Whether international commercial arbitration is appropriate as a method of state contracts dispute settlement is the main question of this thesis. In the course of this study, it is noted that, as a growing method of private commercial disputes settlement, international commercial arbitration, in principle has developed against a private law background. A trend in the practice of such arbitrations points to a desire for an expansion of the powers of arbitrators and the subsequent reduction of the role of national laws in arbitration and its eventual elimination through the so-called 'transnationalisation' of the process. Chapters I-VI focus on the question of how this process of transnationalisation is pursued and to what extent it has been accomplished. These chapters include a study of the nature of arbitration and state contracts, jurisdictional issues, control function in arbitration of state contracts, applicable substantive law, substantive remedies and the recognition and enforcement of awards. The final chapter, the question of why such a transnationalisation is sought is addressed. It attempts to identify the theoretical basis of transnational arbitration and any likely policy objectives followed by its proponents. From such a study, it would appear that, as distinct from national and international law, transnational law theory as the basis of international commercial arbitration follows a reductionist view of the setting of the law relating to transnational economic activities which considers only the commercial aspects. Given such foundations of the theory, it is argued that a bias towards the transnational business community ensues and is in turn reflected in the mechanisms of dispute settlement. In this sense, it would appear that, in relation to the settlement of state contract disputes, the mechanism, in principle, is biased against state parties whose concerns are not purely commercial, but have a public policy element. In dealing with the above, by way of comparison, references are made to the national and international law positions in respect of the matters under discussion.