Examining host-State counterclaims for environmental damage in investor-State dispute settlement from human rights and transnational public policy perspectives

In international disputes between investors and host-States, the traditionally asymmetric nature of international investment agreements (IIAs) may prevent States from bringing claims against investors for harm caused, including environmental damage. At the same time, allowing host-State counterclaims for environmental damage is a potentially useful tool for rebalancing the asymmetric nature of IIAs. Yet, in the highly fragmented area of international investment law, the availability of host-State counterclaims is not always clear. This article analyses the procedural and legal bases available for host-State counterclaims for environmental damage, including newly developing human rights and transnational public policy approaches to such claims. The question that this article seeks to evaluate is to what extent host-State counterclaims are available to rebalance the asymmetric relationship between host-States and investors, specifically concerning environmental damage. To answer this question, the article takes a qualitative approach by examining case law, commentary, and the work of international organizations, and applying the results of the research to the specific context of host-State counterclaims for environmental damage. Future developments are also discussed in the context of ongoing multilateral investor-State dispute settlement reform efforts at the United Nations Commission on International Trade Law. There currently exists a window of opportunity for States to seek cooperative, effective multilateral strategies for partially rebalancing the relationship between investment and the environment. The article posits that harmonization of State approaches towards counterclaims for environmental damage is desirable and States should take a permissive approach towards host-State counterclaims for environmental damage in their IIA treaty negotiation practice.