Originally from World Arbitration And Mediation Review (WAMR)

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SUMMARY: THE PUBLIC-PRIVATE

DISTINCTION IN THE INTERNATIONAL
ARBITRATION OF INDIVIDUAL CLAIMS
AGAINST THE STATE
By Gus Van Harten*

Van Harten distinguishes investment treaty arbitration from
international commercial arbitration. He examines how investment treaty
arbitration can result in the adjudication of public law in the private sphere.

A State can act both as a public and private entity.1 When acting in its
sovereign capacity, a State is acting as a public entity.2 For example, a
dispute between an investor and a State over expropriation is a matter of
public law due to expropriation being a sovereign act that only a State can
commit.3 Conversely, when a State behaves in a manner similar to that of a
private party, the State is acting as a private entity.4 For example, if a State
contracts with an investor to provide lawn care service for State-owned
buildings, the State is acting as a private entity.5

The character of the State’s action determines whether it is acting in the
public sphere or the private sphere. Generally, international commercial
arbitration occurs in the private sphere because both the State and the
investor are acting in their private capacity.6 Accordingly, the State agrees
to arbitrate in a similar manner as two commercial entities that agree to
arbitrate.7 The arbitrator resolves the dispute on the basis of private law.8

Therefore, when a State consents in its private capacity, it is not waiving its
sovereign immunity.9