

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