State contracts and arbitral choice-of-law process and techniques: a critical appraisal

The theory of internationalization of state contracts poses some of the hardest questions that relate to both public and private international law. The theory suggests that, no matter what law the parties to such a contract choose as the proper law of the contract, international law superimposes their choice and applies automatically as the overriding governing law. Thus where the law of the host state applies as the sole applicable law either by virtue of the parties' express choice or by the conflict of laws rule of closest connection in the absence of such choice, the theory of internationalization triggers off not only the theoretical controversies of monism versus dualism of public international law but also the issues of party autonomy and the doctrine of the proper law of the contract in private international law. Besides theoretical interest, the matter has great practical importance in the real world of foreign investment dispute settlement. While critically examining these issues in the context of international commercial arbitration, the article also looks at other relevant issues such as the authority of private international arbitral tribunals to deal with public international law remedies for breach of state contracts.