Originally from the ICDR Handbook on International Arbitration & ADR - Third Edition

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I.    Introduction

International arbitration in which states and state entities  are parties (state-party arbitration) has become a major feature of the international dispute resolution landscape.  This is especially true of international investment disputes; however, states are increasingly choosing to use arbitration to settle other disputes with private parties as well.  The growth of international arbitration is in large part due to the proliferation of bilateral investment treaties (BITs) in the last two decades.  The first BIT was made between Germany and Pakistan in 1959.  Between 1992 and 2001, the number of BITs mushroomed from about 500 treaties in 1992 to more than 2,000.  As of 2015, the number of BITs in force is approximately 2,283, with another 646 concluded but not yet in force. 

Numerous factors contributed to the proliferation of BITs in the 1990s and early 2000s,  among them the “gradual economic interdependence among developed and emergent economies”  and the general trend toward globalization. At least one commentator noted that the fall of the Eastern Bloc (and along with it the theory of absolute state immunity previously ensconced in Communist ideology) caused new markets to open, new opportunities for investment and, inevitably, new disputes requiring resolution.