1. In 1999, Dr Robert Briner was invited by Dr Stephen V. Berti to write a commentary on Article 177 of the Swiss Private International Law Act for the book International Arbitration in Switzerland: An Introduction to and a Commentary on Articles 176-194 of the Swiss Private International Law Statute.1

2. Various statements made therein relating to Article 177(2) of the Swiss Private International Law Statute ('Article 177(2)') contain, in our view, interesting-not to say revolutionary-ideas that captured our attention as flies and mosquitoes are inevitably attracted by lights. 2

3. One must start by recalling that Dr Robert Briner, Chairman of the ICC International Court of Arbitration, seemed to have a strong liking for the rule in Article 177(2). Indeed, when draft awards on jurisdiction rendered in Switzerland rejecting objections raised by a State entity3 came before the ICC Court for scrutiny, 4 Dr Briner would regularly suggest that, if necessary and where pertinent, the arbitral tribunal strengthen its legal reasoning by adding that the State entity's objections were rejected, amongst other reasons, on the basis of Article 177(2). ICC's experience of arbitrations involving State entities shows that the latter indeed often contest arbitral jurisdiction on the basis of their internal laws. 5[Page825:]

4. Before going any further, let us quote the wording of Article 177(2):

If a party to the arbitration agreement is a state, a stateheld enterprise, or a stateowned organisation, it cannot rely on its own law in order to contest its capacity to be a party to an arbitration or the arbitrability of a dispute covered by the arbitration agreement. 6

5. This rule, whose origins lie in ICC arbitral 'jurisprudence'7 and which appears to be more a part of the lex mercatoria adopted by the Swiss legislator than an original provision of Swiss law, seems to be (i) unanimously accepted and (ii) automatically applied by international arbitral tribunals confronted with jurisdictional objections raised by State entities on the basis of their own national law, as pointed out by leading writers. 8

6. According to Jan Paulsson, the first 'leading precedent [on the rule of Article 177(2)] is an award rendered in 1971 under the Rules of Arbitration of the International Chamber of Commerce, in which the tribunal stated that: . . . [Page826:]

international ordre public would vigorously reject the proposition that a State organ, dealing with foreigners, having openly, with knowledge and intent, concluded an arbitration clause that inspires the cocontractant's confidence, could thereafter, whether in the arbitration or in execution proceedings, invoke the nullity of its own promise'. 9

7. The belief that the rule of Article 177(2) has been unanimously accepted and should be automatically applied seems to be based above all10 on recurrent applications of the rule in cases where the Iranian State, or one of its offshoots, objected to the jurisdiction of an arbitral tribunal on the basis of Article 139 of the 1979 Iranian Constitution. This Article provides that: 'the resolution of disputes concerning state property, or the submission of such disputes to arbitration, shall in each case be subject to approval by the Council of Ministers and must be notified to Parliament. Cases in which one party to the dispute is foreign, as well as important domestic disputes, must also be approved by Parliament.' 11

8. Contrary to those idées reçues, Dr Briner's commentary on Article 177(2) suggests, if read between the lines, 12 that (i) the rule of Article 177(2) has not been accepted in practice as unanimously as a number of scholars would have us believe13 and (ii) that the rule of Article 177(2) should not be automatically applied by international arbitral tribunals when they are dealing with jurisdictional issues raised by State entities on grounds arising from their national law. Rather, Dr Briner proposes in his commentary that the rule contained in Article 177(2) is inevitably limited in its basic principles (I) and scope (II). [Page827:]

I. Basic principles limiting the rule of Article 177(2)

9.The basic principles underlying a rule form the rationale behind its articulated provisions and the spirit in which it is applied. 14

10. According to Dr Briner and other authors who have analyzed Article 177(2), 15 this rule appears to derive from three basic principles. First, in Dr Briner's words, 'this rule was inserted into the statute "in the interest of the security and the predictability of the law"' 16 (A). Second, again quoting Dr Briner: 'The rule of Article 177(2) is based on the principle of good faith and contains an interdiction of contradictory conduct (venire contra factum proprium).' 17 (B). Third, ICC arbitral jurisprudence18 has stated that the principle underlying the rule lies in international public policy (C).

A. Security and predictability of the law

11. The first underlying principle-to ensure the security and predictability of the law (sécurité juridique)-considerably limits the applicability of the rule of Article 177(2).

12. That the rule should apply when a State alleges its lack of capacity to execute an arbitration agreement or the nonarbitrability of the dispute on the basis of a law it has enacted after the negotiation and execution of the arbitration agreement needs little explanation. It is clearly unacceptable that a private foreign investor should bear the consequences of a State alleging that a dispute cannot be submitted to arbitration because the latter, after the execution of an arbitration agreement with the foreign investor, has, through its legislature, 19 enacted a new law prohibiting the submission of disputes to arbitration. In this sense, the rule of Article 177(2) serves the same purpose as stabilization clauses20 in the second half of the twentieth century.

13. It is not so obvious, however, that the rule of Article 177(2) should apply when the new law enacted by a State after the negotiation and execution of the arbitration agreement is used as a way of objecting to arbitral jurisdiction by a[Page828:]

State entity with its own legal personality distinct from that of the State to which it belongs. Lex mercatoria should recognize the legal separation between the two entities as it does that between private companies of the same corporate group.

14. Nor is it obvious that the rule of Article 177(2) should be applied when the national law invoked by the State entity was enacted before the negotiation or execution of the arbitration agreement or the contract containing the arbitration clause.

15. Foreign investors have a duty to respect the rules of the society to which they belong, i.e. the rules and principles comprising lex mercatoria.21 This therefore means that they should respect the principle according to which international merchants are deemed to be competent professionals. 22 In our view, the main legal consequence of this principle is that international merchants cannot take advantage of their own negligence (nemo auditor propriam turpitudinem allegans).

16. Given the importance to foreign investors of submitting disputes against State entities to arbitration, we believe that foreign investors have a duty, as competent professionals, to verify whether the State entity with they contract is authorized by its national law to submit disputes to arbitration. Failure to do so would, in our view, amount to a violation of lex mercatoria, for it would constitute a breach of the principle of the competence of international merchants. The legal consequence of that breach should be that, in the event the State entity contests the jurisdiction of the arbitral tribunal, the foreign investor is no longer entitled to seek application of the arbitration agreement and has no choice but to submit the dispute against the State entity to the competent national court.

17. Yet, it might be asked whether the foreign investor could and should have known that the State entity was prevented by its national law from submitting disputes to arbitration. This question is inextricably linked to the second principle underlying the rule of Article 177(2)-good faith. [Page829:]

B. Good faith

18. It seems to be universally and unanimously accepted that good faith forms part of lex mercatoria. 23Article 1.7 of the 2004 UNIDROIT Principles of International Commercial Contracts ('UNIDROIT Principles') provides:

(1)Each party must act in accordance with good faith and fair dealing ininternational trade.

(2)The parties may not exclude or limit this duty.

19. In arbitration involving State entities, the principle of good faith would appear to have two main consequences within the context of the rule of Article 177(2).

20. First, as stated by Dr Briner, 24 the rule of Article 177(2) is an application of the bona fides rule whereby a party cannot contradict itself to the detriment of another (non concedit venire contra factum proprium). Article 1.8 of the UNIDROIT Principles provides that:

A party cannot act inconsistently with an understanding it has caused the other party to have and upon which that other party reasonably has acted in reliance to its detriment.

Thus, a State entity should not be permitted to execute an arbitration agreement and thereafter, when a dispute arises, allege that it was prevented by its internal law from submitting disputes to arbitration. We wonder, however, whether such conduct by the State entity does in fact amount to contradiction to the detriment of a professional and competent international merchant.

21. Second, the good faith principle also places upon contracting parties the duties of cooperation and disclosure. 25

22. Although application of the rule of Article 177(2) on the basis of good faith may have had some justification in the past, it is no longer warranted by presentday circumstances. When, some decades ago, the status of the law in several developing States was uncertain, leaving it unclear whether State entities were entitled to submit disputes to arbitration, and access to the statutes and case law of those States was difficult, the principle of good faith-one of the[Page830:]

main consequences of which is the duty of disclosure26-put the State entity under an obligation to disclose to its private contracting partner, when negotiating the contract, whether it was forbidden by its national law to submit disputes to arbitration. Violation of that duty of disclosure meant that the State could not subsequently rely on a prohibition in its national law to extricate itself from the arbitration agreement that it had nonetheless executed. Moreover, the foreign investor was not in a position to know that the State entity with which it was contracting was prevented by its national law from submitting disputes to arbitration, since this was not disclosed by the State entity. In short, it was presumed in the past that a State entity that entered into an arbitration agreement knowing that it was prevented by its national law from submitting disputes to arbitration manifestly acted in bad faith.

23. We would suggest that the world has dramatically changed since then. First, most national laws-at least as far as the international arena is concerned- have now clarified the arbitrability of disputes involving State entities. 27 Second, the Internet and modern forms of communication make it possible to obtain access to the legal instruments of developing States in a manner totally unknown in the past. Third, in accordance with the professionalism principle described above, 28 a foreign investor engaged in international commerce should not be permitted to allege before an international arbitral tribunal that it did not know or that it could not have known that the State entity with which it contracted was prevented by its national law from submitting disputes to arbitration. On the contrary, international arbitral tribunals should nowadays invariably hold that foreign investors deemed to be competent professionals should have known that fact. In other words, the wellknown adage nemo auditur-a component of lex mercatoria-should be applied to foreign investors who unprofessionally neglect to verify whether the State entities with which they contract are allowed by their national laws to submit disputes to arbitration.

24. We submit that if State entities engaged in international commerce are to be treated as international merchants and required to respect the principles of the lex mercatoria, then the principles of lex mercatoria must also be applied to the multinationals that contract with them. It does not seem theoretically founded to operate a dépeçage of lex mercatoria in favour of international merchants and to the detriment of State entities. [Page831:]

25. Dr Briner would apparently disagree with some of the above statements.

He writes in this respect: 29

Reference has repeatedly been made by writers that the nonstate party cannot invoke Article 177(2) if this party knew that the state party acted in violation of its law or if it should have been aware thereof (A. Bucher, Schiedsgerichtsbarkeit, N 113; contra: Lalive/Poudret/Reymond, N 10). It is submitted that Article 177(2) constitutes a material rule of Swiss international arbitration law and in analogy to the rules developed under Article 177(1) . . . a consideration of the foreign law is basically not permissible. Clear cases of bad faith (e.g. collusion between the nonstate party and the (competent) organs of the State) can be dealt with by invoking principles of public policy which are binding on the arbitral tribunal . . .

26. It is worth noting, however, that most international transactions between State entities and foreign investors involve considerable economic interests. A competent and professional international merchant entering into a contract with a State entity containing an arbitration agreement should hire local counsel in the State hosting its investment to verify, amongst many other legal issues, whether its public cocontractor may submit disputes to arbitration.

27. International arbitration law must recognize that the time when States were more powerful than private companies is gone. Ours is an age of multinationals. They should be deemed to be competent professionals. They should not be allowed to invoke their negligence to their own benefit. Automatic application of the rule of Article 177(2), which purportedly belongs to lex mercatoria, and onesided application of lex mercatoria in favour of multinationals and to the disadvantage of State entities no longer corresponds to the weight of the different forces present in international commerce.

28. For the same reason, characterizing the rule of Article 177(2) as an element of international public policy seems to be unfair to State entities.

C. International public policy

29.Reliance by a State entity on its own national law to assert that, despite having executed an arbitration agreement, it could not submit disputes to arbitration is still generally considered to be a violation of international public policy. 30[Page832:]

30. In our view, however, the above argument takes advantage of the fact that nobody really knows what international public policy is. By the same token we could argue that international public policy is violated by the onesided application of lex mercatoria to reject the jurisdictional objections raised by a State entity, as described above. Is not equal treatment of the parties as much an element of international public policy as the rule of Article 177(2)?

31. Is it not also international public policy that would justify excluding the application of the rule of Article 177(2) when a foreign investor and a State entity manifestly violate a very important law of the host State by entering into an arbitration agreement? Such exclusion arises from Articles 46 and 47 of the Vienna Convention on the Law of Treaties. 31

32. Dr Briner would perhaps agree that international public policy limits the applicability of the rule of Article 177(2). He suggests in this regard that '[c]lear cases of bad faith (e.g. collusion between the nonstate party and the (competent) organs of the State) can be dealt with by invoking principles of public policy which are binding on the arbitral tribunal'. 32

33. The applicability of the rule of Article 177(2) is also limited by the way in which its scope is defined.

II. Limitation of the rule of Article 177(2) through its scope

34. International arbitration literature gives the impression that the rule of Article 177(2) must be applied by international arbitral tribunals irrespective of (i) the geographical reach of the arbitral proceedings and (ii) the jurisdictional argument raised by the State entity. 33[Page833:]

35.However, we believe-and Dr Briner suggests-that, before applying Article 177(2), international arbitral tribunals must examine whether the arbitration is domestic or international (A) and the nature of the jurisdictional argument raised by the State entity (B).

A. Territorial scope

36. There must be no doubt that the rule of Article 177(2) only applies to arbitrations that may be characterized as international. Consequently, it should not apply when the arbitral proceedings may be characterized as domestic. This conclusion is drawn, among other things, from (i) the definition of the scope of the Swiss Private International Law Act, and (ii) the recent adoption of the rule of Article 177(2) by the Spanish legislator.

37. As far as the Swiss Private International Law Act is concerned, Article 176 implicitly provides that the provisions comprising its Chapter 12, including Article 177, only apply to international arbitration, unless-we may add-the parties otherwise agree. Article 176(1) reads as follows:

The provisions of this chapter shall apply to all arbitrations if the seat of the arbitral tribunal is situated in Switzerland and if, at the time when the arbitration agreement was concluded, at least one of the parties had neither its domicile nor its habitual residence in Switzerland.

38.As for the new Spanish Arbitration Act,34Article 2(2) adopts the same rule as is provided for in Article 177(2), expressly stating (emphasis added): 35

When an arbitration is international and one of the parties is a State or company, organization or enterprise controlled by a State, that party may not avail itself of the privileges of its domestic law to avoid its obligations under the arbitration agreement.

39.We would therefore suggest that it is a sophism to argue that the rule of Article 177(2) is an element of the lex mercatoria and must be applied by international arbitral tribunals to jurisdictional objections raised by State entities on the basis of their own internal law irrespective of the territorial scope of the arbitration and/or the seat of the arbitration. [Page834:]

40. The corollary of limiting the application of the rule of Article 177(2) to international arbitration is obviously that the definition of the international character of a contract and of a resulting arbitration is crucial to the definition of the scope of the rule of Article 177(2) as an element of the lex mercatoria that international arbitral tribunals are required to apply in all circumstances.

41. One must note, however, that the international character of an arbitration is defined differently from one legal system to another. While most States have adopted a legal criterion for defining the international character of an arbitration, a few have adopted an economic criterion. The legal definition may be found in the UNCITRAL Model Law on International Commercial Arbitration ('UNCITRAL Model Law'), Article 1(3) of which states:

An arbitration is international if:

(a)the parties to an arbitration agreement have, at the time of the conclusionof that agreement, their places of business in different States; or

(b)one of the following places is situated outside the State in which the parties have their places of business:

(i) the place of arbitration if determined in, or pursuant to, the arbitration agreement;

(ii)any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subjectmatter of the dispute is most closely connected; or

(c)theparties have expressly agreed that the subjectmatter of the arbitrationagreement relates to more than one country.

This definition raises several issues in respect of arbitration involving State entities.

42. First, in many cases of public procurement organized by developing States, the State requires the foreign investor to set up a local affiliate with which the State will contract. 36 As a result, the contract-and hence the arbitration agreement it contains-should, according to Article 1(3)(a) of the UNCITRAL Model Law, be characterized as domestic.

43. Second, developing States further require in many cases of public procurement that the seat of the arbitration be located in their territory. Accordingly, the criterion of Article 1(3)(b)(i) of the Model Law is rarely sufficient to establish that an arbitration involving a State entity is international. [Page835:]

44. Third, State contracts often involve very important infrastructure projects that must be accomplished in the territory of the host State. Thus, the provision of Article 1(3)(b)(ii) of the Model Law is rarely sufficient either to determine that an arbitration resulting from a State contract is international.

45. Lastly, we have never seen an arbitration agreement where the parties expressly agreed that the subject matter of the arbitration agreement relates to more than one country.

This, again, is entirely within the control of the parties and may therefore prove to be fictitious. It is not up to the parties to agree that their arbitration 'relates to more than one country,' so as to ensure that it will be governed by rules that are more liberal than those governing domestic arbitration. Even if this does not constitute a fraud against the law ordinarily applicable, it does at least allow the parties to avoid its application without being objectively justified to do so by the requirements of international trade. 37

46. It may thus be concluded that since most countries have adopted a legal definition of the international character of an arbitration similar to that contained in the Model Law and, for the reasons stated above, its application to State contracts is rather exceptional, then the applicability of the rule of Article 177(2) as an element of the lex mercatoria is extremely limited.

47. On the other hand, the application of the rule of Article 177(2) would be broader if the majority of states had adopted an economic definition of the international character of an arbitration. To our best recollection, this is, however, only the case in France and a few other countries (e.g. Colombia, Spain and Tunisia) that have copied the rule of Article 1492 of the French Code of Civil Procedure ('Article 1492'), which provides that 'an arbitration is international when it involves the interests of international trade'. The French courts, namely the Paris Court of Appeal and the Court of Cassation, have stated that the phrase 'involving the interests of international trade' means that the economic transaction giving rise to the arbitration should entail a transfer of goods, services or funds across national boundaries, while the nationality of the parties, the law applicable to the contract or to the arbitration, and the place of arbitration are irrelevant. 38[Page836:]

48. Article 3(1)(c) of the new Spanish Arbitration Act, for its part, provides:

An arbitration is international if any of the following circumstances are

met: . . .

c) the legal relationship from which the dispute arises affects the interests of international trade.

To the best of our knowledge, however, the Spanish courts have not yet interpreted the words 'affects the interests of international trade' as have the Paris Court of Appeal and the Court of Cassation. 39

49. The economic definition of the international character of an arbitration would no doubt allow a foreign investor to escape the limits of the legal definition described above. In particular, the fact that (i) the parties' places of business, (ii) the seat of the arbitration and (iii) the infrastructure project are all located in the territory of the host State would in no manner prevent the arbitration from being characterized as international.

50. This said, the real question is on what basis international arbitral tribunals must define whether an arbitration is domestic or international in the event a State entity maintains that the dispute is domestic and therefore outside the jurisdiction of an international arbitral tribunal? If the definition of the international character of an arbitration is to be found in the law of the seat of the arbitration, it is very likely that a legal definition will have to be applied and that the arbitral tribunal will necessarily come to the conclusion that, in light of the circumstances above, it does not have jurisdiction to hear the case.

51. Could international arbitral tribunals, however, depart from the definition set forth in the law of the seat of the arbitration and rely on an economic definition as allegedly contained in lex mercatoria?According to Jan Paulsson, this position was adopted by an ICC arbitral tribunal in the Benteler case, where the tribunal came to the conclusion that the international or domestic character of the economic transaction and the arbitration should be determined according to the international criteria set forth in the European Convention on International Commercial Arbitration signed in Geneva on 21 April 1961 ('Geneva Convention') and not in accordance with the domestic criteria listed in any national law such as that of the seat of the arbitration: 40[Page837:]

It has to be seen as a whole. Quite apart from the foreign identity of Benteler, which by itself might perhaps justify the application of the Geneva Convention from the outset, the agreement has a number of aspects characterised by the movement of goods, services or money across frontiers, such as transfers of funds between Benteler and ABC, share transfers from the State to Benteler, the provision of the Belgian ABC with technical andcommercial 'knowhow' by German commercial companies etc. Taken as a whole, the contract indubitably concerns international commercial interests within the meaning of Article I(1)(a) of the Geneva Convention.

It should be pointed out, however, that the arbitral tribunal in Benteler applied only part of Article I(1)(a) of the Geneva Convention by operating a dépeçage to the detriment of the Belgian State. In full, Article I(1)(a) says that the Convention shall apply 'to arbitration agreements concluded for the purpose of settling disputes arising from international trade between physical or legal persons

having, when concluding the agreement, their habitual place of residence or their seat in different Contracting States' (emphasis added).

52. It should also be pointed out that disregarding the definition of the international character of an arbitration contained in the law at the seat of the arbitration could lead to the setting aside of the award on the ground that the subject matter of the dispute was not capable of settlement by international arbitration under that law. 41

53. In general terms, international arbitral tribunals and national courts should not disregard the principles of the applicable law, including those relevant to the various jurisdictional arguments raised by State entities in arbitrations relating to State contracts.

B. Jurisdictional arguments

54. Dr Briner himself delimited the ratione materiae scope of the rule of Article 177(2): it applies only to jurisdictional arguments raised by State entities regarding their capacity to submit disputes to arbitration and the arbitrability of the dispute. It thus excludes two very important jurisdictional arguments that State entities raise from time to time. [Page838:]

55. The first concerns representation. In the words of Dr Briner: 42

In legal writings the question whether Article 177(2) also governs the capacity and the authorisation of the persons signing the arbitration

agreement for the State is controversial (pro: A. Bucher, Schiedsgerichtsbarkeit, N 112; PILSCommentaryVischer, N 25; contra: Lalive/Poudret/ Reymond, Art. 177 N 10 and Art. 178 N 19). However both Bucher and Vischer are of the opinion that the text of Article 177(2) does not cover the question of authority to represent the State and that the inclusion of this authority can only be justified based on the protection of the good faith, which notion is included in Article 177(2). In a decision of 13.10.92, ASA Bulletin 1993, 75, cons. 7c aa the Federal Tribunal explicitly approved the decision of the arbitral tribunal that the question of authority to bind the state has to be decided by the law of that state.

This exclusion is particularly important given the frequency with which the lack of power to represent the State entity is raised in State contract arbitration. 43

56. The second argument not covered by the rule of Article 177(2) concerns the transfer or assignment of the State contract by the State entity that signed it to another State entity within the same State owing to State reorganization. The issue of which State entity is the proper party to the arbitration agreement must, in the circumstances, be resolved in accordance with the statute enacted by the State relating to the reorganization. 44

57. It is worth noting that the scope of Article 177(2)-subject, of course, to the limits identified in the present contribution-does cover jurisdictional objections based on (i) the characterization of the State contract as an administrative contract and (ii) the allegation that the dispute arises from a governmental decision (acte administratif) over which the administrative courts of the host State have exclusive jurisdiction. 45

58. In conclusion, one must note that the applicability of the rule of Article 177(2) is considerably limited by its underlying principles and scope. The rule contained therein was useful at the time when the Iranian State regularly raised jurisdictional objections based on Article 139 of the 1979 Iranian Constitution. The nuances now raised by State entities when objecting to arbitral jurisdiction clearly show that the simple wording of Article 177(2) does not cover all possible situations. [Page839:]

59. The new international legal order also requires that the pillars of lex mercatoria-good faith, the presumption of international merchants' competence and professionalism, and the wellknown adage nemo auditur, to name but a few-must be applied to both State entities and multinationals.

60. It is therefore in this sense that one may wish a clearer and broader rule than Article 177(2) to be established. It may also be desirable to recognize that the balance between the power of States and the power of multinationals has fundamentally changed. This bridge will be crossed when it is reached. For the moment, there can be little doubt that a requiem is being played for the rule of Article 177(2). Dr Briner may well have preferred to hear Mozart's. [Page840:]

1
See S. V. Berti, ed., International Arbitration in Switzerland: An Introduction to and a Commentary on Articles 176-194 of the Swiss Private International Law Statute (The Hague: Kluwer Law International, 2000).

2
'What is your aim in philosophy? - To show the fly the way out of the flybottle.' (L. Wittgenstein, Philosophical Investigations (Oxford: Blackwell, 1998) at 103).

3
'State entity' will be used in the present contribution to cover the State itself as well as its offshoots.

4
Pursuant to Article 27 of the 1998 ICC Rules of Arbitration: 'Before signing any Award, the Arbitral Tribunal shall submit it in draft form to the Court. The Court may lay down modifications as to the form of the Award and, without affecting the Arbitral Tribunal's liberty of decision, may also drawn its attention to points of substance. No award shall be rendered by the Arbitral Tribunal until it has been approved by the Court as to its form.'

5
See E. Silva Romero, 'ICC Arbitration and State Contracts' (2002) 13:1 ICC ICArb. Bull. 34 esp. at 38-41, paras. 15-31; see also E. Silva Romero, 'The Dialectic of International Arbitration Involving State Parties' (2004) 15:2 ICC ICArb. Bull. 79 esp. at 81-85, paras. 10-33.

6
See S. V. Berti, supra note 1 at 317. A slightly different translation is proposed by P. Lalive, J.F. Poudret & C. Reymond, Le droit de l'arbitrage interne et international en Suisse (Lausanne: Payot, 1989) at 304): 'If a party to the arbitration agreement is a state or an enterprise or organisation controlled by it, it cannot rely on its own law in order to contest its capacity to be a party to an arbitration or the arbitrability of a dispute covered by the arbitration agreement.'

7
Our use of this term is inspired by the following words of an ICSID tribunal: 'This raises a question whether, nonetheless, the present Tribunal should defer to the answers given by the SGS v. Pakistan Tribunal. The ICSID Convention provides only that awards rendered under it are "binding on the parties" (Article 53(1)), a provision which might be regarded as directed to the res judicata effect of awards rather than their impact as precedents in later cases. In the Tribunal's view, although different tribunals constituted under the ICSID system should in general seek to act consistently with each other, in the end it must be for each tribunal to exercise its competence in accordance with the applicable law, which will by definition be different for each BIT and each Respondent State. Moreover there is no doctrine of precedent in international law, if by precedent is meant a rule of the binding effect of a single decision. There is no hierarchy of international tribunals, and even if there were, there is no good reason for allowing the first tribunal in time to resolve issues for all later tribunals. It must be initially for the control mechanisms provided for under the BIT and the ICSID Convention, and in the longer term for the development of a common legal opinion or jurisprudence constante, to resolve the difficult legal questions discussed by the SGS v. Pakistan Tribunal and also in the present decision.' (ICSID case ARB/02/6, SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, Decision on Objections to Jurisdiction, 29 January 2004, p. 37, available at <www.worldbank.org/icsid>) Regarding ICC arbitral jurisprudence on the rule adopted in Article 177(2), see especially J. Paulsson, 'May a state invoke its internal law to repudiate consent to international commercial arbitration? Reflections on the Benteler v. Belgium Preliminary Award' (1986) 2 Arbitration International 90; see also Y. Derains, 'Les tendances de la jurisprudence arbitrale internationale' J.D.I. 1993, 829; E. Gaillard & J. Savage, eds., Fouchard, Gaillard, Goldman On International Commercial Arbitration(The Hague: Kluwer International Law, 1999) [hereafter Fouchard Gaillard Goldman] at 325-29, paras. 550-56.

8
See e.g. J. Paulsson, supra note 7; Fouchard Gaillard Goldman, supra note 7.

9
J. Paulsson, supra note 7 at 95, quoting and translating an extract from the award in ICC case 1939, cited by Y. Derains, 'Le statut des usages du commerce international devant les juridictions arbitrales (A la lumière de l'expérience de la Chambre de Commerce Internationale)' Rev . arb. 1973.122 at 145.

10
It would also seem to reflect the ideology underlying the premise that State entities and multinationals must be treated as equals.

11
See Fouchard Gaillard Goldman, supra note 7 at 314-15. Article 139 of the 1979 Iranian Constitution was left untouched by the 1997 Iranian International Commercial Arbitration Act.

12
See L. Strauss, La persécution et l'art d'écrire (Paris: Pocket ('Collection Agora'), 1995).

13
See J. Paulsson, supra note 7; Fouchard Gaillard Goldman, supra note 7 at 325-29, paras. 550-56.

14
The ICC Rules of Arbitration implicitly refer to their underlying principles in Article 35 (emphasis added): 'In all matters not expressly provided for in these Rules, the Court and the Arbitral Tribunal shall act in the spirit of these Rules and shall make every effort to make sure that the Award is enforceable at law.'

15
See P. Lalive, J.F. Poudret & C. Reymond, supra note 6 at 303-12.

16
R. Briner, Commentary on Article 177 in S. V. Berti, supra note 1 at 324.

17
Ibid.; see also P. Lalive, J.F. Poudret & C. Reymond, supra note 6 at 309.

18
See J. Paulsson, supra note 7; Y. Derains, 'Les tendances de la jurisprudence arbitrale internationale' J.D.I. 1993.829 ; Fouchard Gaillard Goldman, supra note 7 at 325-29, paras.550-56.

19
Article 4 of the International Law Commission's Draft Articles on Responsibility of States for Internationally Wrongful Acts provides: '1. The conduct of any State organ shall be considered an act of that State under international law, whether the organ exercises legislative, executive, judicial or any other functions, whatever position it holds in the organization of the State, and whatever its character as an organ of the central government or of a territorial unit of the State. 2. An organ includes any person or entity which has that status in accordance with the internal law of the State.' See J. Crawford, The International Law Commission's Articles on State Responsibility, Introduction, Text and Commentaries (Cambridge: Cambridge University Press, 2002).

20
See A. Giardina, 'Clauses de stabilisation et clauses d'arbitrage : vers l'assouplissement de leur effet obligatoire?' Rev. arb. 2003.647.

21
See E. Silva Romero, 'ICC Arbitration and State Contracts' supra note 5 esp. at 85-88, paras. 34-53.

22
See e.g. E. Loquin, 'La réalité des usages du commerce international' Revue internationale de droit économique 1989.163; Lord Mustill, 'The New Lex Mercatoria: The First TwentyFive Years' in Liber Amicorum for The Rt. Hon. Lord Wilberforce (Oxford: Clarendon, 1987) 149. Referring to Eric Loquin's article, Fouchard, Gaillard and Goldman expressly state that 'the presumption of competence of parties in international trade' is a principle of lex mercatoria (Fouchard Gaillard Goldman, supra note 7 at 818)

23
See e.g. E. Loquin, supra note 22; Lord Mustill, supra note 22; Fouchard Gaillard Goldman, supra note 7 esp. at 818-34.

24
R. Briner, Commentary on Article 177 in S. V. Berti, supra note 1 at 324.

25
Those duties have been clearly defined under French law. See e.g. F.Terré, Ph. Simler & Y. Lequette, Droit civil : Les obligations, 7th ed. (Paris: Dalloz, 1999) at 403ff.

26
Ibid. See also E. Loquin, supra note 22; Lord Mustill, supra note 22.

27
This is, for instance, the case in Colombia. Article 70 of Law No. 80 of 1993 authorizes all Colombian State entities to execute arbitration agreements, without limitation.

28
See para. 15, above.

29
See R. Briner, Commentary on Article 177 in S. V. Berti, supra note 1 at 326.

30
See J. Paulsson, supra note 7; Y. Derains, supra note 7.

31
'Article 46. Provisions of internal law regarding competence to conclude treaties. 1. A State may not invoke the fact that its consent to be bound by a treaty has been expressed in violation of a provision of its internal law regarding competence to conclude treaties as invalidating its consent unless that violation was manifest and concerned a rule of its internal law of fundamental importance. 2. A violation is manifest if it would be objectively evident to any State conducting itself in the matter in accordance with normal practice and in good faith. Article 47. Specific restrictions on authority to express the consent of a State. If the authority of a representative to express the consent of a State to be bound by a particular treaty has been made subject to a specific restriction, his omission to observe that restriction may not be invoked as invalidating the consent expressed by him unless the restriction was notified to the other negotiating States prior to his expressing such consent.'

32
R. Briner, Commentary on Article 177 in S. V. Berti, supra note 1 at 326.

33
See J. Paulsson, supra note 7; Fouchard Gaillard Goldman, supra note 7 at 325-29, paras. 550-56.

34
Law N° 60/2003 of 23 December 2004. See F. MantillaSerrano, Ley de Arbitraje - Una perspectiva internacional (Madrid: Iustel, 2005); idem, 'La nouvelle loi espagnole du 23 décembre 2003 sur l'arbitrage' Rev. arb. 2004. 225. See also E. Verdera y Tuells, La Ley 60/2003 de 23 de diciembre de Arbitraje, entre la tradición y la innovación (Madrid : Real Academia de Jurisprudencia y Legislación, 2005).

35
As translated by F. MantillaSerrano, Ley de Arbitraje - Una perspectiva internacional, supra note 34 at 351.

36
This seems to be the case in Thailand.

37
Fouchard Gaillard Goldman supra note 7 at 53, para. 102.

38
See e.g. Paris, 14 March 1989, Murgue Seigle v. Coflexip, Rev. arb. 1991.355 (Annot. J.H. Moitry & C. Vergne); Cass. civ. 1re, 21 May 1997, Renault v. société V 2000 (Jaguar France), Rev. arb. 1997.537 (Annot. E. Gaillard).

39
See para. 47, above.

40
Cited by J. Paulsson, supra note 7 at. 95.

41
See e.g. Article 34 of the UNCITRAL Model Law.

42
R. Briner, Commentary on Article 177 in S. V. Berti, supra note 1 at 325.

43
See E. Silva Romero, 'The Dialectic of International Arbitration Involving State Parties', supra note 5 at 83, para. 20.

44
Ibid. at 83, para. 23.

45
Ibid. at 82-84, para. 17-27; idem, 'ICC Arbitration and State Contracts' supra note 5 at 39-41, paras. 21-31.