This article explores the possibility of environmental counterclaims in
the context of investment arbitration and arbitral rules, focusing in
particular on the UNCITRAL Arbitration Rules and ICSID Arbitration Rules.
States have only rarely raised counterclaims against investors in investment
arbitration. Yet, in disputes raising environmental issues, counterclaims could
prove useful to States to obtain compensation for environmental damage caused
by an investor’s economic activities. This article examines first the
procedural and legal requirements for raising counterclaims in investment
arbitration, including the provisions set out by the arbitral rules and
relevant case law. It then proceeds to consider recent cases in which States
have raised environmental counterclaims with varying degrees of success.
Finally, the article considers the conclusions to be drawn for policy making
and investment treaty negotiations.