Contracting With Governments: Pitfalls, Arbitration, Sovereign Immunity And Enforcement

Entering into a contract with an entity owned or controlled by the state poses unique challenges not faced when dealing with a private commercial counterparty. Parties should be aware of certain distinctive features of negotiating with a state entity from the start of any commercial relationship. It is particularly important for parties to consider these implications when conducting business in the Middle East given that:

1. state entities play a major role in the procurement of major projects, particularly in GCC countries; and
2. the reconstruction of infrastructure and the development of natural resources in countries such as Iraq require significant foreign investment in the form of contracts with state-owned entities.