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Iv) Non-inter-State arbitration agreements between States and private parties

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The questions of whether and to what extent there has been an implied waiver of the rule of local remedies may arise in connection with arbitration clauses which are included in State contracts with aliens and which are not also covered in some way by an inter-State agreement between the States concerned. Such contracts would not be on a par with treaties, 98 nor strictly would they be contracts within the international legal system, nor between international persons, although they might be governed by transnational law. 99 A preliminary question that must be answered is whether arbitration clauses included in such contracts would become ineffective, if the contracts themselves are terminated or cease to have effect for some reason. The question is of some importance, because, if arbitration clauses could become ineffective in this way, the question of whether there has been an implied waiver of the rule of local remedies may often become moot. The problem becomes particularly significant where, for example, the contract is governed by the national law of the State party to the contract and the contract is terminated under that law, perhaps by legislation.

(p. 168) It seems to be the better view that such arbitration clauses survive contracts between States and aliens. 100 Hence, the substantive issues of whether and to what extent a waiver of the rule of local remedies can be implied where such an arbitration occurs assumes importance. There appear to be many cases in which arbitration has been resorted to under a State contract with an alien and in which the argument has not been raised by the respondent State that the alien has not exhausted local remedies before seeking arbitration. 101 In a few cases concerning this kind of arbitration which came before the PCIJ and the ICJ, the issue was raised by the respondent State, and the plaintiff State argued for a waiver of the rule, but in none of these cases was the issue decided. 102 The fact that the issue of local remedies has not been contested in the majority of cases may lend some support to the view that an arbitration clause of this kind does imply a waiver of the rule of local remedies, at least in regard to the merits of the dispute, although it may not be conclusive. The absence of an international decision to the contrary would also not militate against this position. Indeed, it would be reasonable to conclude from the fact that arbitration has been chosen as the means of settling disputes that it was intended as such in the absence of contrary indications to withdraw the merits of the dispute from the jurisdiction of the local courts and institutions at least until the arbitral award had been given. This is the better view supported by authority. It would be difficult to find acceptable arguments for the opposite view. 103 The ILC does not deal specifically with this issue.




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Ii) Article 10 | Iv) Article 12 | Abstract and Keywords | Scope of the Rule | Exceptions to or Limitations on the Rule | A) Ineffective Remedies | B) Undue Delay | D) Circumstances Not Limiting the Operation of the Rule | E) Circumstances Rendering the Requirement of Exhaustion of Remedies Unreasonable | A) Express Waiver |


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