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Counterclaims and the Rule of Law in Investment Arbitration

  • Tomoko Ishikawa (a1)
Extract

While the rule of law was originally developed with reference to domestic constitutional orders, it is also widely embraced by international lawyers. This essay argues that the admission of counterclaims in certain circumstances helps investment arbitration advance the rule of law on several counts. The rule of law is defined here to include not only formal elements such as rule-by-law and formal legality, but also “thicker” elements attached to certain substantive values, including fundamental human rights. The UN's work on the rule of law clearly adopts a broad interpretation of this concept. This essay examines the potential for counterclaims to bridge the gap between the lack of effective mechanisms to hold foreign investors accountable for their conduct and the extensive protection of foreign investors in international investment law. By doing so, counterclaims in investment arbitration may promote the thicker elements of the rule of law such as accountability to the law, access to justice, and fairness in the application of the law.

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This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
References
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2 Lord Bingham, The Rule of Law, 66 Cambridge L.J. 67, 75–77 (2007).

3 See, e.g., GA Res. 67/1 (Nov. 30, 2012); UN Secretary-General, The Rule of Law and Transitional Justice in Conflict and Post-Conflict Societies, UN Doc. S/2004/616 para. 6 (Aug. 23, 2004).

4 W. Michael Reisman, International Investment Arbitration and ADR, 24(1) ICSID Rev. 185 (2009).

6 UN Human Rights Council, Resolution 26/9, UN Doc. A/HRC/Res/26/9 (July 14, 2014).

8 See Balkan Energy v. Ghana, PCA Case No. 2010–7, Award (Apr. 1, 2014).

9 For a comparative institutional analysis between investment law and other adjudicatory and nonadjudicatory mechanisms including domestic dispute settlement mechanisms, see Sergio Puig & Gregory Shaffer, Imperfect Alternatives: Institutional Choice and the Reform of Investment Law, 112 AJIL 361 (2018).

10 See Lise Johnson & Brooke Skartvedt Guven, The Settlement of Investment Disputes: A Discussion of Democratic Accountability and the Public Interest, 8(1) Investment Treaty News 7 (2017).

12 Aguinda v. ChevronTexaco, No. 2011–0106 (Sucumbios Prov. Ct. J., Nueva Loja App. Div. Jan. 3, 2012) (Ecuador); Aguinda v. ChevronTexaco, No. 002003, Judgment (Prov. Ct. J., Nueva Loja in Lago Agrio, Feb. 14, 2011) (Ecuador).

13 See Chevron v. Ecuador, PCA Case No. 2009–23, Second Partial Award on Track II, part V (Aug. 30, UNCITRAL, 2018); Chevron v. Donziger, 974 F. Supp. 2d 362, 386–546 (S.D.N.Y. 2014); Chevron v. Donziger, ___ F.3d ___, 2016 WL 4173988 (2d Cir. Aug. 8, 2016).

14 Commentary to Principle 2 of the UN Guiding Principles on Business and Human Rights (2011) (hereinafter UN Guiding Principles).

15 See, e.g., Lungowe v. Vedanta Resources [2017] EWCA Civ 1528 (UK); Dooh v. Shell, ECLI:NL:GHDHA:2015:3586 (Court of Appeal The Hague, Dec. 18, 2015) (Neth.).

16 Jesner v. Arab Bank, 584 U.S. ___ (2018), 18–26. See also Kiobel v. Royal Dutch Petroleum, 569 U.S. 108 (2013).

17 For additional discussion, see Andrew Sanger, Transnational Corporate Responsibility in Domestic Courts: Still out of Reach?, 113 AJIL Unbound 4 (2019).

18 The issue of coexistence of domestic remedies and counterclaims based on the same factual and legal grounds remains and should be addressed by, for example, requiring the host state to waive its right to file the claims against the claimant investor at any jurisdiction other than the relevant investment arbitration as a condition for filing counterclaims.

19 See UN Human Rights Comm., General Comment No. 31, Nature of the General Legal Obligation Imposed on States Parties to the Covenant, UN Doc. CCPR/C/21/Rev.1/Add.13 para. 8 (May 26, 2004); UN Guiding Principles, supra note 14, para. 1.

20 African Commission on Human and Peoples' Rights, Communication No. 155/96 (Oct. 27, 2001). For other cases in which the human rights treaty dispute settlement bodies found that states breached their obligations to protect against actions by private entities, see Robert McCorquodale, Corporate Social Responsibility and International Human Rights Law, 87(2) J. Bus. Ethics, 385, 387 (2009).

21 African Commission on Human and Peoples' Rights, supra note 20, at paras. 57–58.

22 Id., holding.

23 See Johnson & Skartvedt Guven, supra note 10.

24 GA Res. 67/1 para. 2 (Nov. 30, 2012).

25 Id. at para. 14.

26 The membership of the Convention of 30 June 2005 on Choice of Court Agreements is limited to the European Union and its member states, Mexico, Montenegro, and Singapore (as of Nov. 29, 2018).

28 Susan D. Franck, Foreign Direct Investment, Investment Treaty Arbitration, and the Rule of Law, 19 Global Bus. & Dev. L.J. 337, 372 (2007).

29 Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award (Dec. 7, 2011).

30 See, e.g., Rusoro Mining v. Venez., ICSID Case No. ARB(AF)/12/5, Award (Aug. 22, 2016) and Vestey Group v. Venez., ICSID Case No. ARB/06/4, Award (Apr. 15, 2016).

31 Burlington Resources v. Ecuador, ICSID Case No. ARB/08/5, Decision on Ecuador's Counterclaims (Feb. 7, 2017).

32 Perenco Ecuador v. Ecuador, ICSID Case No ARB/08/6, Interim Decision on the Environmental Counterclaim (Aug. 11, 2015). See also Desert Line Projects v. Yemen, ICSID Case No. ARB/05/17, Award (Feb. 6, 2008).

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AJIL Unbound
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  • EISSN: 2398-7723
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