There was a time when foreign states rarely found themselves involved in dispute resolution proceedings in court or arbitration. With the enactment of the Foreign Sovereign Immunities Act, 28 U.S.C. §§1602 et seq., however, came codification and clarification of the circumstances under which foreign states and their agencies and instrumentalities could be sued in United States courts in disputes arising out of their commercial activities (jus gestionis) - as opposed to their activities in their sovereign capacity (jus imperii). The result was that foreign states were increasingly named as defendants in litigation in the United States.

More recently, this trend to reduce the scope of sovereign immunity has manifested itself in the arbitration context, as private parties investing in foreign countries have been afforded — by way of investment and other treaties — the right to bring arbitration proceedings against foreign countries for violations of obligations under those treaties. Those obligations implicate activities that can be characterized as being beyond what is ordinarily regarded as commercial. The growing availability of arbitration for testing these obligations represents a potentially important development in the laws of international commerce and investment.

Under the North American Free Trade Agreement (NAFTA), and under various bilateral investment treaties (BITs) entered into by the United States over the past several years, nationals of signatory nations who are investors in countries of which they are not nationals may assert claims based on violations of those treaties, particularly claims based on discrimination or non-national treatment by the other states.

It has been suggested that the right of an investor to be treated in the same way as a national of the country in which it is doing business is jus cogens, a norm having the force of fundamental international law. To the extent that this proposition is supportable, an argument can be made that the right to national treatment is so fundamental under international law that a foreign judgment based on a violation of it should not be enforced because permitting it would be contrary to the public policy of the United States.