Originally from American Review of International Arbitration - ARIA

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I. INTRODUCTION

During the last 5–8 years there has been a dramatic increase in the number of arbitrations involving states and state entities. No official statistics are available to confirm this statement, but this is certainly the general perception of arbitration lawyers in most parts of the world. As I see it, this is the result of two overlapping and interdependent developments, i.e., the transformation of the political and economic systems in Eastern Europe, including the former Soviet Union, and the significant increase in so-called investment arbitrations.

As far as Eastern Europe is concerned, the most dramatic aspect is perhaps the dissolution of the Soviet Union resulting, inter alia, in more than a dozen new States. All the former republics of the Soviet Union have now become independent States. All of them are now participants in international trade and finance, albeit to varying degrees. The new States and their State-owned entities are actively trying to entice foreign investments into their economies, in particular in the oil and gas sectors and with respect to other natural resources. The opening up of the economies of Eastern Europe has made such markets much more interesting for foreign investors than was the case in the past. Many of the new States and East European countries have signed bilateral investment protection treaties ("BITs") as well as other treaties addressing other aspects of foreign investment. Such investment treaties often include arbitration provisions which allow investors to initiate arbitration proceedings against the host State.