The starting point is correct in the sense that the issue of whether or not a state is to be considered a party to a contract (and specifically to an arbitration agreement) is to be determined by normal principles of contract law and interpretation – although there has been much academic discussion of such principles as alter ego, estoppel and state responsibility, there are few or no actual examples of the application of such principles producing an actual result ( a lot of discussion but no decisions). The cases where the state has been bound to the contract of one of its organs such as was the case in one of the Bridas cases have been decided on the basis of a finding about the intention of the parties. The relationship of principal and agent (at least under English law) comes about as a result of a deliberate act by the Principal. Ms Roos makes that clear.

However the examples she gives of possible situations where this relationship may be established sre unlikely in practice. In modern government practice state owned entities tend to be established with the deliberate intent to distance government from the enterprise. One of the reasons is often to keep debt off the public balance sheet and in order to do this it is necessary to demonstrate a very clear degree of independence. Thus the situations where the statute or founding document demonstrates subservience to the degree that they can be read as showing a generalised agency relationship are likely to be rare.

I discussed some of these issues in an article in Arbitration International (Volume 20 Number 4 2004, p 287) and reached the following conclusions:

• The issue of whether a state is bound to a contract is entirely one of the intention of the parties;

• the parties whose intentions must be judged are the private counterparty and the state itself (not the state’s organ);

• the test of intention is not one of ‘reasonable expectations’ raised in the mind of the private counterparty by the behaviour of the slate during or after the negotiations;

• the only true test is one of subjective intention on the part of both parties. External ‘objective’ factors may serve to prove the existence of such subjective intention, but however many of these factors there may be, they will not make the state liable in the absence of an intention on its part to be bound;

• the state organ may be acting as the agent of the state, but if it is so doing, the organ itself cannot be liable for its acts to the extent that it is acting as agent:

• the concept of ‘alter ego’ meaning that the state itself is treated as the contracting party notwithstanding the absence of provable intention or a provable agency relationship, has not moved beyond being a theoretical possibility and it is unlikely ever to be the correct basis for a finding that a state is a party. The issue is more likely to be resolved in favour of the claimant by an ‘agency’ or ‘true intent’ argument. If it is not resolved in that way there is unlikely to be the basis for a finding that the organ is an alter ego of the state. If the agency and intent arguments fall to be resolved against the claimant, the claimant is unlikely to succeed in an alter ego argument;

One of the interesting results of the above conclusions is that if the Claimant succeeds in showing that the state organ is merely an agent of the state, it may lose its right to an award against the organ. Although, as Ms Roos correctly points out, the motivation for pursuing the state rather than the organ may be that it is concerned about its ability to enforce against the organ, it is also the case that it is often difficult to enforce against the state. Thus in successfully joining the state the claimant may be jumping out of the frying pan into the fire!