Dana H. Freyer is a partner in the New York office of Skadden, Arps, Slate, Meagher & Flom LLP, where she specializes in international arbitration and litigation and corporate compliance. Barry H. Garfinkel is a senior partner at the New York office of the firm, where he heads the firm’s international arbitration and litigation practice. Hamid G. Gharavi is an associate in the New York office of the firm concentrating on international arbitration and litigation, as well as a Visiting International Professor at Richmond University School of Law.
Investors, to the extent possible, should always require that the international contracts they execute contain adequate arbitration provisions. If the sovereign state refuses to, or allegedly cannot, enter into an arbitration agreement, the investor should then scrutinize the bilateral investment treaties entered into by that state. The scope of the dispute resolution provisions contained in the BITs should be considered. The authors explain why this is so important and examine the scope of arbitration in BITs between several countries.
Multinational companies (“investor(s)”) desire a neutral, efficient and binding mechanism to resolve disputes arising out of their international transactions. This is particularly the case when contracting with sovereign states with respect to investments made in the territory of the states (“state contracts”). It is therefore not surprising that arbitration provisions are often prerequisites to investors entering into state contracts. Situations remain, however, where state contracts do not provide for international arbitration. This may be because the state refused or under its internal law was prohibited from entering into an arbitration agreement.