Legal Challenges And China’s Strategies To The Host State Counterclaims In International Investment Arbitration

In the field of international investment,international investment arbitration is among the main ways for investors to protect their own rights and interests.In recent years,international investment arbitration institutions have shown favoritism towards investors in an increasing number of international investment arbitration rulings,leading to their legitimacy being questioned.In order to protect their own rights and interests,some countries have attempted to find a way out through the host state counterclaim system.However,in arbitration practice,counterclaims are difficult to be accepted,and even more difficult to be supported.The reasons for this are mainly reflected in two aspects: firstly,it is difficult to determine whether counterclaims are within the scope of consent of the parties when determining the jurisdiction of the arbitral tribunal;secondly,when determining the admissibility of counterclaims,the arbitral tribunal will carefully examine the counterclaim to confirm whether there is a "close relationship" between it and the original claim.Theoretically,there are two key factors for the counterclaim mechanism to work: first,the tribunal is found to have jurisdiction;second,the counterclaim is admissible.The conditions for the arbitral tribunal to have jurisdiction include the consent of the parties,the eligibility of the parties and the obligation of the investor under the applicable law.The core of admissibility is the issue of relevance,and the criteria for determining the relevance of a counterclaim is that the investment dispute is directly arising out of the investment.As one of the favored target countries for investors,China also faces the possibility of investment arbitration by foreign investors.Under such circumstances,China,as a respondent to international investment arbitration,should actively respond to investment arbitration and try to file effective counterclaims.At the same time,China should take the initiative to introduce counterclaim rules in Chinese-foreign investment agreements,improve the Chinese-foreign investment agreements by formulating special provisions to stipulate the obligations of investors,and actively and timely use the arbitration counterclaim system to protect its rights and interests.