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I. Introduction

1. One of the most widely-resorted to and classic defence raised by

States (or State-owned entities) trying to escape arbitration

proceedings brought against them is that provisions of domesticlaw (sometimes at a constitutional level) of such States contain

limitations or even prohibitions preventing the States (or State-

owned entities) from agreeing on arbitration1.

2. Disagreement exists among commentators as to the classification of

the objection mentioned in the preceding paragraph. On the one

end, in fact, some writers argue that such objection relates to the

legal capacity of the State (or State-owned entity) to enter into

valid and binding arbitration agreements2; on the other end, other

commentators contend that the objection under considerationrather concerns issues of subjective arbitrability (or arbitrability

ratione personae) of the dispute to be submitted to arbitration3.

In this respect, it has also been argued that classifying the

objection as relating to arbitrability rather than capacity of the

State would be helpful in order to overcome the problems arising

out of the application of the so-called choice-of-law method. In

other words, the classification of the objection as one of capacity

would trigger the application of the law of the State which invokes

the incapacity defence and the result of such approach would be

1 G. B. BORN,International Commercial Arbitration , Vol. I, Alphen aan den Rijn (2009), 630.2 SeeA. J. VAN DEN BERG, The New York Arbitration Convention of 1958, Deventer [etc.] (1981),

277 et seq.; J.-F. POUDRET / S. BESSON, Comparative Law of International Arbitration, 2nd ed.,

London/Zurich (2007), 182 para. 228.; G. B. BORN, International Commercial Arbitration, Vol. I,

Alphen aan den Rijn (2009), 630.3 E. GAILLARD / J. SAVAGE,Fouchard, Gaillard, Goldman on International Commercial Arbitration,

The Hague [etc.] (1999), 313 et seq. paras. 534 et seq. (and, in particular, para. 539) who states that

[w]here a public entity is prohibited from entering into arbitration agreements, that prohibition cannot

be explained in terms of capacity on the basis that the entity is incapable of judging where its own

interests lie. [] Laws preventing states and state-owned entities from validly entering into arbitration

agreements are thus true examples of the non-arbitrability of disputes, founded on the public policy.See also J. D. M. LEW / L. A. MISTELIS / S. M. KRLL, Comparative International Commercial

Arbitration, The Hague (2003), 735 paras. 27-6 et seq..Some commentators appear then to consider the subjective arbitrability as a sort of qualification of, or

synonym for, incapacity, See, in this regard, P. NACIMIENTO,sub Article V(1)(a), in H. KRONKE / P.NACIMIENTO / D. OTTO / N. C. PORT (eds.),Recognition and Enforcement of Foreign Arbitral Awards.

A global Commentary on the New York Convention , Alphen aan den Rijn (2010), 218 para. 2; See also

on this point C. I. SUAREZ ANZORENA, The Incapacity Defence Under the New York Convention, in E.

GAILLARD / D. DI PIETRO (eds.), Enforcement of Arbitration Agreements and International Arbitral

Awards. The New York Convention in Practice, London (2008), 625.

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increasingly to raise the chances for the prohibitions or limitations

relied upon by the State itself to be effective4.

3. The question of the proper classification of the States (or State-

owned entitys) objection is relevant5 insofar as it may trigger

consequences, for instance, at the stage of recognition and

enforcement of awards (See paragraphs Error: Reference source

not foundet seq. below).

4. The present writer agrees with those who support the idea that the

objection mentioned above properly relates to the capacity of the

State (or State-owned entity) to enter into valid and binding

arbitration agreements. The national statutes which contain

provisions aimed at limiting the binding effects of arbitration

agreements towards the State (and State-owned entity) in factoperate in such a way so as to exclude (or limit) the States (or

State-owned entitys) right to execute those types of agreements.

As rightly pointed out by one commentator, those prohibitions or

limitations fall fairly clearly within the classic definitions of legal

capacity6 which indeed refers to the power of one party to enter

into legal relationships in a valid and binding manner.

4 E. GAILLARD / J. SAVAGE,Fouchard, Gaillard, Goldman on International Commercial Arbitration,The Hague [etc.] (1999), 316-317 para. 538.

5 See, however, N. BLACKABY / C. PARTASIDES with A. REDFERN / M. HUNTER,Redfern and Hunter on

International Arbitration, 5th ed., New York (2009), 99 para. 2.38 who appear to suggest that the

distinction set out above has limited relevance where they state that [i]n practice, the important point is

that there may be restrictions on the power of a State or State entity to enter into an arbitration

agreement, whether these restrictions are qualified as matters of capacity or of subjective arbitrability.6 See G. B. BORN,International Commercial Arbitration , Vol. I, Alphen aan den Rijn (2009), 631.