The state counterclaim cases appearing recent years in international investment arbitration actuallyreflect problems of partial to investors and benefit unbalance of disputing parties existing in the investor-state dispute settlement mechanism. The host state's rights of counterclaim in investment arbitration not onlyreflect principles of fair procedure and benefit balance, but also play the role of restricting acts of abusingclaim right. In practice, the judgment and confirmation of arbitral tribunals on the jurisdiction and admissibilityof counterclaims are so rigorous that state counterclaims could hardly be supported. As for these problemsconcerned, the arbitral tribunals are also faced with the challenging problems of how to decide applicablecriterion of counterclaim rules, and how to deal with the relation of rules application between ICSID conventionand investment treaties. Meanwhile, the relation between breach of contract counterclaim and breach of treatyprincipal claim and mutual influence of the two are also the theoretical problem ready to be resolved. Theproblems of application of counterclaim rules discussed in this article are expounded and analysed from three-tier aspects of convention standard, treaty provisions and domestic law of host state so as to ascertain the relationof rules application among the three. The related key issues refer to two aspects. The first is how to confirmrequirements for the consent of disputing parties and the connexity under the jurisdiction of counterclaim, andthe second is the relation between factual connexity and judicial connexity. Through the way of demonstrationand inference, the substance of this article is to find out and reveal the reasonable and feasible principleand thought forming in the practice of state counterclaim under investment arbitration. As the requirementof connexity concerned, a counterclaim may be dismissed because of inconformity with judicial connexityrequirement unless host state can demonstrate that there is actual connection between the based domestic lawprovisions and the contents of investment treaty. The obligation under investment agreement and that underinvestment treaty are too close to institute factual connexity of counterclaim. Whereas judicial connexity shouldbe valued combining with factual connexity instead of independent and prerequisite requirement.