Barry Leon and John Terry are partners at Torys LLP in Toronto. Mr. Leon practices business litigation and international and domestic commercial arbitration. Mr. Terry practices business, international and public litigation and arbitration, and has a significant practice in investor-state arbitration.
The number of international arbitrations in which states and state entities1 are parties (state-party arbitrations) has increased considerably in recent years, and is continuing to grow.2 This growth is a result of the proliferation of bilateral investment treaties (BITs), which mushroomed from about 500 treaties in 1992 to more than 2,000 in 2001.3 And it is estimated that several hundred treaties have been signed since 2001.
Numerous factors have contributed to the growing number of BITs,4 among them the “gradual economic interdependence among developed and emergent economies”5 and the general trend toward globalization. At least one commentator has noted that the fall of the Eastern Bloc (and along with it the theory of absolute state immunity previously ensconced in Communist ideology) has caused new markets to open and new opportunities for investment and, inevitably, new disputes to be resolved.6
It is not just the numeric increase in state-party arbitrations that is significant, but also that these arbitrations often involve large sums of money, complex issues, high-profile subject matter and a plethora of national and international interests—economic, political and even cultural.
An arbitration to which a state is a party involves at least 12 special considerations that may make the arbitration different in some ways from an arbitration in which all parties are private commercial entities.