Disputes with or between Governments
Like any company, it’s difficult for a government to require its own national court to challenge another governments if they want to foster a durable relationship on equal terms.
Therefore many governments always use arbitration to resolve disputes with other governments. In some countries the state even accepts arbitration in matters such as taxation, land registry, loans, grants, aid to developing countries, etc.
The latest development in international relations is in material aid to developing countries. Fortunately cultural and economic agreements such as, MFN clauses (Most Favoured Nation) and BITs (Bilateral Investment Treaties) now often include an arbitration clause in case of litigation between the parties.
The Institute of Arbitration has an important role as a neutral entity without any dependence on either business lobbies or from one government. The accordance between the Standard Dispute Rules and the Arbitration Law is not limited to one country or government but depends of the seat of arbitration.
So that the conflict settled by arbitration will be fiscally neutral, parties often choose the seat of arbitration that is different from the parties’ countries or a country that can fully ensure neutrality.
This is the most frequently used arbitration clause between governments:
Any dispute shall be settled at Geneva by the Institute of Arbitration (www.euro-arbitration.org) according to the Standard Dispute Rules (SDR).
This doesn’t prevent that hearings may be via videoconference or take place elsewhere than the place of arbitration (e.g. in Brussels).