A Study Of Host Country Counterclaims In International Investment Arbitration

International investment arbitration between investors and host states is one of the main ways to resolve disputes between investors and host states.In recent years,the investor-state dispute settlement mechanism has favored investors,leading to an imbalance in the interests of both parties to the dispute.The host state’s counter-claim not only helps to rebalance it to a certain extent,but also makes investment disputes efficient and thorough in international investment arbitration.To avoid excessive and accused investors.At the current stage,China is also increasing its efforts to attract foreign capital inflows.In the future,it will inevitably cope with more disputes with investors.The host state’s counterclaim has provided China with another alternative response strategy without replacing other dispute settlement systems.In the practice of international investment arbitration,more and more countries are beginning to try to respond by filing counterclaims,and the number of related cases is gradually increasing.The practice of the counterclaim rules of the host state has been applied to a certain extent and has exerted its value and positive effects,but the majority of the arbitral awards that have been made have not been supported by the arbitral tribunal.The host state’s counterclaim has not been widely applied.One of the important reasons is that there are still some differences and uncertainties in the application of host state counterclaim rules.Therefore,it is necessary to explore the basic problems in application,combine the practice of arbitral tribunals and the viewpoints of scholars in practice,analyze the performance of the problem,predict the direction in which the problem may be solved,and incorporate counter-request rules into international investment agreements concluded in China in the future.It is helpful to better file counter-claims under the existing international investment agreements,so that host state counter-claims can be more widely applied and the value of host state counter-claims can be better exerted.From a procedural point of view,in practice,most cases involving counter-claims by the host state were rejected because the arbitral tribunal determined that it had no jurisdiction.There were two main reasons.The arbitral tribunal has disputes and differences on how to determine whether the parties agree to the counterclaim or not,and whether the subjects of the counterclaim are qualified when the subjects of the counterclaim are inconsistent.Therefore,it is necessary to analyze the determination of the parties’ consent to the counterclaim and the eligibility of the counterclaim subject.From the perspective of the entity,the arbitral tribunal often rejects the counterclaim on the grounds that the counterclaim is unsubstantiated,and the counterclaim is not related to the original claim,mainly because the investor’s obligations are difficult to determine and the arbitral tribunal has not unified the principle of determining the connectedness between the counterclaim and the original claim.Therefore,it is necessary to discuss and analyze the reasons why the investor obligation is difficult to determine,the source of the investor obligation,namely the legal basis of the counterclaim of the host state,and the rationality of different connectedness determination principles.This article is divided into four chapters.The first chapter mainly expounds the theoretical and practical status of the counterclaim of the host state.By analyzing the international arbitration rules and the provisions on counterclaims in the international investment agreement,it is found that these international arbitration rules have given the host state the right to file counterclaim in the procedure.It is stipulated that the counterclaim should meet the parties’ consent and connectedness requirements.A small number of international investment agreements clearly affirm the application of the host state’s counterclaim,and provide for investor obligations,which will inevitably affect the development of international investment agreements in the future.By analyzing the practice status of counterclaim of host country in international investment arbitration,it is found that most counterclaims of host state have not been supported by the arbitral tribunal,and counterclaim is always suppressed.This leads to the reasons why counterclaims are difficult to be supported by the arbitral tribunal and the problems in their application,that is,whether the parties concerned agree with the counterclaim is difficult to determine,the arbitral tribunal determines the suitability of the counterclaim subject differently when the counterclaim subject is inconsistent,the investor’s obligation is difficult to determine,and the principle of connectedness determination is controversial.Chapter 2 and chapter 3 will discuss the above issues.In addition,the counterclaim of the host state has its necessity and rationality,which can not only rebalance the rights and obligations between the investor and the host state,prevent the abuse of litigation by the investor,but also reflect the principle of procedural efficiency and avoid repeated litigation.In addition,the counterclaim makes the dispute more just and neutral,and also embodies the principle of judicial consistency.Therefore,the host state counterclaim should be allowed and supported,and the application of the host country counterclaim should be expanded on the basis of analyzing and solving the above problems.The second chapter analyzes the determination of the consent of the parties in the host state’s counterclaim and the eligibility of the parties.In practice,the arbitral tribunal’s determination of these two issues is quite different.First,the arbitral tribunal’s determination of whether the parties agree to the counterclaim has two standard principles.One standard principle is that the arbitration rules applicable to the international investment agreement have given the host state the right to counterclaim,and the investor’s action in requesting international investment arbitration shows that it has agreed to the counterclaim,another standard principle holds that it is still necessary to confirm whether the parties agree to the counterclaim in accordance with the specific provisions in the international investment agreement.By analyzing the rationality of the two standard principles,this article leans to the second standard in principle.Based on this,it also analyzed the arbitral tribunal’s determination of whether the parties’ scope of consent contained counterclaims in accordance with the relevant provisions of the international investment agreement on the scope of the "disputes" and the subject of the arbitration who can file claim,when adopt broad definition as arbitration,the arbitral tribunal tends to find that the parties’ consent includes a counterclaim.When the arbitral tribunal is inconsistent with the original claiment,it has two views to determine whether the party’s subject is eligible.One view is that the principle of subject consistency should be adhered to,and the subject of the party is not qualified at this time.Another view is that under special circumstances,the principle of subject consistency can be broken and the company’s veil can be pierced.The parties are essentially consistent.Scholars have also disputed about this question.In view of the small number of cases in practice that advocate the principle of subject consistency,this article considers that in general,the arbitral tribunal still tends to adhere to the principle of subject consistency.The third chapter discusses the host state’s counterclaim investor obligations and connectedness issues.The breach of relevant obligations by investors is the basis of the substantive law of the host state in counterclaim,but in practice it is difficult to determine the investor’s obligations for two main reasons.One is that the applicable laws in international investment agreements are not broad enough and some exclude the host state’s domestic law.This makes it difficult for the host state’s counterclaim based on the investor’s violation of domestic law to obtain tribunal’s support.Second,the international investment agreement itself does not establish investor obligations,resulting in the lack of investor obligations.In this case,the legal source of investor obligations needs to be analyzed,and the laws can be used to determine investor obligations.First,through case analysis,it is found that the host state can file a counterclaim in accordance with domestic law,but some counterclaims based on general laws generally applicable to the host state are usually rejected because the dispute in question is not related to the dispute in the original claim.The practice of raising domestic legal obligations to the international level,so that domestic legal obligations become treaty obligations at the same time,will undoubtedly help the host state to file relevant counterclaims.Secondly,the host state can determine investor obligations in accordance with international law.Some international investment agreements have established obligations for investors.In some cases,the arbitral tribunal also found that investors should assume obligations under international law other than international investment agreements,such as international human rights law and International environmental law.In practice,there are two principles for the arbitral tribunal to determine the relevance between the counterclaim and the original claim,namely,legal and factual connections.In some early cases,the arbitral tribunal insisted on the principle of legal connection,that is,the counterclaim and the original claim were based on the same legal system,mainly referring to the fact that the counterclaim and the original claim originated from the same contractual relationship.However,in recent cases,the arbitral tribunal has mainly adopted the principle of factual connection for determination.Scholars also believe that the principle of legal connection seems to be too harsh and is mainly applicable to early arbitration based on investment contracts,but not to arbitration based on international investment agreements.Adopting a more slack identification principle in practice seems to be the direction of development.Chapter 4 is based on the analysis above,how to incorporate counterclaim rules into future international investment agreements concluded in China,and how to raise counterclaims more strategically and make relevant suggestions under the existing framework of international investment agreements.This will enable China to better apply the counterclaim rule and actively respond to international investment arbitration.The inclusion of counterclaim requirements in international investment agreements can be achieved in the following ways.First,expand the scope of the parties’ agreement,including directly affirming the application of counterclaims,or adopt a broader wording scope of the dispute and the requirements for the subject of filing arbitration.Secondly,the provisions of applicable laws can be expanded,including,in particular,the host state’s domestic and international rules,and finally,investor obligations must be clearly defined in international investment agreements,including the promotion of domestic law to the international level,and the inclusion of investor compliance with corporate social responsibility.Under the existing framework of international investment agreements,how to file a counterclaim more effectively is reflected in three aspects.First,it should be ensured that the parties agree to the counterclaim,which can be achieved by signing a separate agreement with the investor or proving that the relevant wording is sufficiently broad.Secondly,the counterclaim should be filed against the investor.If the counterparty is a third party,it should prove that the third party has sufficient and close relationship with the investor to pierce the company’s veil so that the two can be regarded as the same entity.Finally,the counterclaim should meet the requirements of legal connectedness as far as possible,and if it cannot be achieved,it should prove that there is a de factual connection.