The Legal Framework for Counterclaims in Investment Treaty Arbitration

The notion of counterclaims has recently become a hotly debated topic in the context of investment treaty arbitration as the scholarship and case law have questioned the limits traditionally associated with counterclaims in international dispute settlement. This article critically examines this new approach, together with competing views, and presents a general legal framework and methodology for assessing counterclaims in investment treaty arbitration. We submit that the recent views, spearheaded by Prof Reisman's dissenting opinion in Roussalis v. Romania, must be rejected. The present article starts with an introduction of the concept of counterclaims in international dispute settlement and investment treaty arbitration in particular, and sketches out the legal bases for their admission in different dispute settlement mechanisms in order to emphasize similarities and differences among them for comparative arguments used in the main thrust of the article. In turn, it critically analyses the three general requirements for admitting counterclaims: parties' consent, close connection with the primary claim, and the issue of party identity. We conclude with an outline of our legal framework where we posit that the availability of host states' counterclaims depends largely on the wording of the applicable legal sources and universal approaches that brush away important differences among them must not be encouraged.