State contracts, state interests and international commercial arbitration: a Third World perspective

An unmistakable feature of international commerce during the last four decades has been the active participation of developing countries, usually in the form of contractual relationships with foreign private parties. Development economists believe that many developing countries do not have, nor can they generate enough savings to finance industrialisation. The direct result is their inability effectively to pursue their development aspirations without foreign investment. Knowing that doing business with a developing state is tantamount to dealing with a partner whose legal rights, prerogatives and competence in the domestic and international legal orders may be vastly superior to those of the foreign investor, the latter has consistently demonstrated an 'almost omnivorous desire for protection of his investment'. Consequently, state contracts with foreign private parties, the subject of this paper, consistently contain, inter alia, provisions for the settlement of disputes by arbitration and for the regulation of the contracts by a body of law acceptable to the investor.