The Admissibility of Environmental Counterclaims in Investment Arbitration

Abstract

The admissibility of environmental counterclaims in investment arbitration is untouched academic territory. The Ecuadorian counterclaims of Perenco and Burlington were the impetus of this analysis. As the first successful environmental counterclaims in investment arbitration, the tribunals’ failure to inquire into admissibility warrants further attention. This paper provides an in-depth examination of the gap in this area of investment arbitration. It draws upon international jurisprudence in an attempt to redefine the admissibility inquiry. It concludes that traditional approaches to admissibility will not exclude environmental counterclaims. Requiring a legal connection is an unreasonable and restrictive approach which denies the reality of investment treaties. The asymmetry of such instruments lend host states to rely upon alternative sources of environmental obligations. This should not be fatal to a host State’s environmental claim. The nature of environmental claims, including the implication of public policy should not be an impediment for a tribunal to exercise its jurisdiction. So long as an environmental counterclaim has a temporal and geographical connection to the principal claim or arises directly from the investment, there is no reason for it to be inadmissible. In reaching this conclusion, this paper also yields some insight into how host states can increase the receptivity of investment arbitration to environmental matters.