## Facts

- German companies (Benteler) and the Belgian State, with a Belgian company (ABC), executed a February 4, 1980 Protocol of Agreement concerning ABC’s industrial and financial restructuring.
- The Protocol included an arbitration clause requiring that disputes between Benteler and Belgium be decided by a three-member arbitral tribunal, without appeal, with authority to decide ex aequo et bono.
- The clause specified party-appointed arbitrators (each of the State and Benteler appointing an arbitrator of its own nationality), selection of a third arbitrator as president of a different nationality, and a seat at the president’s domicile (set in Geneva).
- A dispute arose over implementation of the restructuring, and Benteler commenced ad hoc arbitration.
- Belgium objected at the outset, arguing the arbitration clause was invalid under Belgian Judicial Code Article 1676, which barred the State from submitting disputes to arbitration.
- The tribunal bifurcated proceedings to decide, as a preliminary matter, the validity of the arbitration clause and the tribunal’s jurisdiction.

## Issues

1. Whether Belgium could rely on Belgian Judicial Code Article 1676 to invalidate its consent to arbitrate in an international commercial agreement.
2. Whether Article II(1) of the 1961 European Convention on International Commercial Arbitration applied and confirmed that public-law entities, including States, may conclude arbitration agreements for international commercial transactions.
3. Whether the Protocol qualified as an “international commercial operation” within the meaning of the European Convention, triggering its regime for arbitration agreements.

## Decision

- The tribunal issued a preliminary award upholding the validity and effectiveness of the arbitration clause.
- The tribunal rejected Belgium’s attempt to invalidate the clause by invoking Belgian domestic law prohibiting the State from arbitrating.
- The tribunal held the dispute fell within the scope of the 1961 European Convention on International Commercial Arbitration and that Belgium had capacity to agree to arbitration under Article II(1).
- The tribunal affirmed its jurisdiction, allowing the arbitration to proceed to the merits.

## Legal Principles

- A State that has consented to arbitrate an international commercial dispute may not repudiate that consent by invoking internal law restrictions on the State’s capacity to arbitrate, particularly where an applicable international convention recognizes such capacity.
- Under Article II(1) of the 1961 European Convention on International Commercial Arbitration, public-law entities of Contracting States may conclude arbitration agreements relating to international commercial transactions.
- “International commercial operation” under the European Convention is interpreted autonomously and broadly for Convention purposes, rather than being limited by narrow domestic classifications.
- International arbitration may apply transnational principles, including good faith and the prohibition against contradictory conduct to another party’s detriment, to prevent a State from denying a freely given agreement to arbitrate.

## Conclusion

The tribunal held that Belgium’s consent to arbitration in an international restructuring agreement was binding and could not be nullified by Belgium’s domestic prohibition on state arbitration; the European Convention confirmed the State’s capacity to arbitrate and the proceedings continued on the merits.


Benteler & Others v. Belgian State, Ad Hoc Arbitral Award (Geneva) (Nov. 18, 1983)