I. Introduction

It has been said that the lex mercatoria is a Buchrecht, that is to say, a law constructed from books, lacking reference to actual legal relations. Sceptics will say that it has the defect of having been constructed from only a few books. In the UNIDROIT Principles of International Commercial Contracts it can even be said that the Buchrecht is reduced to a single book. 2 No doubt there are advantages in being able to refer to one book, and it is true that the Principles are proving helpful to arbitrators, counsel and advisers. However their role in the practice of international commercial arbitration continues to be rather indeterminate. 3 As the categories of application anticipated in the Preamble imply, the Principles hover between being a proper law (proper law properly so-called, as John Austin might have said) and a set of rules which may be incorporated into a contract by reference. 4

However they are to be characterized, the Principles may nonetheless be useful in the context of state contracts, especially those involving direct foreign investment. These will often be submitted to arbitration under ICC auspices or otherwise. The non-state party may be reluctant to submit to local law; the state party will be equally reluctant to submit to foreign law. Hence the contract may lack a choice-of-law clause entirely, or it may refer to such vague constructs as 'general principles', fairness, 5 or even 'natural justice'. As Bonell notes, these references, which are often construed as a choice of non-national rules as the governing law, are common in 'concession agreements for the exploitation of natural resources or other kinds of economic development agreements entered into between states and foreign private enterprises'. 6

The result of this choice-of-law technique is to put the contractual relationship on a more even footing. At the same time it introduces a pronounced vagueness into the applicable law and it is here the Principles may assist. In a number of ICC arbitrations two facts - (1) that a contract lacks an explicit choice-of-law [Page58:] clause and (2) that it is made with a state or state entity - have been taken as together justifying the application of general principles of law to the contract, and the Principles have been taken as a convenient statement of their content. 7

But if state contracts are suitable for such treatment, are the Principles suitable for state contracts? The Principles themselves only refer to the state as regulator or as locus in quo, not as a party to a dispute. Yet state contracts, especially major economic development contracts, have special features. 8 They commonly concern public resources. They give rise to long-term relationships involving a variety of obligations mostly performed on the territory of the state and within the framework of its administrative system. They may involve a substantial initial capital commitment by the non-state party; they also concern the continuing public interest of the host state. Arbitration of state contract disputes in the field of economic development contracts demands developed procedural, jurisdictional and substantive approaches. How do the Principles fare in disputes involving such contracts? In an attempt to answer this question it is proposed to discuss, first, the key threshold question when the Principles should be held to be relevant in state contract arbitrations, and, secondly, how they fare when confronted with certain difficulties specific to state contracts.

II. Choice of the UNIDROIT Principles in state contract arbitration

The past 20 years have seen the enactment of more flexible conflict rules especially designed for arbitrators, rules which diverge more or less from the applicable conflict rules for courts. For instance, article 28(1) of the UNCITRAL Model Law allows disputes to be decided 'in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute'. The term 'rules of law' implies that the parties need not choose a system of national law or indeed any system at all. A number of countries have adopted this wording, including France, Germany, Italy, the Netherlands and Switzerland. 9 The Arbitration Act 1996 (UK) contains a differently worded provision to similar effect. 10 These arbitration laws would allow the parties to chose the Principles as a body of rules of law applicable to their contract, although there seem so far to have been no published awards involving contracts containing such an explicit choice. On the other hand, article 28(2) of the UNCITRAL Model Law directs that, in the absence of a choice of applicable law by the parties, the arbitral tribunal shall apply the law determined by the conflict rules which it considers applicable. Set against the use of the term 'rules of law', the latter wording implies a narrower approach that would exclude direct recourse to the Principles as the governing law.

Some national arbitration laws follow the mould of the UNCITRAL Model Law, 11 while others deviate from it in this respect to allow arbitrators to fill the gap caused by the lack of choice by applying non-systemic rules of law. 12 In the absence of party choice, ICC arbitrators are free to apply the rules of law they determine to be appropriate. 13 Within that framework, they may refer to the Principles to supplement their conclusions, or even to find that they are the 'applicable law'. [Page59:]

The leading published decision is perhaps ICC arbitration 7110. 14 It has been suggested that this award 'may be regarded as the official entrée of the Principles into international arbitration'. 15 A series of contracts between an English supplier and a Middle Eastern governmental agency were for the most part silent as to the applicable law, although a number of the contracts said that disputes arising would be referred to ICC arbitration and resolved 'according to natural justice'. The supplier asserted that 'natural justice' was an English concept and that therefore the parties had made an implied choice that their disputes would be resolved in accordance with English law. The ministry countered, arguing that 'natural justice' was an ancient idea recognized in its religious laws; moreover, in English law natural justice was an essentially procedural concept developed in administrative law which was not applicable to contractual relations as such. Finding that the parties had clearly excluded the application of the national law of either of them and that there was no basis upon which to identify the law of any particular third state as applicable, the arbitral tribunal by a majority concluded that by agreeing to international commercial arbitration, the parties intended the application of general legal rules and principles to govern the contracts. In finding that contracts were governed by and should be interpreted in accordance with the Principles, the tribunal observed that they primarily embodied those general legal rules and principles applicable to international contractual obligations and enjoying wide international consensus. 16

One of the arbitrators dissented: in his view the parties could not have contemplated reference to any set of rules as vague and uncertain as 'general principles'. 17 Moreover, reference to the Principles could not remedy the defect since they had not been conceived, let alone promulgated, at the time the contracts were concluded.

In this case, reference to the Principles derived from an implied choice of general principles of law, rather than a so-called 'negative choice of law'. 18 By contrast, ICC arbitration 7375 19 was a clear case of negative choice. It concerned a contract for supply of goods between a United States seller and a Middle Eastern buyer. The Middle Eastern party, a government agency, claimed damages with interest in connection with delayed delivery of the goods. The contract contained no choice-of-law clause. The respondent, invoking the law of Maryland as the legal system of the place where the most significant contractual obligations (i.e. the manufacture of the goods) had been performed, pleaded that the claim was out of time under the law of Maryland. The claimant invoked its own law as the proper law; it submitted that, under this law, the claim was not out of time. If the tribunal did not accept that such law was applicable, claimant subsidiarily invoked general principles of law.

Referring to the first partial award in ICC case 7110, the tribunal considered that the parties had impliedly made a negative choice of law. Although one should not too readily construe silence as a negative choice, 20 the tribunal found that the absence of a choice-of-law provision in the contract, together with the fact that one party was a ministry of state, should be interpreted as implying a mutual intent to avoid the other party's national law. Moreover, there was no basis for choosing any third national law: given the absence of any significant connection of the transaction with any third country, such a choice would only be arbitrary. To maintain that equilibrium between the parties, the tribunal applied general principles and rules applicable to international contractual obligations that qualified as rules of law and were widely accepted and agreed [Page60:] upon in the international business community, including concepts belonging to lex mercatoria and taking into account relevant trade usages and the UNIDROIT Principles, to the extent that they reflect generally accepted principles and rules.

In contrast to the concept of 'general principles of law' referred to in article 38(1)(c) of the Statute of the International Court of Justice, the tribunal considered the UNIDROIT Principles to have a concrete and workable content. 21 On the other hand, while asserting that the Principles 'contain in essence a restatement of those "principes directeurs" that have enjoyed universal acceptance and, moreover, are at the heart of those most fundamental notions which have consistently been applied in arbitral practice', 22 the tribunal admitted that they had not undergone detailed scrutiny in all their aspects and that some provisions may not reflect any international consensus. Again, the Principles were not the proper law as such but rather provided a guide to its content. 23 As a final example, in ICC case 9474, the parties had agreed that the disputes should be decided 'fairly'. The arbitral tribunal determined that it would apply 'the general standards and rules of international contracts', their content being drawn from a range of international commercial instruments including, inter alia, the UNIDROIT Principles. 24

It may be concluded that arbitral tribunals will apply the Principles where they are expressly made applicable, where they are relevant or useful to supplement and support the chosen applicable law, or in cases of negative choice. The question then is what assistance the Principles offer to the resolution of state contract disputes.

III. Special features of state contracts on which the UNIDROIT Principles are silent

It may be presumed that states have at least the same freedom to organize their commercial activities as private persons do. A state may decide that for certain activities it will create an enterprise possessing separate personality and enjoying the normal legal consequences of that form. But when the state itself, through its senior officials, is engaged in the negotiation of the contract and is required to give various consents or permissions for the transaction to proceed, the identity of the state party may be obscured. If difficulties arise, the foreign investor may be surprised to find that the host state and the signatory state enterprise stress their legal independence. In many arbitrations, a state joined as a party has objected to proceedings instituted against it because the contract containing the agreement to refer disputes to arbitration was signed by a subservient but separate legal entity. 25 States in such a position may object to jurisdiction on the ground of an alleged incapacity or the invalidity of the arbitration agreement. 26 A review of published ICSID awards reveals that in around half, the state party raises some preliminary objection to jurisdiction on grounds such as these.

In the following sections we examine two areas in which the fact that one party to the contract is a state or state entity raises special problems. The first concerns whether the consent of a state entity to refer disputes to arbitration may justify the joinder of the state itself in the proceedings. The second concerns whether a state entity can claim that legislative or executive acts of the state amount to force majeure. [Page61:]

These areas do not of course exhaust the subject and are merely illustrative. Topics not dealt with include state immunity, 27 especially issues of the enforcement of an award or judgment given against a state enterprise, 28 and the international law of state responsibility as it may impact on disputes arising from state contracts. 29

A. Identifying the state party to a contract containing an arbitration clause

Faced with considerable uncertainty as to the identity and capacity of the state contracting party, claimants have initiated proceedings against all manner of respondents including, in one set of pleadings, the government, the state, the signatory state entity and the controlling government ministry. 30

Clearly, the onus falls upon the foreign party to ascertain and confirm the identity, legal capacity and authority of the state party. The problem may be practically challenging because the categories of state organs are 'localised and conventional' 31 and are not closed. Moreover, the question may be affected by specific definitions of the state and related entities adopted for particular purposes. 32 In one unpublished ICC award, under the applicable law the party to an international contract was a separate legal entity although created and wholly controlled by its government. It was classified as a 'state enterprise' liable for its own obligations and able to sue or be sued in its own name. It was specifically provided that the state should not bear responsibility for the obligations of state enterprises, nor were those entities liable for the obligations of the state. Later, the state enterprise, on the direction of the government, assigned its interests in the contract to a government ministry, with a view to exercising greater control over the joint venture operations. The assignee ministry was likewise classified as a legal entity able to possess its own assets and to sue and be sued in its own name. At the same time, it was 'an executive and administrative state organ', created and wholly controlled by the government.

Drawing on their own legal traditions and the applicable laws of the arbitration and the contract, arbitrators might not conceive of a state ministry or other agency as anything other than a constituent subdivision of the government. 33 However, there are difficulties in transferring general constitutional ideas from one legal system to another. 34 The status and capacity of a legal entity is, in principle, determined by the personal law applicable to it. 35 The existence of an alleged agency relationship between a state and a state contracting party is determined, in the absence of express choice, in accordance with the law of the place where that relationship is said to arise, which will usually, if not invariably, be the law of the state concerned. 36 Arbitrators will refer to the applicable personal law, but in some cases that law will not give a conclusive answer and other criteria must be resorted to, including relevant principles of the arbitral law and, in some cases, general [Page62:] principles of law and international public policy. The problem is the more serious in that who is a party will be a decision relating to jurisdiction, and will be reviewable both by the courts of the seat of the arbitration and also of any state in which enforcement is sought. 37

If it is found that the state itself is also a party to the arbitration agreement, issues concerning the separate corporate personality of the state entity will be less significant. To establish state consent, claimants may rely on a wide variety of contextual material including: the context of the negotiations, heads of agreement, memoranda of understanding or letters of intent concluded, 38 and any approvals, licences or grants that a state or state authority may be called upon to execute in relation to a contract between a separate state entity and a foreign party. 39 The Principles contain a series of articles 40 concerning the application of public permissions where the law of a state requires a public permission affecting the validity of the contract or its performance, but they do not contemplate that official approval could be evidence of an intention to create contractual relations. In any event, such arguments are rarely conclusive: the fact that the state may have signed initial heads of agreement may not assist if it is not expressed to be a party to the eventual formal agreement. Approval given by state officials to aspects of a project, or indeed to the project agreement as such, may not be enough to constitute the state a party to the agreement. In the well-known Southern Pacific Properties case, an ICC tribunal attributed state participation in the project agreements to annexed words of approval signed by the minister of tourism, 41 a decision subsequently set aside by the French courts. 42

The difficulty in such cases is that the government's approval of an agreement, or similar transactions such as letters of comfort or even indemnities, may actually underline the separateness of the state from the state entity which is the party of record. It is not necessary formally to approve contracts by which one is already bound, and the existence in such contracts of common form integration clauses hardly assists the argument that the government is in truth a party. If it were a party, why did the contract not expressly say so? But there are circumstances in which a state may be bound by a contract including an arbitration clause, even if it has not signed it. This may be the case, for example, where the state is successor in title or 'universal successor' to the rights of the party to the agreement, 43 or where it is subrogated to the rights of a creditor or insured party to an arbitration agreement, 44 or where the agreement, made with the government's knowledge and approval, involved undertakings which only the government could perform. An assignee may be bound by the arbitration clause consented to by the assignor, 45 as a partner is bound by an arbitral clause entered into by the general partnership (société en nom collectif). 46 On the other hand, the wording of an agreement may preclude a finding that the state is a party to the agreement. 47[Page63:] In some cases the relief sought may not require that the state be joined, even if it is arguably bound by the agreement for some or all purposes. 48

Where consent cannot be imputed to the state in such ways, the claimant may question the separate legal personality of the state entity with which it has contracted. Legal systems are characteristically prepared to pierce the corporate veil in cases of fraud or abuse of the corporate form, and the International Court of Justice lent hesitant approval to this practice in what is still the leading case on corporate personality in international law, the Barcelona Traction case. 49 That involved a private company, but there is no reason to believe that state corporations should be exempt from such a process, where it is justified in the circumstances. 50

The legal form and nature of the respondent under the system of law that governs its status and capacity remains the first stage of analysis. That investigation must take into account the legislative or executive acts by which it was created, the objects and purposes for which it was created, and whether by those laws it has separate legal personality and the power to act autonomously. 51 The initial presumption must be to respect and recognize legal separation between the state and its entity under the relevant applicable law. That presumption was articulated by the Supreme Court of the United States in First National City Bank v. Banco Para El Comercio Exterior de Cuba:

Due respect for the actions taken by foreign sovereigns and for principles of comity between nations . . . leads us to conclude - as the courts of Great Britain have concluded in other circumstances - that government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such. 52

Accepting that starting point, the question is how to define the exceptional cases in which the separate legal personality of a state entity may be disregarded. Taking a functional approach, Böckstiegel has grouped these situations into three non-exclusive categories: 53 estoppel, based on the actual or apparent authority of the state agency; cases where the state enterprise has functional identity with the state; and those exceptional cases of disregard of the corporate form amounting to an abuse of rights. In addition, of course, a state may be bound by a contract as principal, by virtue of any applicable principles of agency. 54

In certain circumstances, representations by the state as to the performance of an agreement, especially when combined with the state's overwhelming influence and control over its nominee, may give rise to an estoppel preventing the state from [Page64:] relying on its separate legal personality. 55 In ICC case 9151, it was argued that the factual matrix in which the agreement was concluded was such as to establish that the state party and the assignee ministry contracted as organs of the government. The state party contracted the services of a foreign company as agent to attract interested foreign businesses to the proposed project. That agent undoubtedly acted on behalf of the government and with its full approval. Promotional documentation circulated by the agent represented that the state party was 'the arm of the Ministry . . . and of the . . . Government'. A letter written by the vice premier on behalf of the government confirmed that the foreign party could assume the effective conduct of the operations and would have all the rights and guarantees stipulated in the agreement without any further governmental approval or authorization. The tribunal considered that at the least the letter showed that the state party was acting with the full knowledge and consent of the government. The claimant also argued that its case was supported by the extent of government control, illustrated by the government's unilaterally substituting the state party for another. The tribunal stated that 'the nature of a ministry taken together with the provision in its statute that it is "an executive and administrative State organ"' prima facie supported the claimant. 56 Ultimately, however, the tribunal found it unnecessary, for the purposes of deciding the case before it, to decide whether the original state party or the assignee ministry contracted as an organ of the government. That issue was left to the stage of enforcement. 57

If the state entity, acting with the approval of the government, contracts to perform functions exclusively reserved to the government as such, there is a strong indication that the state entity is identified with the state itself. In such cases, functional identity may justify a court or tribunal to pierce the veil of separate personality and find that the state was itself party to the contract, at least for the purposes of the performance of those obligations which only the state can perform. State contracts commonly contain undertakings dealing with aspects of public authority that may be considered exclusively state functions; for example, taxation, rights of nationalization or expropriation, granting of licences and concessions to exploit natural resources and licences to import and export materials and products. 58 The undertaking to perform a state function, coupled with the circumstances in which the contract was entered into, including the ownership or control of the contracting party by a central organ of the state, can create in the investor a legitimate expectation that the parties intended the state to be bound as principal by the activities of the state joint venture partner. In the words of one ICC tribunal that has considered the point:

The legitimate expectation of a party can translate into intention. That is, the legitimacy of the expectation reflects the intention of the representor for the representee to have an expectation. The expectation reflects the intention of the representee. 59

In the closely related ICC cases 9058 and 9151, the claimants argued that both the respective state contracting parties and the ministry that succeeded to the contractual rights of one of them as the nominee of the government acted as arms or organs of the government. The argument was based on the terms of the joint venture agreement and on the circumstances of its conclusion. As to the contractual terms of the agreement, one article ambiguously stated: 'Interests rights and obligations of [State X] as represented by [the state party] and interests rights and obligations of the foreign party under this Agreement, shall be solely governed by the provisions of this Agreement . . .' (emphasis added). This was a splendid example of an integration clause which raised questions rather than excluding them. Other provisions apparently assumed that the state party would exercise [Page65:] powers or grant rights which were essential state prerogatives. One article provided that the state party would, upon request, 'use the power of eminent domain when necessary and possible in compelling cases'. Eminent domain is plainly a state power, even if its exercise may be delegated. Further provisions involved guarantees and undertakings of a type which normally only a government could give. These included both general and specific undertakings including granting the foreign party the right to use state infrastructure, providing visas and work permits, granting exemptions from customs duties and currency controls and granting the foreign party minimum national treatment. The terms of the agreement did not make plain whether the state party merely undertook a best endeavours obligation, or merely assumed the financial consequences of certain state powers not being exercised - but the text of the agreement did not support either interpretation, which would have been imposed ab extra on the basis that the state party had to be distinguished from the state.

The validity of the test of functional identity stands or falls on the strength of the claim of legitimate expectation. Two difficulties arise. The first is that legitimacy of the expectation depends in turn on the acceptance of a core set of 'state functions', which are difficult to discern given the breadth of modern state activity. Secondly, the legitimacy of any expectation is of course controlled by the surrounding circumstances in which the agreement was concluded.

For the arbitral tribunals in the ICC cases 9151 and 9058 the terms of the agreement gave 'powerful support' to the theory that the state party or the ministry contracted as an organ of the government. But for the tribunal in the former case, that theory was apparently contradicted by other articles of the agreement in which the distinction between the contracting party and the state itself was plainly apparent. The tribunal held that the government was substantively bound by the agreement to the extent that it imposed obligations which only the government could fulfil, but not otherwise.

This result was achieved by interpretation, but, in addition, tribunals and courts may pierce the corporate veil to hold that the state was bound to an arbitration clause where 'there is such unity of interest and ownership that separate personalities of the corporations no longer exist, and that failure to disregard the corporate form would result in fraud or injustice'. 60 Neither in international nor in most systems of national law may a real party in interest abuse the corporate form in order to evade its obligations. But tribunals will require very strong evidence before making such a finding. 61

In the Westland Helicopters award, 62 which was subsequently annulled, 63 the tribunal found that it had jurisdiction over the founding states that sought in its view to evade jurisdiction and responsibility. The decision was expressed to be on the ground that such states were liable for the organization's obligations, on the basis of an alleged general rule that those who engage in transactions of an economic nature are deemed liable for the obligations which flow therefrom. 64 This rule was said to derive from general principles of good faith and by analogy to domestic legal forms such as partnership. But as so often with analogies, the problem is to select the right one: the analogy of corporations might have suggested the opposite conclusion, and the Institute of International Law concluded in 1989 that there is no rule that one or more states cannot use corporate forms or that they necessarily act through the vehicle of entities such as partnerships. Article 7 of that Resolution provided:

Agreement by a state enterprise to arbitrate does not in itself imply consent by the State to be a party to the arbitration. 65[Page66:]

Some authors perceive 'a trend by arbitrators to extend their jurisdiction to parties not formally privy to the contract'. 66 Certainly, arbitrators retain considerable flexibility in framing their awards and it is not easy to reconcile the various decisions by reference to any consistent principle. But it may be that there is no need to do so. The cases turn on different agreements, different state enterprises, different facts and different rules of applicable law. At best they may show a willingness by tribunals to ensure that the corporate form is not used by governments to evade the liability they have assumed in respect of transactions.

What assistance is to be gained from the UNIDROIT Principles in respect of these issues? The answer is, very little. The Principles deal with a number of issues relating to the formation of contracts. For instance, article 2.15 ('Negotiations in bad faith') allocates liability for pre-contractual negotiations conducted in bad faith. A state that awards a contract for a business project to foreign parties on a tender basis, or negotiates with more than one party, will not be liable if no agreement is reached, but will be liable if it is shown to have conducted a tender in bad faith. 67 Likewise, if it conducts secret negotiations with third parties, this may be a violation of an implied principle of good faith in an already concluded contract. 68 However, the Principles do not specifically address questions of the formation of state contracts. For example, they do not deal with invalidity for lack of capacity or authority to contract. 69 In these and other respects, reference to the Principles is no substitute for traditional conflict techniques.

Similar conclusions apply as to the question of mistake. This is the subject of article 3.5, which provides that:

(1) A party may only avoid the contract for mistake if, when the contract was concluded, the mistake was of such importance that a reasonable person in the same situation as the party in error would only have concluded the contract on materially different terms or would not have concluded it at all if the true state of affairs had been known, and

(a) the other party made the same mistake, or caused the mistake, or knew or ought to have known of the mistake and it was contrary to reasonable commercial standards of fair dealing to leave the mistaken party in error; or

(b) the other party had not at the time of avoidance acted in reliance on the contract.

(2) However, a party may not avoid the contract if

(a) it was grossly negligent in committing the mistake; or

(b) the mistake relates to a matter in regard to which the risk of mistake was assumed or, having regard to the circumstances, should be borne by the mistaken party.

Article 3.5 may provide some protection to a foreign party that contracts with a state corporation believing it to be an agent or organ of the state. If the foreign party enters into a contract on that basis and a dispute subsequently arises, the foreign party might seek to avoid the contract on the grounds of mistake. But in such cases article 3.5 does not go so far as to provide any recourse against the state itself. It also raises difficult questions of proof in establishing that the state party 'caused the mistake, or knew or ought to have known of the mistake', that 'it was contrary to reasonable commercial standards of fair dealing', and that the mistake of identity does not relate to a matter in regard to which the foreign party should bear the risk. 70 Moreover, article 3.5 does not elaborate on the very meaning of mistake, which is likely to be the key issue.

There is evidently a distinction to be drawn between a mistake as to the identity of the other contracting party and the attributes of that party. 71 In theory, it may be possible that the foreign party contracts with an entity believing it to be contracting [Page67:] with the state itself, in which case the contract may be avoided. 72 But it may be more likely that the mistake, if there is one, concerns the attributes of the entity. Anyway, it will be difficult to show that the foreign party should not have made proper inquiries, and the more important the issues at stake the more this consideration may impress itself. In the ICSID arbitration Cable Television of Nevis Ltd. and Cable Television of Nevis Holdings Ltd. v. Federation of St. Kitts and Nevis, 73 the tribunal found that the party to the agreement was the Government of Nevis (which became the Nevis Island Administration) in its own right and not on behalf of the federation. The Government of Nevis was not a designated subdivision for the purposes of establishing jurisdiction ratione personae under the ICSID Convention. Nor would the tribunal agree to substitute the federation for the Government of Nevis. On its face, the agreement recognized the Government of Nevis and the Federation separately, both entities being referred to expressly in separate places in the agreement. Many additional factors in the agreements pointed to this conclusion: the definition clause defined the government party as the Government of Nevis; the signatory was the Premier of Nevis; there was provision for the continuation of the agreement in the event that Nevis became an independent state; and explicit reference was made to the federation as distinct from the government of Nevis. It was evident the Cable's intention and understanding were that it was at all times dealing with the Government of Nevis. All its subsequent conduct, including legal correspondence, was with that government. The claimants were not mistaken as to the identity of the party they contracted with, but (if they were mistaken at all) as to the attributes the Government possessed under the federal constitution. Article 3.5 would not provide relief to a party in such circumstances. In the words of the tribunal:

One cannot overlook the fact that Clause 16 of the Agreement, which is the only foundation for the institution of these Arbitral Proceedings, does not appear to have been given due consideration by the parties at the time the Agreement was negotiated and signed . . . Clause 16, to put it mildly, was an anachronism since it had no legal effect at the time of the Agreement . . . 74

It may be concluded that in such circumstances the UNIDROIT Principles will only help the non-state party which helps itself, and that in the absence of clear misrepresentations as to the identity or status of the contracting state party, the burden of inquiry and the consequential risk is on the former.

B. Termination and variation of contracts in the purported exercise of public power

All legal systems to varying degrees provide for the discharge or suspension of a party's obligations when they become impossible to perform. This section considers whether supervening impossibility caused by the state may be relied upon as force majeure by a separate state entity and on how the solutions set out in the Principles fare in this regard.

The problem is, of course, that in some circumstances contracts between a state entity and a foreign national may be subjected to concerted manipulation and interference by the state. Such interference may come in a great many forms. In extreme cases, the state party may be prohibited by its state from fulfilling its contractual obligations. In ICC case 4600, a French company owned by the French government was expressly prohibited, by confidential ministerial direction, from performing its contractual obligations. Corporations might be prohibited from trading with the enemy in time of war, or by economic sanctions. 75 The [Page68:] underlying tension revealed by a brief survey of state contract arbitrations is the clash of public and private interests: the contracting state's need to govern and regulate in the national interest and the other party's desire for commercial certainty.

Some of the older cases of force majeure in contracts involving state entities concerned governmental decrees restricting the import or export of goods, material or currency in times of national shortage. 76 In the decades following World War II, many states attempted to redefine the fiscal and economic bargain negotiated with a foreign investor, once a project had achieved commercial success, so as better to realize the value of their natural resources. In 1973, the Organization of the Petroleum Exporting Countries (OPEC) passed a resolution on the renegotiation of agreements with oil companies. 77 In 1974, the OPEC states agreed to a new rate of return which they sought to impose on their agreements. 78 In the 1980s, other states (e.g. Azerbaijan) sought to revise established arrangements for the development of oil and gas fields in the Caspian Sea with a view towards increasing their share of profits. 79 The observation has been made that this type of conduct is also present in Western legal systems; for example, the Petroleum and Submarine Pipelines Act 1975 (UK) altered the contractual production licence regime for foreign investors, including imposing new obligations and restrictions on licence holders for which they were not compensated. 80

In more recent cases, state regulation is commonly motivated by environmental, health and safety concerns. In the Southern Pacific Properties (Middle East) ICSID arbitration, one justification asserted by the government of Egypt was that cancellation of the tourism project had been required both under Egyptian and international law, especially the 1972 UNESCO Convention for the Protection of the World Cultural and Natural Heritage. 81 In a number of recent NAFTA chapter 11 arbitrations, foreign investors have brought claims against the state alleging that environmental measures breach their rights under the North American Free Trade Agreement. In Ethyl Corporation v. Canada, Ethyl alleged that Canadian legislation banning the inter-state transport of the fuel additive MMT violated chapter 11 provisions on national treatment, performance requirements and expropriation. 82 In Methanex Corporation v. United States, Methanex alleged that the Californian decision to ban the gasoline additive MTBE amounted to an expropriation of their rights and a denial of fair and equitable treatment. 83 The Metalclad arbitration84 involved an alleged breach of the NAFTA: in a manner which was found to be tantamount to expropriation, various permissions to operate a landfill in an important environmental ecosystem were denied a US corporation on the ground that it had in place inadequate mechanisms to respond to environmental emergencies. Such disputes reveal a tension between the desire for regulation of environmental, health and safety matters and the protection of investments apparently made in good faith. [Page69:]

Other international concerns may lead the state to act in a manner that interferes with a contract with a foreign investor. The Wintershall A.G. v. Government of Qatar case is a further example of a subsequent alteration of investment terms and conditions by a state. 85 Here, Qatar prevented the foreign investors from enjoying the full scope of their contractual rights in an exploration and production sharing agreement to which they were party with a Qatari state-owned corporation, by denying them the right to drill in an area which was vulnerable to a boundary dispute with Bahrain.

In such circumstances it has been common for the state contracting party to seek to rely on the legislative or executive acts of its government as an excuse for non-performance, for example by invoking a force majeure clause in the contract. 86 Of course, the term force majeure has different meanings in different legal systems: 87 it will be used here to denote a contractual attempt to make express provisions either for specific obstacles to performance, or for such obstacles in general, so as to prevent application of the doctrine of frustration. 88 These clauses apply when contractual performance becomes illegal, impossible, or radically different from the contractually stipulated performance. They typically entitle one or both of the parties to be discharged, or at least temporarily excused, in whole or in part, from performance of the contract, and may provide for the financial consequences flowing therefrom. If the contract terms allocate strict areas of responsibility for undertakings, these terms will prevail.

Generally, the changes should be extraordinary, and have caused an uncontemplated extraordinary shift of the balance of obligations, making further performance objectively unacceptable. In addition, the change of circumstances relied upon for a plea of force majeure should not have been foreseeable, nor have actually been foreseen by the party seeking to rely on it. 89 Of course, the alleged impossibility or frustrating situation must also amount to force majeure upon proper construction of the contract terms and the proper law of the contract. 90 The state entity must show that the governmental act involved an event of force majeure within the terms of the contract in question and that there exists an appropriate causal link with the impossibility of performance.

Whether force majeure arises is complicated when the party seeking to excuse its non-performance is a state entity having separate legal personality under the law applicable to it. By contrast, the problem does not arise where the state entity is identified with the state as an organ, arm or alter ego, as it is established that the change should not be due to the fault of the obligated party. 91 If the state entity is a separate legal person the question arises as to whether a state entity can rely on its separate personality to plead that an act of state constitutes force majeure, thereby excusing the state entity from its contractual obligations. The separation of legal personality under the state party's applicable law is generally accepted and, therefore, so will be its plea of force majeure. By contrast, if the state acts can be imputed to the state enterprise, reference to piercing the veil is superfluous as the state entity must be taken to have itself caused the relevant acts. For instance, if it can be shown that a state enterprise has used its influence in order to obtain a state order, or could have prevented without difficulty a state order which interferes with a contract, the issue of piercing the corporate veil does not arise. In such cases, according to general principles, the enterprise is liable for the consequences of the order it caused.

Of course, governmental orders and acts of state may amount to force majeure. Indeed, in private contracts they are standard examples of an event beyond the control of the contracting parties which may render performance of the contract [Page70:] impossible. The position when one of the parties is a state entity is however a distinct one, and not all executive, legislative or judicial acts should be recognized as force majeure excusing a state party with separate legal personality from performance. If all acts of state interference were accepted as such, the state could then always provide a supervening act causing force majeure if the fulfilment of the contract was no longer considered in the state's interests. 92 Thus, in circumstances which are not always clearly explained in the awards, arbitrators sometimes decline to apply even mandatory laws of the host state.

Whether mandatory laws of the state that purport to be applicable irrespective of any law or rules of law chosen by the parties or determined by the arbitral tribunal are applicable is a difficult question calling for careful analysis. 93 The question may have to be determined on the basis of applicable laws other than the legal system of the state itself, and in the specific circumstances of international business relations. 94 The mandatory rules of the proper law of the contract will be relevant, and possibly also those of the place of arbitration. Reference may also be made to considerations of international public policy or ordre public international, 95 although strictly speaking international law is only relevant where it is itself the applicable law or is incorporated in it. 96 Given their 'natural comparative orientation', 97 international arbitrators very often apply a cumulative approach, referring to more than one conflict-of-laws rule and justifying their choice-of-law conclusion with reference to all relevant sources, without indicating a preference for one over the other. They will often supplement conclusions drawn from a particular applicable law by reference to general principles of private international law or international public policy. 98

In the final analysis, solutions must conform with the lex arbitri. 99 Irrespective of the conclusion under the personal law of the state entity which is a party to the contract, the issue is to be characterized as one concerning liability, not status. At the same time, there remains the question of how far arbitrators will allow the legal separateness of entities under their applicable personal law to be relied on. An instructive example is an ad hoc award rendered in Switzerland in 1983 involving a Polish state trading company and a German seller, where the tribunal concluded that:

. . . Polish law applies to the issue whether the defendant is a legal entity as well as to the question of when a Polish statute enters into force in Poland. Once these preliminary questions have been decided, their legal relevance is to be determined in accordance with Swiss law. Accordingly, Swiss law decides the impact of the decision on the legal personality of defendant on the issue of force majeure. Above all Swiss law applies - in spite of the application of Polish law to the legal personality - to the issue in how far legal separation of legal entities with respect to force majeure may be claimed and to the question under which circumstances such claim is not made in good faith and therefore irrelevant. Also the question as to what extent acts of persons interfering with the business of the defendant - even though not formally organs of the defendant - are to be imputed to the defendant is to be decided in accordance with Swiss law, as also this question depends on the interpretation of the contract and on the question of abuse of rights.

. . .

In order not to allow the State the opportunity of manipulating the choice of the legal form, further cases in which acts may be imputed on the basis of piercing the veil should be distinguished along specific criteria. It is by no means acceptable that the State enters into obligations through a State enterprise which is subject to its instructions and then could avoid its obligations by means of an act of government directed against the contract, with the consequences that the State enterprise claims force majeure and is excused of its obligations. 100[Page71:]

The first point to make is that courts and arbitrators should be slow to disapply any applicable mandatory law, including one properly characterized as concerning the capacity or status of a state entity party to a contract. Thus, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards provides that recognition or enforcement may be refused if the parties to the arbitration agreement 'were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it . . .' 101 An aspect of the task of the arbitrator may be to render an effective award capable of enforcement: article 35 of the 1998 ICC Rules of Arbitration states that arbitrators 'shall make every effort to make sure that the Award is enforceable at law'. In that same vein, Mayer warns that:

arbitrators should pay heed to the future of their award. They should consider that if they do not apply a mandatory rule of law, the award will in all likelihood be refused enforcement in the country which promulgated that rule . . .

Although arbitrators are neither guardians of the public order nor invested by the State with mission of applying its mandatory rules, they ought nevertheless have an incentive to do so out of a sense of duty to the survival of international arbitration as an institution. 102

On the other hand, and despite these cautions, where the issue arises it may be necessary to characterize the law in question and, in doing so, considerations of motive and objective cannot be disregarded. 103 As Böckstiegel argues, 104force majeure should be presumed not to exist where the state act is an individual one which affects a specific contract or specific contracts. Where the state act is of a general character and is based on general considerations which would affect private enterprises in the same manner as a state enterprise, the plea of force majeure may be available.

Thus, for instance, in an unpublished ICC arbitration between Western European companies and two Iranian state agencies, 105 the tribunal declared that for a plea of force majeure to be accepted the act of state must be a political decision involving the exercise of national sovereignty; it must not have been taken to favour the personal interests of the state or contracting party; and it must have been such that its effects would have been the same for private enterprises.

Many of the older cases on the application of force majeure to a contract involving a state entity concerned issues of the relations between communist states and state-controlled monopoly trading corporations. Separate legal personality was upheld in one of the first arbitral decisions dealing with this subject: the 1958 award of the Moscow Arbitration Commission in Jordan Investments Ltd v. Sojuzniefteeksport. 106 The tribunal accepted that war events in Israel motivated a Russian general export prohibition to Israel and so justified a plea of force majeure for the respondent, a Russian foreign trade organization which failed to meet its obligations to deliver mineral oil to an Israeli company. 107 Similarly, in the Rolimpex case in the English House of Lords, 108 the defendant, a Polish foreign trade enterprise, invoked force majeure when the Polish authorities refused to grant sugar export licences after a very bad harvest in Poland. It was held that the ban made it impossible for Rolimpex to fulfil its contractual obligations to Czarnikow, even though they could have been fulfilled by sourcing sugar from other markets, albeit at higher prices. 109 In case of emergency, a state may well prohibit the export of scarce commodities in order to ensure their availability on the home market.

In that case the House of Lords was aware of the possibility that a government might, under cover of some general prohibition, act to extricate a state entity from [Page72:] its contractual liability. But this was not such a case. 110 Essential to that conclusion was evidence of controversies between Rolimpex and the Polish government: Rolimpex had tried to fulfil its obligations but was prevented from doing so by the state. In effect, evidence of the actual intention of the state entity party was tendered and admitted to override an inference which might otherwise have been unfavourable to the state as such.

By contrast, if the claimant can show that the particular interest of the state in the affected state entity, or some purely economic or financial interest, motivated the interference, reliance on force majeure is excluded. So, in a 1983 interim award concerning a dispute between a German seller and a Polish state purchaser, the need to relieve the Polish national financial burden which motivated the interruption of the industrial projects at issue did not preclude the tribunal from denying the state entity's plea of force majeure. The state character of the enterprise concerned was a decisive factor: the government would have had no reason to prevent private enterprises, acting on their own account, from completing the projects. 111

In the award in ICC case 4600, a French company was acquired by a French state entity shortly after signing an international contract with an Asian developing state. The company was forbidden by confidential ministerial instructions to perform its contract and also to disclose the existence of those instructions. The company could not rely on the force majeure clause in the contract, having failed to prove the existence, contents and legality of the prohibition to perform. The domination exercised over the company by the French government also precluded the plea. Likewise, in the Air France case, 112 it was held that Air France could not rely on force majeure when the state had sought to prevent it from carrying out its obligations without any objective and independent basis. Differentiating between executive and legislative acts, Böckstiegel 113 proposes that for executive acts there should be a presumption that the government would not act to the detriment of its own legal entity, and correspondingly that executive acts are to be imputed to the state entity regardless of its separate legal personality. The burden of proof shifts back again from the state party to the foreign party, if prima facie or on the basis of evidence submitted by the state the measure is one of a general nature, executed for other reasons. The foreign party may rebut this presumption by proving that the measure did not have 'general' consequences in similar cases or that in the particular case it could not have been the reason for the executive act. As for legislative acts, no force majeure should be available in respect of specific targeted laws as distinct from laws that are prima facie of general application. To rebut this presumption the foreign party would have to show that the particular interest that the state has in its interposed legal entity played a significant role in the decision to enact the legislation.

Clearly, the burden of proof in such cases may be difficult to discharge. Arbitrators and courts may be loath to order the production of high-level documents, or even to examine evidence actually tendered of a state's motive in interfering with a state contract. 114 But where specific interference is cloaked in generality, such evidence will be essential if the foreign party is going to uphold the contract. 115 As one tribunal noted:

Only in rare cases the private party will be able to offer conclusive proof that a certain executive or legislative act of the State was issued because of the State's interest in its legal entity. As also is the case in other fields of business law the difficulty of proof should be overcome by dividing the burden of proof in order to obtain foreseeable risks as is required in business relations. 116[Page73:]

How do the Principles approach the problem? The starting point is that where applicable, mandatory rules of the state will prevail over the Principles where they are chosen by the parties to govern their contract or are incorporated as terms of the contract. Bonell admits that 'given their particular nature the Principles themselves will as a rule be replaced by such external mandatory considerations'. 117 Article 1.4 is to that effect:

Nothing in these Principles shall restrict the application of mandatory rules, whether of national, international or supranational origin, which are applicable in accordance with the relevant rules of private international law.

Thus, the application of the Principles, whether these are incorporated by reference or applied by analogy, may be constrained by mandatory rules of the applicable law. In other words, the Principles can be applied only to the extent that they do not affect rules of the applicable law from which no derogation is permitted. 118 Even where the Principles are applied as the law governing the contract, they cannot prejudice the application of those mandatory rules which claim application irrespective of which law is applicable (lois d'application nécessaire). The Principles say nothing on the applicability of foreign mandatory laws and, again, they cannot replace the careful use of general conflict techniques.

General principles of good faith and fair dealing inform article 7.1.7 ('force majeure') 119 which reads in full:

(1) Non-performance by a party is excused if that party proves that the non-performance was due to an impediment beyond its control and that it could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences.

(2) When the impediment is only temporary, the excuse shall have effect for such period as is reasonable having regard to the effect of the impediment on the performance of the contract.

(3) The party who fails to perform must give notice to the other party of the impediment and its effect on its ability to perform. If the notice is not received by the other party within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, it is liable for damages resulting from such non-receipt.

(4) Nothing in this article prevents a party from exercising a right to terminate the contract or to withhold performance or request interest on money due. 120

A party which has not received performance retains the right to terminate the contract if the non-performance is fundamental, even if the non-performing party is excused from liability in damages. 121 Temporary impossibility of performance may only excuse non-performance for a limited period; performance must be restored as soon as it becomes possible again. 122 International commercial contracts often contain much more precise and elaborate provisions on force majeure. The parties may chose to adapt the content of this article so as to take account of the particular features of the specific transaction. 123

In discussing force majeure, the commentary to the Principles contemplates state interference amounting to force majeure for a contracting party which is subject to the laws of that state. 124 But the Principles do not refer to the possible unity of interest between a state and a state contracting party. Similarly, in addressing requirements to obtain state permission and the consequences flowing from lack of permission, 125 the Principles do not take account of the possible identity of state contracting parties and the state itself. Thus they contribute little to resolving the special problems posed by the separate legal personality of state entities. [Page74:]

If a state's supervening act does not give rise to force majeure, non-performance is 'unexcused non-performance', to which specified remedies attach. 126 The state party will not be able to rely on the foreign party's non-performance if that default was caused by its own act, omission, or other event for which it bears the risk. If the foreign party is unable to perform, either wholly or in part, because the state party has done something which makes performance in whole or in part impossible, the foreign party's conduct does not become excused non-performance but loses the quality of non-performance altogether. 127

As far as remedies are concerned, in respect of non-performance on non-monetary obligations, article 7.2.2 ('Performance of non-monetary obligation') provides:

Where a party who owes an obligation other than one to pay money does not perform, the other party may require performance, unless:

(a) performance is impossible in law or in fact;

(b) performance or, where relevant, enforcement is unreasonably burdensome or expensive;

(c) the party entitled to performance may reasonably obtain performance from another source;

(d) performance is of an exclusively personal character; or

(e) the party entitled to performance does not require performance within a reasonable time after it has, or ought to have, become aware of the non-performance.

Article 7.2.2 is founded on the belief that a party to a contract should be entitled to require actual performance not only of monetary but also of non-monetary obligations: in other words, whatever the ultimate remedial situation may be, as a matter of law a contractual obligation does not give an option to perform or pay damages. That idea is particularly important with respect to state contracts, especially those of a long-term character. In a state contract the specific obligations can often be performed only by the state contracting party itself. While specific performance is less controversial in civil law countries, common law systems allow enforcement of non-monetary obligations only in special circumstances. Where the Principles apply, specific performance is not a discretionary remedy, that is, an arbitrator must order performance unless one of the exceptions laid out in article 7.2.2 applies. 128

The exceptions raise several interrelated problems. In the first instance, whether performance is impossible in law itself raises potential issues of legal appreciation. Secondly, where the subject matter of a state contract involves, for instance, a licence to extract natural resources, measures of enforcement may interfere with the state's regulatory and policy freedom. Whether or when, as a matter of international law, an order in the nature of specific performance or restitutio in integrum may be made against a state, in the interest of a private party, is an unresolved question: 129 the principle of permanent sovereignty over natural resources, taken literally, might suggest the answer, never.

The Principles arguably favour claimants in two further respects. In the first case, if the lex arbitri allows, article 7.2.4 ('Judicial penalty') permits an arbitral tribunal 130 to order the party in breach to pay a penalty in addition to an order for specific performance. This rule, that finds no counterpart in the common law, regards payment of the penalty as compensating the aggrieved party for those disadvantages which cannot be taken into account under the ordinary rules for the recovery of damages. Secondly, where the claimant has required performance of a non-monetary obligation, or where a tribunal has issued a partial award ordering [Page75:] performance but that order is not complied with or cannot be enforced, the claimant may, if within time, invoke another remedy. 131 This may be a useful option for the claimant. For instance, where the state party is not in a position to meet its obligations for non-performance, or monetary compensation is not the preferred remedy, the claimant may wish to keep the contract on a binding footing for a period of time, to assist as a bargaining chip in achieving a negotiated settlement.

In these respects, the Principles arguably extend the range of remedies available to claimants in state contract disputes. On the other hand, the failure of the Principles specifically to address such cases raises doubts as to the availability of enhanced remedies such as judicial penalties.

IV. Conclusion

A.V. Dicey believed that the individual citizen and the government ought to be equal before the law and treated alike in like circumstances. Modern scholars who adopt this approach stress the similarities and analogies between governmental and private activity. According to this view, what matters most is the nature of the activity and the issue in question, not the identity of the state body concerned. 132 Thus, it is said, 'the state party may neither be privileged nor discriminated against as compared to private parties'. 133

For others, notably those influenced by the French concept of the contrat administratif, the governmental, public element of a state contract cannot be ignored. 134 Due account must be taken of the fact that a state or state entity is one of the parties and that the public interest of that state is more often than not engaged to one degree or another. Although the contrat administratif is not recognized as such in many legal systems, 135 its supporters have been influential in shaping the theory and practice of mixed international commercial arbitration.

Clearly, there is as yet no consensus on these matters in international law. Faced with such uncertainties, legal advisers must draft agreements with state parties with great care and creativity. Despite their best efforts, disputes undoubtedly arise and so arbitrators are sometimes required to draw upon the depths of their legal resources to penetrate some very difficult problems that state contracts present. Yet the Principles are silent in a number of these crucial areas. Whether this is an advantage or a disadvantage may be open to question. Just as the emergence of the 'negative choice' choice-of-law solution arose out of silence and has given arbitrators a certain flexibility in the legal resources from which they can find solutions, silence in the Principles may give arbitrators the flexibility they need to deal with abuses of public power in cases where the state party attempts unjustifiably to frustrate or deny a contract.

1
This article is an extended and updated version of the presentation made by James Crawford at the ICC/UNIDROIT 2001 seminar.

2
See UNIDROIT, Principles of International Commercial Contracts (Rome: UNIDROIT, 1994) [hereafter UNIDROIT Principles, or Principles].

3
See e.g. U. Drobnig, 'The UNIDROIT Principles in the Conflict of Laws' (1998) III Unif. L. Rev. 385 at 386; M.J. Bonell, An International Restatement of Contract Law: The UNIDROIT Principles of International Commercial Contracts (New York: Transnational Juris Publications, 1994) at 138.

4
UNIDROIT Principles, Preamble, para. 2 ('They shall be applied when the parties have agreed that their contract be governed by them.'); para. 3 ('They may be applied when the parties have agreed that their contracts be governed by "general principles of law", the "lex mercatoria" or the like.'); cf. para. 4 ('They may provide a solution to an issue raised when it proves impossible to establish the relevant rule of applicable law.').

5
In the recent ICC case 9474 between a state bank and a foreign mint, the arbitration clause provided that the tribunal should decide disputes 'fairly', (2001) 12:2 ICC ICArb. Bull. 60.

6
Bonell, supra note 3 at 130. But Bonell does not discuss the specific problem of state contract arbitration.

7
See e.g. the awards in ICC cases 7110 and 7375. See also final award in ICC case 9029, (1999) 10:2 ICC ICArb. Bull. 88. But see the final award in ICC case 9419 ((1999) 10:2 ICC ICArb. Bull. 104), where the sole arbitrator stated: '. . . the undersigned arbitrator sides with the other school of thought that does not believe in the existence of lex mercatoria and which firmly believes that the search for a law that can be applied to a contractual relationship must necessarily lead to the identification of a national law. This is all the more so since, in accordance with the provisions of article 13(3) of the ICC Rules . . . the arbitrator . . . is required to apply the law that is applicable on the basis of the rules of conflict that he considers to be appropriate.'

8
The literature on state contracts routinely excludes state sale of goods contracts. They will not be further considered here.

9
France: Code of Civil Procedure, art. 1496 (amended 1991); Germany: Code of Civil Procedure § 1051(1), (2) (amended 1997); Italy: Code of Civil Procedure, art. 834(1) (amended 1994); Netherlands: Dutch Code of Civil Procedure, art. 1054(2) (amended 1986); Switzerland: Private International Law Act 1987, art. 187(1). For further details see Bonell, supra note 3 at 127.

10
Arbitration Act 1996 (UK), s. 46(1)(b): 'The arbitral tribunal shall decide the dispute - . . . (b) if the parties so agree, in accordance with such other considerations as are agreed by them or determined by the tribunal.'

11
Germany: Code of Civil Procedure § 1051(1), (2) (amended 1997); Italy: Code of Civil Procedure, art. 834(2) (amended 1994); UK: Arbitration Act 1996, s. 46(3). See Bonell, supra note 3 at 129.

12
France: Code of Civil Procedure, art. 1496 (amended 1991); Netherlands: Dutch Code of Civil Procedure, art. 1054(2) (amended 1986).

13
1998 ICC Rules of Arbitration, art. 17(1); see also art. 17(2) which directs a tribunal to take account in all cases of relevant trade usages. cf. 1988 ICC Rules of Arbitration, art. 13(3) of which set out a two-step approach: first, the tribunal determined the applicable conflict-of-laws rules, which secondly were then used to identify the applicable national law, although in practice art. 13(3) did not exclude direct choice of the appropriate substantive law (the so-called voie directe). See e.g. partial award in ICC case 7110, (1999) 10:2 ICC ICArb. Bull. 39 at 50-51.

14
Partial awards in ICC case 7110, The Hague, June 1995, April 1998, February 1999, (1999) 10:2 ICC ICArb. Bull. 39.

15
K. Boele-Woelki, 'Principles and Private International Law: The Unidroit Principles of International Commercial Contracts and the Principles of European Contract Law: How to Apply Them to International Contracts' (1996) I Unif. L. Rev. 652 at 661. See also e.g. M.J. Bonell, 'Unidroit Principles: A Significant Recognition by a United States District Court' (1999) IV Unif. L. Rev. 651 at 653; K.P. Berger, 'International Arbitral Practice and the Unidroit Principles of International Commercial Contracts' (1998) 46 Am. J. Comp. L. 129 at 143.

16
(1999) 10:2 ICC ICArb. Bull. 39 at 49.

17
Ibid. at 52.

18
cf. Principles of European Contract Law (The Hague: Kluwer Law International, 1999; also at www.ufsia.ac.be/~estorme/PECL2en.html), article 1.101(3)(b) of which allows application of general principles 'when the parties have not chosen any system or rules of law to govern their contract'. Some blurring of the two approaches can be seen in the literature.

19
Partial award of May 1996, (1997) II Unif. L. Rev. 598; Bonell, supra note 15 at 656-57; Berger, supra note 15 at 143; for summary in French see Gaz. Pal. (29 April-3 May 2001) 38.

20
P. Lalive and K.-P. Berger, 'The Lex Mercatoria Doctrine and the UNIDROIT Principles of International Commercial Contracts' (1997) 28 Law & Pol'y Int'l Bus. 943 at 986.

21
As so often in international commercial arbitration, the reference to general principles of law in the sense of article 38(1)(c) is beside the point. Although that sub-paragraph has had a certain catalytic effect even outside the field of public international law, within that field it is not the function of general principles to constitute or substitute for a set of actual legal rules; rather they underpin and supplement rules derived from treaty and custom. As to the identification of general principles of law, this is neither more nor less indeterminate than the culling process carried out by international commercial arbitral tribunals.

22
This passage was cited with approval in the final award in ICC case 9797, (2001) 12:2 ICC ICArb. Bull. 88 at 89.

23
See also final award of 5 May 1997 in ICC case 7365 summarized by M.J. Bonell in (1999) IV Unif. L. Rev. at 796 and 1014. The tribunal held with regard to two contracts between the Iranian Air Force and a US company: '[s]ince both Parties eventually agreed to the complementary and supplementary application of general principles of international law and trade usages, and based on article 13(5) of the ICC Rules, the Tribunal shall, to the extent necessary, take into account such principles and usages as well. As to the contents of such rules, the Tribunal shall be guided by the Principles of International Commercial Contracts . . .' And see the enforcement proceedings in Ministry of Defense of Iran v. Cubic Defense Systems, 29 F. Supp., Second Series (S.D.Cal. 1998) 1168, reprinted in (1999) XXIV Y.B. Comm. Arb. 875.

24
(2001) 12:2 ICC ICArb. Bull. 60 at 60-61.

25
Well known examples include Texaco Overseas Petroleum Company and California Asiatic Oil Company v. Government of Libya, (1979) 53 ILR 389; Southern Pacific Properties (Middle East) Limited [SPP (ME)] v. Arab Republic of Egypt, award in ICC case 3493 of 11 March 1983, (1983) 22 I.L.M. 752, (1984) IX Y.B. Comm. Arb. 111; ICSID case ARB/84/3, 3 ICSID Reports 101 (ICSID tribunal decision on jurisdiction), 3 ICSID Reports 131 (second decision on jurisdiction including dissenting opinion), 3 ICSID Reports 189 (award and dissenting opinion).

26
E. Lauterpacht, Aspects of the Administration of International Justice (Cambridge: Grotius, 1991) at 50-51 ('Basically, the position is that if a respondent State sees a possible escape from the jurisdiction, it will use it.')

27
State immunity has nothing to do with the choice of law or arbitrability: it may operate as a bar to jurisdiction or prevent enforcement measures, but does not concern the legal relationship between the parties as defined in the contract. See e.g. The El Condado No. 2, 1939 S.C. 413 at 430; preliminary award in ICC case 2321, (1976) I Y.B. Comm. Arb. 133 at 134. See also E. Paasivirta, Participation of States in International Contracts and Arbitral Settlement of Disputes (Helsinki: Finnish Lawyers' Publishing Co., 1990) at 49.

28
See e.g. A. van Blankenstein, 'Enforcement of an Arbitral Award Against a State: With Whom Are You Dealing?' in S. Muller & W. Mijs, eds., The Flame Rekindled: New Hopes for International Arbitration (London: Martinus Nijhoff, 1994) 154; Empresa Exportadora de Azucar v. Industria Azucera Nacional S.A. (The 'Playa Larga' and 'Marble Islands') [1983] 2 Lloyd's Rep. 171.

29
For the ILC's final draft Articles on State Responsibility see Report of the International Law Commission, Fiftythird Session (23 April1 June and 2 July10 August 2001), A/56/10, ch. IV; J. Crawford, The ILC's Articles on State Responsibility: Introduction, Text and Commentaries (Cambridge: Cambridge University Press, 2002).

30
Unpublished partial award of 8 June 1999 in ICC case 9151.

31
I. Brownlie, System of the Law of Nations: State Responsibility (Part One) (Oxford: Clarendon Press, 1983) at 136.

32
e.g. the Claims Settlement Declaration of 19 January 1981, (1983) 1 Iran-US C.T.R. 9, art. VII(3): '"Iran" means the Government of Iran, any political subdivisions of Iran, and any agency, instrumentality, or entity controlled by the Government of Iran or any political subdivision thereof.' This definition was expanded on e.g. in Economy Forms Corporation v. Government of the Islamic Republic of Iran, The Ministry of Energy, Dam and Water Works Co., Sherkat Sakatemani Mani Sahami Kass and Bank Mellat (formerly Bank of Tehran), Award No. 55-165-1, (1983) 3 Iran-US C.T.R. 42; cf. the dissenting opinion of Judge Kashani (1984) 5 IranUS C.T.R. 1 at 106-111.

33
e.g. Town Investments Ltd v. Department of the Environment [1978] A.C. 359, 380-81.

34
As noted e.g. by R. David, 'Structure and the Divisions of the Law' in International Encyclopaedia of Comparative Law, vol. II (Tübingen: J.C.B. Mohr (Paul Siebeck), 1984) at 6; Lord Wilberforce, I Congresso del Partido [1983] 1 A.C. 244 at 258. Some authors fall into this trap: e.g. A.H. Hermann, 'Disputes between States and Foreign Companies', in J.D.M. Lew, ed., Contemporary Problems in International Arbitration (London: Queen Mary College Centre for Commercial Law Studies, 1986) 250.

35
Under English conflict-of-laws rules, the constitution and capacity of a corporation are governed by the law of its place of incorporation: Carl Zeiss Stiftung v. Rayner and Keeler Ltd (No. 2) [1965] Ch. 596 at 657, [1967] 1 A.C. 853 at 972; National Bank of Greece and Athens S.A. v. Metliss [1958] A.C. 509 at 528.

36
P.M. North & J.J. Fawcett, Cheshire and North's Private International Law, 13th ed. (London: Butterworths, 1999) at 549.

37
New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards [hereafter New York Convention], arts. II, V(1).

38
See e.g. ICC case 8331 of December 1996, (1999) 10:2 ICC ICArb. Bull. 65. Relying on the Principles which were incorporated into the contract, in particular article 2.13, the tribunal found that a 'Memorandum of Understanding' was a binding contract, as the parties had left only secondary matters to be clarified.

39
A.J. Ross & E.P. Eichmann, 'Partnership and Joint Venture Agreements: Cross-Border Joint Ventures' (1998) Practising Law Institute: Commercial Law and Practice Course Handbook Series 141 at 154.

40
6.1.14-6.1.17.

41
Southern Pacific Properties, (1983) 22 I.L.M. 752 at 757, para. 17 and 766, para. 45. On the same day as the project agreement was concluded, SPP and EGOTH also signed a statement that: 'It is understood between the contracting parties (EGOTH) and (SPP) in concern of the agreement signed on the 12th December 1974, that obligations which lie on EGOTH are subject to the approval of the competent governmental authorities and that the feasibility study prove the profitability of the projects.' See also, for another controversial example, Westland Helicopters (1986) XI Y.B. Comm. Arb. 127 at 132; and also see interim award of ad hoc tribunal, 9 September 1983, German seller v. Polish state buyer, reprinted in (1987) XII Y.B. Comm. Arb. 63.

42
In an application for annulment, the Paris Court of Appeal set aside the ICC award on the ground that there was no arbitration clause to which the government was undoubtedly a party. The Court ruled that the minister of tourism's ratification did not constitute an agreement to enter into the contract but was only an approval given in his capacity as EGOTH's supervisory authority: Arab Republic of Egypt v. Southern Pacific Properties (Middle East) Ltd (1984), 23 I.L.M. 1048, noted (1985) 26 Harvard International Law Journal 263, upheld on appeal by the Court of Cassation: Arab Republic of Egypt v. Southern Pacific Properties Ltd and Southern Pacific Properties (Middle East) Ltd, 86 I.L.R. 490, 3 ICSID Reports 96, (1987) 118 J.D.I. 638. The dispute proceeded as an ICSID arbitration, jurisdiction being founded upon investment protection provisions in Egyptian legislation: Southern Pacific Properties (Middle East) Limited [SPP (ME)] v. Arab Republic of Egypt (case ARB/84/3) (1983-1992), 3 ICSID Reports 101.

43
National Bank of Greece and Athens S.A. v. Metliss, [1958] A.C. 509 (HL); Adams v. National Bank of Greece, [1961] A.C. 255 (HL); AMCO Asia Corporation et al. v. The Republic of Indonesia, interim award on jurisdiction of 25 September 1983, (1992) 89 I.L.R. 379, (1993) 1 ICSID Reports 377, (1984) 23 I.L.M. 351, (1985) X Y.B. Comm. Arb. 61.

44
e.g. award of 1977 in ICC case 1704, (1978) 105 J.D.I. 976 at 980.

45
e.g. the AMCO Asia award; Sapphire International Petroleums Ltd v. National Iranian Oil Company, (1967) 35 I.L.R. 136, 5 I.L.M. 477, (1964) 13 I.C.L.Q. 1011.

46
Westland Helicopters, (1986) XI Y.B. Comm. Arb. 127 at 129, (1984) 23 I.L.M. 1071.

47
Unpublished partial award of 8 June 1999 in ICC case 9151.

48
e.g. in Biloune and Marine Drive Complex Ltd v. Ghana Investments Centre and the Government of Ghana, (1994) 95 I.L.R. 184 at 205, an ad hoc tribunal considered whether various entities including a state corporation and a city council, which had each been instrumental in the investment project and its subsequent failure, should be joined in the proceedings. The parties differed as to whether, under the governing law of Ghana, the entities were legally and factually independent of the government of Ghana, or whether they should instead be considered as subdivisions or agents of the government. The tribunal found that it did not need to determine whether their status qualified them to be considered parties to the arbitration. No relief was sought against them, and they did not need to be parties to the arbitration for their acts to be taken into account by the tribunal.

49
Barcelona Traction, Light and Power Company, Limited, [1970] I.C.J. Reports 3 at 40.

50
See especially, K.-H. Bockstiegel, 'Arbitration on Contracts between States and Foreign Private Enterprises' in Collection of the IVth International Congress on Arbitration Materials (Moscow, 1972) 670; 'Specific Problems of International Arbitration between States and Private Enterprises' in Proceedings of the Vth International Arbitration Congress (New Delhi, 1975); Arbitration and State Enterprises: A Survey on the National and International State of Law and Practice (Deventer: Kluwer, 1984) [hereafter Böckstiegel (1984)]; 'The Legal Rules Applicable in International Commercial Arbitration Involving States or State-controlled Enterprises' in International Arbitration 60 Years On: A Look at the Future (ICC Court of Arbitration 60th Anniversary) (Paris: ICC Publishing, 1984 (ICC Publication No. 412)) 115 [hereafter Böckstiegel, ICC Proceedings (1984)].

51
See e.g. the ad hoc award of 9 September 1983, (1987) XII Y.B. Comm. Arb. 63, for a close analysis of the identity of the defendant Polish state entity.

52
First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 at 626-27 (1983). See also C. Czarnikow Limited v. Centrala HandIu Zagranicznego Rolimpex, [1979] A.C. 351; I Congreso del Partido, [1983] 1 A.C. 244 at 258 (Lord Wilberforce).

53
Böckstiegel (1984) at 41; Böckstiegel, ICC Proceedings (1984) at 134.

54
Generally, the existence of an alleged agency relationship between a state and a state contracting party is determined in accordance with the law of the place where that relationship is said to arise: North & Fawcett, supra note 36 at 549. Thus in Economy Forms Corporation and other cases, the Iran-United States Claims Tribunal accepted that the existence of state control or an agency relationship between Iran and separate Iranian entities is governed by Iranian law: Economy Forms Corporation v. Government of the Islamic Republic of Iran, The Ministry of Energy, Dam and Water Works Co., Sherkat Sakatemani Mani Sahami Kass and Bank Mellat (formerly Bank of Tehran), Award No. 55-165-1, (1983) 3 Iran-US C.T.R. 42. Also, Sea-Land Services Inc v. The Islamic Republic of Iran, Ports and Shipping Organisation of Iran, Award No. 135-33-1, (1984) 6 Iran-US C.T.R. 149 at 217; Oil Field of Texas Inc v. The Government of Iran, Award No. 258-43-1, (1986) 12 Iran-US C.T.R. 308 at 311-13; cf. Cal-Maine Foods Inc v. Government of the Islamic Republic of Iran and Sherkat Seamourgh Company Inc, Award No. 133-340-3 (1984) 6 Iran-US C.T.R. 52, where the tribunal, without reference to Iranian law, found that an agency relationship existed, connecting the Iranian state with a joint venture vehicle wholly owned by a state-owned company.

55
See the discussion in ad hoc award of 9 September 1983, (1987) XII Y.B. Comm. Arb. 63, citing K.H. Böckstiegel, Der Staat als Vertragspartner ausländischer Privatunternehmen (Frankfurt, 1971) at 70.

56
The tribunal referred to English cases supporting the theory: Don Jose Ramos Yzquierdo v. Clydebank Engineering and Shipbuilding Company Ltd, [1902] A.C. 524; Baccus Srl v. Servicio Nacional del Trigo, [1957] Q.B. 438; and referred to Texaco Overseas Petroleum Company and California Asiatic Oil Company v. Government of Libya, (1979) 53 I.L.R. 389, (1978) 17 I.L.M. 1, (1978) 104 J.D.I. 320, (1979) IV Y.B. Comm. Arb. 177; Southern Pacific Properties v. Arab Republic of Egypt, (1987) 26 I.L.M. 1004, 3 ICSID Reports 101; Biloune v. Ghana Investment Centre and Government of Ghana, (1989) 95 I.L.R. 184.

57
Unpublished partial award of 8 June 1999 in ICC case 9151.

58
Böckstiegel (1984) at 44.

59
Unpublished partial award of 25 June 1999 in ICC case 9058.

60
Oriental Commercial and Shipping Co Ltd (Saudi Arabia) and Oriental Commercial and Shipping Co Ltd (United Kingdom) v. Rosseel N. V. (Belgium), 609 F. Supp. (1985) 75, reprinted in (1987) XII Y.B. Comm. Arb. 532 at 535.

61
cf. I. Seidl-Hohenveldern, Corporations in and under International Law (Cambridge: Grotius, 1987) at 59-60.

62
ICC case 3879, Westland Helicopters Ltd. (U.K.) v. Arab Org. for Industrialization, (1984) 23 I.L.M. 1071, (1986) XI Y.B. Comm. Arb. 127 at 130.

63
The award was annulled by a Swiss court: (1989) 28 I.L.M. 687.

64
Westland Helicopters, (1986) XI Y.B. Comm. Arb. 127 at 130.

65
Institute of International Law, 'Arbitration between States and Foreign Enterprises' (1990) 63-II Annuaire de l'Institut de droit international 324 at 330, art. 7, reprinted in (1990) 5 ICSID Rev. 139. See also, A. von Mehren, 'Arbitration Between States and Foreign Enterprises: The Significance of the Institute of International Law's Santiago de Compostela Resolution' (1990) 5 ICSID Rev. 54; I. Shihata, 'The Institute of International Law's Resolution on Arbitration between States and Foreign Enterprises - A Comment' (1990) 5 ICSID Rev. 65.

66
P. Cahier, 'The Strengths and Weaknesses of International Arbitration Involving a State as a Party' in Lew supra note 35 at 243, citing Southern Pacific Properties and Westland Helicopters and doubting those cases for that reason.

67
Hughes Aircraft Systems International v. Airservices Australia, (1997) 146 A.L.R. 1 (Federal Court of Australia), (1997) II Unif. L. Rev. 813. A Californian company initiated proceedings against an Australian governmental agency in respect of a bidding procedure. In considering whether a duty to ensure bidders had equal opportunity was implied in the pre-award contractual context the Court referred to the other jurisdictions and the UNIDROIT Principles (art. 1.7) to find in the affirmative after concluding that Australian law was unsettled.

68
Maritime International Nominees Establishment (MINE) v. The Republic of Guinea, case ARB84/4, 4 ICSID Reports 54, (1989) XIV Y.B. Comm. Arb. 82; H. van Houtte, 'The Unidroit Principles of International Commercial Contracts' (1995) 11 Arbitration International 373 at 377.

69
See Principles, art. 3.1.

70
In this regard, see Principles, art. 2.17 ('Merger clauses'), discussed in the final award in ICC case 9117, (1999) 10:2 ICC ICArb. Bull. 96 at 100. cf. art. 4.3(a): interpretation may be assisted by reference to the preliminary negotiations between the parties.

71
G.L. Williams, 'Mistake as to Party in the Law of Contracts' (1945) 23 Can. Bar Rev. 271 at 278, 380.

72
e.g. Ingram v. Little, [1961] 1 Q.B. 31. In English law, the contract is void ab initio.

73
Cable Television of Nevis Ltd and Cable Television of Nevis Holdings Ltd v. Federation of St Christopher (St Kitts) and Nevis, (1998) 13 ICSID Rev. 328.

74
Ibid., para. 2.18. Clause 16 provided for ICSID arbitration at a time when the Federation had not yet acceded to the ICSID Convention.

75
e.g. award of sole arbitrator of Chamber of National and International Arbitration of Milan, 20 July 1992, (1993) XVIII Y.B. Comm. Arb. 80, applying 1990 E.C. Council Regulation embargo against Iraq.

76
e.g. Jordan Investments Ltd v. Sojuzniefteeksport, (1959) 53 AJIL 800, 27 I.L.R. 631(oil in time of war); Czarnikow Ltd v. Centrala Handlu Zagranicznego ('Rolimpex'), [1979] A.C. 351 (H.L.), affirming [1978] Q.B. 176 (sugar following a poor harvest); ad hoc award of 9 September 1983, (1987) XII Y.B. Comm. Arb. 63 (imports of industrial investment goods in time of national budget deficit).

77
OPEC, Resolution on Renegotiation of Agreements with Oil Companies, 16 September 1973, (1974) 13 I.L.M. 222.

78
At the 42nd (Vienna) meeting of OPEC, 12-13 December 1974, the following decision was adopted: 'The Conference . . . decided to adopt a new pricing system based on the financial effect of the decision taken on the 10th and 11th November, 1974, in Abu Dhabi. In accordance with this decision the average government take from the operating oil companies will be $10.12 per barrel for the marker crude.' See Aminoil arbitration: American Independent Oil Company (AMINOIL) v. Kuwait, 66 I.L.R. 519, (1982) 21 I.L.M. 976.

79
T.W. Wälde & G. Ndi, 'Stabilizing International Investment Commitments: International Law Versus Contract Interpretation' (1996) 31 Texas Int'l L.J. 215 at 225.

80
T. Daintith & I. Gault, 'Pacta Sunt Servanda and the Licensing and Taxation of North Sea Oil Production' (1977) 8 Cambrian Law Review 28 at 42; D.W. Bowett, 'Claims Between States and Private Entities: The Twilight Zone of International Law' (1986) 35 Catholic University Law Review 929 at 935, note 23; D.W. Bowett, 'State Contracts with Aliens: Contemporary Developments on Compensation for Termination or Breach' (1988) 59 British Yearbook of International Law 49; T. Daintith & G. Willoughby, A Manual of United Kingdom Oil and Gas Law (London: Oyez Publishing, 1977) at 1065, para. 1-331.

81
ICSID tribunal award of 20 May 1992, Southern Pacific Properties (Middle East) Ltd and Southern Pacific Properties Ltd v. Arab Republic of Egypt and the Egyptian General Organisation for Tourism and Hotels, 3 ICSID Reports 189.

82
Ethyl Corporation v. Canada, award on jurisdiction of 24 June 1999, (1999) 38 I.L.M. 708; see also A.C. Swan, 'Case Report: Ethyl Corporation v. Canada' (2000) 94 AJIL 159.

83
In the case Methanex v. United States, the claimant filed an amended statement of claim on 6 March 2001; transcripts of pleadings and documents concerning the arbitration are available online at www.methanex.com/investorcentre/mtbe; see also unpublished partial award of 13 November 2000, S.D. Myers v. Canada (B.P. Schwartz, E.C. Chiasson, arbitrators; J.M. Hunter, chairman), available online at www.appletonlaw.com/4b2myers.htm

84
Award of 30 August 2000, Metalclad Corporation v. United Mexican States, (2001) 40 I.L.M. 36, (2001) 13 World Trade and Arbitration Materials 47; cf. decision of Supreme Court of British Columbia of 2 May 2001, United Mexican States v. Metalclad Corporation, (2001) B.C.S.C. 664.

85
Partial award and final award of ad hoc tribunal, Wintershall A.G., et al. v. Government of Qatar, (1989) 28 I.L.M. 795.

86
e.g. Jordan Investments Ltd v. Sojuzniefteeksport, (1963) 27 I.L.R. 631, (1959) 53 AJIL 800; Czarnikow (C.) Ltd v. Centrala Handlu Zagranicznego ('Rolimpex'), [1979] A.C. 351 (H.L.), affirming [1978] Q.B. 176 (C.A.); award of 30 May 1979 in ICC cases 3099 and 3100, (1982) VII Y.B. Comm. Arb. 87 (although this award did not concern a long-term state contract); ad hoc award of 9 September 1983, (1987) XII Y.B. Comm. Arb. 63.

87
For a comparative survey see e.g. A.H. Puelinckx, 'Frustration, Hardship, Force Majeure, Imprévision, Wegfall der Geschäftsgrundlage, Unmöglichkeit, Changed Circumstances: A Comparative Study in English, French, German and Japanese Law' (1986) 3 J. Int'l Arb. 47; and for a discussion of the concept of force majeure in article 79 of the United Nations Convention on Contracts for the International Sale of Goods (Vienna Sales Convention) see C.M. Bianca & M.J. Bonell, Commentary on the International Sales Law: The 1980 Vienna Sales Convention (Milan: Giuffrè, 1987) at 572.

88
See e.g. G. Treitel, Frustration and Force Majeure (London: Sweet & Maxwell, 1994) at 50.

89
Award of 30 May 1979 in ICC cases 3099 and 3100, (1982) VII Y.B. Comm. Arb. 87.

90
See F.A. Mann, 'State Contracts and State Responsibility' (1960) 54 AJIL 572.

91
See J. Lauritzen A/S v. Wijsmuller BV (The Super Servant Two), [1990] 1 Lloyd's Rep. 1 at 8 (Bingham L.J.). In an unpublished ICC arbitration between Western European companies and two Iranian state agencies, reported by P. Lalive, in Lew supra note 34 at 294, the Iranian state entities which had relied on force majeure were unsuccessful after their documents of incorporation revealed that both were controlled by the government; also on this point, although later annulled on different grounds, award in ICC case 3493, Southern Pacific Properties (Middle East) Ltd and Southern Pacific Properties Ltd v. Arab Republic of Egypt and the Egyptian General Organisation for Tourism and Hotels, (1983) 22 I.L.M. 753 at 780, annulled by the Paris Court of Appeal, 12 July 1984, (1984) 23 I.L.M. 1048.

92
Böckstiegel (1984) at 47.

93
See e.g. D. Hochstrasser, 'Choice of Law and Foreign Mandatory Rules in International Arbitration' (1994) 11 J. Int'l Arb. 57; S. Lazareff, 'Mandatory Extraterritorial Application of National Law' (1995) 11 Arbitration International 137; P. Mayer, 'Mandatory Rules of Law in International Arbitration' (1986) 2 Arbitration International 274; Y. Derains, 'Public Policy and the Law Applicable to the Dispute in International Arbitration' in Comparative Arbitration Practice and Public Policy in Arbitration (8th International Arbitration Congress), ICCA Congress Series No. 3 (Deventer: Kluwer, 1987) [hereinafter ICCA Congress Series No. 3] 227; T.G. Guedji, 'Theory of the Lois de Police: A Functional Trend in Continental Private International Law (A Comparative Analysis with Modern American Theories)' (1991) 39 Am. J. Comp. L. 660; P. Lalive, 'Transnational (or Truly International) Public Policy and International Arbitration' in ICCA Congress Series No. 3, 257.

94
Böckstiegel (1984) at 35.

95
See Derains; Lalive; Hochstrasser; supra note 93.

96
e.g. Texaco arbitration, Texaco Overseas Petroleum Company and California Asiatic Oil Company v. Government of Libya, (1979) 53 I.L.R. 389, (1978) 17 I.L.M. 1, (1978) 104 J.D.I. 320, (1979) IV Y.B.. Comm. Arb. 177.

97
Berger supra note 15 at 131; E. Gaillard, 'The Use of Comparative Law in International Commercial Arbitration' in Arbitration in Settlement of International Commercial Disputes involving the Far East and Arbitration in Combined Transportation (9th International Arbitration Congress) ICCA Congress Series No. 4 (Deventer: Kluwer, 1989) 283.

98
e.g. award in ICC case 4650, (1987) XII Y.B. Comm. Arb. 111 at 112; award in ICC case 6149, (1995) XX Y.B. Comm. Arb. 41 at 54.

99
See F.A. Mann, 'Lex Facit Arbitrum' in P. Sanders, International Arbitration. Liber Amoricum for Martin Domke (The Hague: Martinus Nijhoff, 1967) 157.

100
Ad hoc award of 9 September 1983, (1987) XII Y.B. Comm. Arb. 63 at 65-66 and 69 [original in German].

101
New York Convention, art. V(1)(a).

102
P. Mayer, 'Mandatory Rules of Law in International Arbitration' (1986) 2 Arbitration International 274 at 28486.

103
Ad hoc award of 9 September 1983, (1987) XII Y.B. Comm. Arb. 63.

104
Böckstiegel (1984) at 47-48; Böckstiegel, ICC Proceedings (1984) at 140, also distinguishing between administrative and legislative acts.

105
Discussed by P. Lalive in Lew supra note 34 at 294.

106
Jordan Investments Ltd v. Sojuzniefteeksport, (1959) 53 AJIL 800, 27 I.L.R. 631, noted (1959) 24 L.C.P. 323, (1959) 72 Harvard Law Review 1442, (1959) 24 Rabels Zeitschrift 449.

107
M. Domke, 'The Israeli-Soviet Oil Arbitration' (1959) 53 AJIL 787.

108
Czarnikow Ltd v. Centrala Handlu Zagranicznego, [1979] A.C. 351 (H.L.), affirming [1978] Q.B. 176 (C.A.) 1043; and for comment J. Becker, 'The Rolimpex Exit from International Contract Responsibility' (1978) 10 N.Y.U.J. Int'l L & Pol. 447; A.H. Hermann, supra note 34 at 252, who argues that the decision neglects any sophisticated analysis of the nature of a state monopoly and the logical impossibility of government intervention under Soviet law.

109
cf. Atisa v. Aztec, [1983] 2 Lloyd's Rep. 579, where, on similar facts to Czarnikow v. Rolimpex, arbitrators found that the Kenyan government was in fact acting as a private trader, so its repudiation of the contract with its own state entity did not amount to force majeure. Force majeure is not normally admitted when performance can be effected by other means: Treitel supra note 88 at 267-68, para. 6-032; National Oil Corporation v. Libyan Sun Oil, first award of 31 May 1985, (1990) 29 I.L.M. 565 at 584, (1991) XVI Y.B. Comm. Arb. 54 at 57.

110
[1979] A.C. 351.

111
Ad hoc award of 9 September 1983, (1987) XII Y.B. Comm. Arb. 63.

112
Air France case, Gréard v. Compagnie Air France, and Compagnie Air France v. Trémoulet, Cass., 15 April 1970, D.1971Jur.107 at 109.

113
See Böckstiegel (1984) at 47-8; Böckstiegel, ICC Proceedings (1984) at 140.

114
Settebello Ltd v. Banco Totta & Acores, [1985] 1 W.L.R. 1050 (Hirst J.): an order for production of evidence on the purposes of a Portuguese decree would be meddling in the governmental affairs of a friendly power: 'If this effectively deprives the plaintiffs of obtaining evidence that they need in order to sustain their plea, this is because their interests must yield to a higher principle . . . [relying on the House of Lords decision Buttes Gas and Oil Company v. Hammer, [1982] AC 882] . . . which effectively rules out evidence concerning the motives of a foreign legislature as a matter of principle on grounds of comity.'

115
Hermann, supra note 34 at 255.

116
Ad hoc award of 9 September 1983, (1987) XII Y.B. Comm. Arb. 63 at 75.

117
Bonell, supra note 3 at 59.

118
The analogous conflicts approach for court proceedings in states that are signatories to the 1980 Rome Convention on the Law Applicable to Contractual Obligations is article 7(1). In the 1994 Inter-American Convention on the Law Applicable to International Contracts, the relevant provision is art. 11(2).

119
Bonell, supra note 3 at 87, notes that the article draws heavily on art. 79(1) of the United Nations Convention on Contracts for the International Sale of Goods, on which see e.g. Bianca & Bonell, supra note 87.

120
The commentary to art. 7.1.7, para. 1 explains: 'This article covers the ground covered in common law systems by the doctrines of frustration and impossibility of performance and in civil law systems by doctrines such as "force majeure", Unmöglichkeit, etc. but it is identical with none of these doctrines.'

121
Principles, art. 7.1.7(4).

122
On whether impossibility is temporary or permanent and so giving rise to a right to terminate, see e.g. Mobil Oil Iran Inc. v. Islamic Republic of Iran, Iran-US Claims Tribunal, Award No. 311-74/76/81/150-3 of 14 July 1987, 16 Iran-US C.T.R. 3 at 38-39; and award of 20 July 1992, Chamber of National and International Arbitration of Milan, (1993) XVIII Y.B. Comm. Arb. 80 at 87, considering that UN sanctions directed at Iraq were a permanent impossibility after they had been in place for two years; H. van Houtte, 'The UNIDROIT Principles of International Commercial Contracts' (1995) 11 Arbitration International 373 at 390.

123
Note in this regard art. 7.4.13 of the Principles ('Agreed payment for non-performance').

124
e.g. comment on art. 7.1.7, para. 1 ('Illustration').

125
Principles, arts. 6.1.14-6.1.17.

126
We exclude here the question of whether the intervening circumstances merely amount to hardship, whose consequences are different. For a critique of the Principles in this respect, see D. Maskow, 'Force Majeure and Hardship' (1992) 40 Am. J. Comp. L. 657.

127
See art. 7.1.2 ('Interference by the other party'): 'A party may not rely on the non-performance of the other party to the extent that such non-performance was caused by the first party's act or omission or by another event as to which the first party bears the risk.'

128
Bonell, supra note 3 at 88, note 155.

129
See e.g. BP Exploration Co (Libya) Ltd v. Government of the Libyan Arab Republic, (1979) 53 I.L.R. 297, (1980) V Y.B. Comm. Arb. 143; American Independent Oil Company (AMINOIL) v. Kuwait, 66 I.L.R. 519, (1982) 21 I.L.M. 976; Libyan American Oil Company v. Libyan Arab Republic, (1982) 62 I.L.R. 140, (1981) 20 I.L.M. 1; Brownlie, supra note 31 at 210; C. Gray, 'The Choice between Restitution and Compensation' (1999) 10 European Journal of International Law 413.

130
According to art. 1.10, 'court' includes an arbitral tribunal. See comment on art. 7.2.4, para. 6, which suggests this provision may be more suitable for enforcement.

131
See Principles, art. 7.2.5 and accompanying comment § 4.

132
P. Cane, 'Public and Private Law: A Study of the Analysis and Use of a Legal Concept' in J. Eekelaar & J. Bell, eds., Oxford Essays in Jurisprudence, 3d series (Oxford: Clarendon Press, 1987) 57 at 61.

133
K.-H. Böckstiegel, 'Besondere Probleme der Schiedsgerichtsbarkeit zwischen Privatunternehmen und ausländischen Staaten oder Staatsunternehmen' (1977) Neue Juristische Wochenschrift 1581.

134
e.g. W. Friedmann, The Changing Structure of International Law (1964) at 200; A.A. Fatouros, 'The Administrative Contract in Transnational Transactions: Reflections on the Uses of Comparison' in Ius Privatum Gentium: Festschrift für Max Rheinstein, vol. 1 (1969) 261; M. Sornarajah, International Commercial Arbitration: the Problem of State Contracts (Singapore: Longman Singapore, 1990).

135
Both the Texaco and the Aramco arbitrations rejected the contrat administratif as general principles of law: Saudi Arabia v. Arabian American Oil Company (ARAMCO), award of 23 August 1958, (1963) 27 I.L.R. 117, (1963) 12 Rev. cri. dr. internat. privé 272.