Summary: | Arbitrations involving states and foreign private parties are a complex phenomenon, sharing certain animating values with other forms of adjudication, particularly international arbitrations of private commercial disputes, but reflecting at the same time singular values that must be fostered if the institution is to play a beneficial role in the international community. A study of institutional forms of arbitration designed primarily to resolve commercial disputes between private parties reveals that their emphasis upon stability and upon the certainty and predictability of rules can make such institutions inappropriate for the arbitration of disputes involving states. Regimes designed specifically to regulate arbitrations between states and foreign private entities may be more successful in displaying sensitivity to the needs and aspirations of both public and private parties, but the work of the largest specialised institution, the International Centre for Settlement of Investment Disputes, is hampered by its governing Treaty for it does not deal adequately with the enforcement of awards against states. Ad hoc arbitration continues to be a useful means of resolving commercial disputes between states and foreign private parties, especially because the parties are free to design or to choose a delocalised procedural law which need not hinder enforcement. The great difficulty with all forms of arbitration between states and private entities is the substantive law to be applied by such tribunals. Under the principle of the autonomy of the will, the parties are free to choose the governing law, and they may select international law. If they do so, however, the choice does not imply that the foreign private party is assimilated to a state or that the international responsibility of the state party is engaged directly vis-a-vis the private party. The enforcement of arbitral awards is also a troubling problem, but recent municipal case law reveals a growing pro-enforcement bias. Nevertheless, the experience of the Iran-United States Claims Tribunal reveals the significant advantages that accrue to the parties if they agree in advance upon an independent enforcement mechanism. The political tensions inherent in most "mixed" arbitrations demand flexibility in the application of procedural and substantive rules, and require an approach to dispute resolution that emphasises the value of compromise. As such, the awards that emerge from mixed arbitrations are likely to be idiosyncratic or, at the very least, vague. Nevertheless, if one stresses the importance of process values rather than the elaboration of substantive rules, arbitration between states and foreign private parties can play an important role in the enhancement of the international rule of law.
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