The future of environmental counterclaims in ICSID arbitration: challenges, treaties and interpretations

This article considers the potential of addressing global environmental risks through the investor–State dispute settlement regime, specifically arbitration under the International Centre for Settlement of Investment Disputes. It examines the viability of States raising environmental counterclaims against investors for breaches of environmental norms through an analysis of the jurisdictional and substantive issues in Burlington v Ecuador and Perenco v Ecuador. The article then assesses broader challenges in using such counterclaims to address environmental risks. However, it also tracks recent developments, such as the rise of new generation treaties that directly impose environmental obligations on investors and tribunal pronouncements that reflect environmental concerns, which demonstrate that international investment law is evolving in a way that will encourage and strengthen environmental counterclaims in the future. The article notes that these developments come with their own set of limitations, some of which are underexamined in practice and in existing literature. While the viability of environmental counterclaims will turn on a careful analysis of the circumstances of each case, the article concludes that such counterclaims will likely play a greater role in supporting global environmental protection in the near future.