DAVID AVEN

Claimant

And

THE REPUBLIC OF COSTA RICA

Respondent

The Claimants invested to develop a project (Las Olas) in Costa Rica. This project required
different kind of permit and authorization in order to start the construction of the site such as
the environmental permit. The Claimants assured that they received all the necessary permits
and authorization for the construction of their project. However, it seems that the permit,
which has been issued, the environmental one is not valid because after investigation, it turns
out that there were wetlands and forests ground within the project site. Which led to the
construction site to shut down by the Costa Rican authorities. This shutdown caused the
destruction of the Claimants’ investment. Following these Respondent’s actions, the
Claimants seized the arbitral tribunal since they agreed on this form of dispute resolution
under ICSID convention, for breach of the DR-CAFTA.

This case law is particular because the BIT that has been used here is different from others
BITs. Indeed, in old BITs, they used to protect mostly the investment and the investor.
Investors had no specific obligation, only rights and States have only obligation. The modern
BITs primary concern is to protect the environment. Investors are well known to disrespect
the environment of the host state. The Respondent has been able to win this case because in
the BIT they dedicated a complete chapter on environment. While in other model of BIT, they
barely mention the issue of the environment. Therefore, there are obligations for the state but
for the investor as well.
Generally, in the BITs, there are very few obligations for the investors; they are usually the
ones that are protected against the state’s actions. Investors have rights and no obligation
under the BIT and therefore it is very uncommon that the investor is sued by the state for a
violation of the BIT. However, as mentioned above, under this BIT, the chapter 10 is
dedicated to the respect of the environment and contains obligation for the investor as well.
For that reason, the tribunal accepted the counterclaim of the state of Costa Rica for the
breach of the BIT under chapter 10.
Counterclaim from the Respondent is very difficult to satisfy. The present arbitration based
therefore its reasoning on 2 cases: Urbaser v Argentina and Burlington v Ecuador cases.
These are one of the cases where the arbitral tribunal accepted the counterclaim of the
respondents. However, in the present arbitration, the tribunal will only rely on the Urbaser
case because the facts of this present dispute are more likely the same as the facts in this
present dispute.

In the ICSID convention, the environment is part of international law, that a foreign investor
must follow and respect. The investor has no immunity against the application and the respect
of international law. Also, in the DR-CAFTA, it is clear that the investor has an obligation
toward the respect of domestic law regarding the environment.

The counterclaim of the respondent (states) was not that popular because in order for the
tribunal to be competent, we need to have the consent on the arbitral tribunal from the parties
which is hard to satisfy because usually, only the state’s consent is referred in the BIT.
The investor’s consent only figures when he or she files a claim against the state. In most
treaty cases, it is the international responsibility of the state that is sought.
States were able to respond by trying to prove that the tribunal has no jurisdiction or that the
said investment or investor is not covered under the treaty.
With this case, states have now another angle of defense.
The particularity here is that in the DR-CAFTA, it is stated that state can raise a counterclaim
under the same proceedings because, according to the state of Costa Rica, the word
“Respondent” has not be defined as “state party” but in general.

Arbitration is based on parties consent. Therefore, in order for a state to bring a counterclaim
before an arbitral tribunal and in order for this tribunal to be competent, the investor must give
its consent to arbitration. Usually, the investor gives his/her consent to arbitration by choosing
this forum while filing a claim against the state.
For that reason, we can consider, that this is an implicit consent to arbitration regarding
counterclaim.

This case law highlights and gives a precedent regarding the responsibility of investors
towards environmental obligation in the host state. The importance of this case relies on
state’s right to enforce its domestic laws and regulation regarding the environment toward
foreign investors. This case sets a new way to interpret some BIT by showing the importance
accorded to the protection of the environment for investors. Investors have now to bare in
mind that any claims that they can bring against the state can turn out to be counterclaim and
they can be held responsible for their bad actions.