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How Effective is Arbitration?

Jan Paulsson, International Resources Law: Today's Oil, Gas, and Mining Projects (1997)

A few simple truths about the source of the danger, and about the types of remedies that may be sought when the evil day has come, merit reflection at the threshold of this analysis, because they will influence the entire discussion.

The danger may come from within the contractual relationship, as when the foreign party has contracted directly with the host government, which is then tempted to disrupt the bargain. Or it may come from without, as when the host government has signed no contract, but is tempted to intervene politically to load the dice in favour of another national entity — public or private — which is nominally the contracting party. (The case of an investment or other business initiative in the absence of any contract at all falls under this second category.)