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A Rebalancing Act? - Human Rights and Environmental Counterclaims in International Investment Arbitration

Bisting, Ellen LU (2022) JURM02 20221
Department of Law
Faculty of Law
Abstract
International investment law (IIL) is a highly complex area of law that consists of around 3000 international investment agreements (IIAs) that aim to promote and protect foreign investment. They provide for investor-State dispute settlement (ISDS) which gives investors the right to sue host States directly through international arbitral tribunals. During the last decade, this system has received significant criticism for being asymmetric as it affords only rights to investors and consequently only obligations for host States. IIL is at the same time becoming increasingly connected to issues of environmental protection and human rights as investors have used the ISDS mechanism to challenge host State’s public policy measures in these... (More)
International investment law (IIL) is a highly complex area of law that consists of around 3000 international investment agreements (IIAs) that aim to promote and protect foreign investment. They provide for investor-State dispute settlement (ISDS) which gives investors the right to sue host States directly through international arbitral tribunals. During the last decade, this system has received significant criticism for being asymmetric as it affords only rights to investors and consequently only obligations for host States. IIL is at the same time becoming increasingly connected to issues of environmental protection and human rights as investors have used the ISDS mechanism to challenge host State’s public policy measures in these fields and often been successful in doing so. This has generated further criticism and concerns that the IIL regime is obstructing much needed State efforts to address such non-economic issues. Furthermore, transnational corporations (TNCs) can often avoid liability for environmental destruction and human rights violations when operating abroad due to the lack of a mechanism at the international level that can impose responsibility on such actors. Reform efforts to rebalance this asymmetry have been made at international level, primarily within the UNCITRAL Working Group III but also at domestic level by renegotiating and reforming IIAs. The increasing significance afforded to the non-economic issues that are implicated in investment law and ISDS can be seen in this progress as well as in arbitral awards in which arbitrators are to a greater extent dealing with such issues. A mechanism that has been presented as a potential tool to further this reform, and rebalance the IIL regime, is counterclaims. States have traditionally rarely raised counterclaims in ISDS but over the last years they have become increasingly common.
This thesis examines the legal framework of counterclaims in ISDS and how such counterclaims have been received by investment tribunals. The questions that are asked are how counterclaims could support the ongoing reform efforts and how they can be used to promote accountability for TNCs for environmental harm and human rights violations. It draws the conclusion that counterclaims do in fact have great potential to rebalance the system but that the current framework must be improved in order to allow counterclaims by host States to a higher degree. The need for reform of IIAs is discussed as well as the possibilities to interpret existing IIAs in a way that is more open to counterclaims despite their asymmetry. The thesis further concludes that ISDS could become a venue in which TNCs can be held accountable for environmental harm and human rights violations, something that is much needed. However, it also discusses concerns of allocation of authority between arbitral tribunals and domestic courts as well the appropriateness of dealing with such non-economic issues closely related to public policy in ad hoc tribunals. (Less)
Abstract (Swedish)
Internationell investeringsrätt är ett mycket komplext rättsområde som
består av cirka 3000 internationella investeringsavtal som syftar till att
främja och skydda utländska investeringar. De tillhandahåller en
tvistlösningsmekanism kallad investor-state dispute settlement (ISDS)
mellan investerare och stater som ger investerare rätt att stämma värdstater
direkt inför internationella skiljedomstolar. Under det senaste decenniet har
detta system fått betydande kritik för att vara asymmetriskt eftersom det
endast ger investerare rättigheter och följaktligen endast skyldigheter för
värdstater. Internationell investeringsrätt blir samtidigt allt mer kopplat till
frågor om miljöskydd och mänskliga rättigheter eftersom investerare har
... (More)
Internationell investeringsrätt är ett mycket komplext rättsområde som
består av cirka 3000 internationella investeringsavtal som syftar till att
främja och skydda utländska investeringar. De tillhandahåller en
tvistlösningsmekanism kallad investor-state dispute settlement (ISDS)
mellan investerare och stater som ger investerare rätt att stämma värdstater
direkt inför internationella skiljedomstolar. Under det senaste decenniet har
detta system fått betydande kritik för att vara asymmetriskt eftersom det
endast ger investerare rättigheter och följaktligen endast skyldigheter för
värdstater. Internationell investeringsrätt blir samtidigt allt mer kopplat till
frågor om miljöskydd och mänskliga rättigheter eftersom investerare har
använt denna tvistlösningsmekanism för att utmana värdstaters åtgärder på
dessa områden och ofta varit framgångsrika med det. Detta har genererat
ytterligare kritik och oro för att regelverket hindrar välbehövliga statliga
ansträngningar för att ta itu med sådana icke-ekonomiska frågor. Dessutom
kan transnationella företag ofta undvika ansvar för miljöförstöring och brott
mot mänskliga rättigheter när de verkar utomlands på grund av avsaknaden
av en mekanism på internationell nivå som kan ålägga sådana aktörer
ansvar.

Reformansträngningar för att balansera denna asymmetri har gjorts på
internationell nivå, främst inom UNCITRAL Working Group III men också
på nationell nivå genom att omförhandla och reformera internationella
investeringsavtal. Den ökande betydelsen av icke-ekonomiska frågor som
blir påverkade av internationell investeringsrätt kan ses i dessa
ansträngningar såväl som i skiljedomar där skiljemän i större utsträckning
tar hänsyn till sådana frågor. En mekanism som har presenterats som ett
potentiellt verktyg för att främja denna reform, och balansera systemet, är
genstämningar. Stater har traditionellt sällan fört fram genstämningar i
tvister gentemot investerare men under de senaste åren har de blivit allt
vanligare.

Denna uppsats undersöker rättsläget runt genstämningar i ISDS och hur
sådana genstämningar har mottagits av internationella skiljedomstolar.
Frågorna som ställs är hur genstämningar kan stödja det pågående
reformarbetet och hur de kan användas för att främja ansvarsskyldighet för
transnationella företag för miljöskador och brott mot mänskliga rättigheter.
Uppsatsen drar slutsatsen att genstämningar faktiskt har stor potential att
balansera systemet men att det nuvarande regelverket måste förbättras för att
tillåta genstämningar från värdstater i högre grad. Behovet av reformering
av internationella investeringsavtal diskuteras liksom möjligheterna att tolka
befintliga investeringsavtal på ett sätt som är mer öppet för genstämningar
trots deras asymmetri. Vidare dras slutsatsen att ISDS skulle kunna
användas för att hålla företag ansvariga för miljöskador och kränkningar av
mänskliga rättigheter, något som är välbehövligt. Uppsatsen diskuterar
emellertid också frågor om fördelning av befogenheter mellan
internationella skiljedomstolar och inhemska domstolar samt lämpligheten
av att behandla sådana icke-ekonomiska frågor som är av stort allmänt
intresse i temporära internationella skiljedomstolar. (Less)
Please use this url to cite or link to this publication:
author
Bisting, Ellen LU
supervisor
organization
course
JURM02 20221
year
type
H3 - Professional qualifications (4 Years - )
subject
keywords
public international law, international investment law, ISDS, international arbitration, human rights, environment, counterclaims
language
English
id
9079971
date added to LUP
2022-06-14 20:01:48
date last changed
2022-06-14 20:01:48
@misc{9079971,
  abstract     = {{International investment law (IIL) is a highly complex area of law that consists of around 3000 international investment agreements (IIAs) that aim to promote and protect foreign investment. They provide for investor-State dispute settlement (ISDS) which gives investors the right to sue host States directly through international arbitral tribunals. During the last decade, this system has received significant criticism for being asymmetric as it affords only rights to investors and consequently only obligations for host States. IIL is at the same time becoming increasingly connected to issues of environmental protection and human rights as investors have used the ISDS mechanism to challenge host State’s public policy measures in these fields and often been successful in doing so. This has generated further criticism and concerns that the IIL regime is obstructing much needed State efforts to address such non-economic issues. Furthermore, transnational corporations (TNCs) can often avoid liability for environmental destruction and human rights violations when operating abroad due to the lack of a mechanism at the international level that can impose responsibility on such actors. Reform efforts to rebalance this asymmetry have been made at international level, primarily within the UNCITRAL Working Group III but also at domestic level by renegotiating and reforming IIAs. The increasing significance afforded to the non-economic issues that are implicated in investment law and ISDS can be seen in this progress as well as in arbitral awards in which arbitrators are to a greater extent dealing with such issues. A mechanism that has been presented as a potential tool to further this reform, and rebalance the IIL regime, is counterclaims. States have traditionally rarely raised counterclaims in ISDS but over the last years they have become increasingly common.
This thesis examines the legal framework of counterclaims in ISDS and how such counterclaims have been received by investment tribunals. The questions that are asked are how counterclaims could support the ongoing reform efforts and how they can be used to promote accountability for TNCs for environmental harm and human rights violations. It draws the conclusion that counterclaims do in fact have great potential to rebalance the system but that the current framework must be improved in order to allow counterclaims by host States to a higher degree. The need for reform of IIAs is discussed as well as the possibilities to interpret existing IIAs in a way that is more open to counterclaims despite their asymmetry. The thesis further concludes that ISDS could become a venue in which TNCs can be held accountable for environmental harm and human rights violations, something that is much needed. However, it also discusses concerns of allocation of authority between arbitral tribunals and domestic courts as well the appropriateness of dealing with such non-economic issues closely related to public policy in ad hoc tribunals.}},
  author       = {{Bisting, Ellen}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{A Rebalancing Act? - Human Rights and Environmental Counterclaims in International Investment Arbitration}},
  year         = {{2022}},
}