Whether international commercial arbitration is appropriate as a method of stale contracts dispute settlement is the main question of this thesis. State contracts are different from ordinary commercial contracts, in that, due to the sovereign status of one party and the involvement of public interest, there is a need, recognised by municipal law and international law, for the flexibility in contractual relations. The ability of international commercial arbitration to respond to various needs of international trade have no doubt been among factors contributing to its popularity with the main recipient of its service i.e. the international business community. In particular, the law and practice of international commercial arbitration in popular seats of arbitration have considerably promoted the stability of contractual relations much desired by the business community. Such strong support for the stability of contractual relations is also in line with the broad economic interests of these countries. It is. however, submitted that this overall commitment by international commercial arbitration to the stability of contractual relations is not compatible with the flexibility requirement of state contracts. This work follows a classical structure, in that, various aspects of arbitration including jurisdictional issues, questions of control and procedural remedies, substantive law, remedies and recognition and enforcement of awards will be studied. More specifically, the effects of the developments in national laws and arbitral practice on the arbitration of state contracts will be considered. As well as international commercial arbitration, this work will cover other types of state contracts arbitrations including treaty-based arbitrations such as those conducted within the regimes of the ICSID and the Iran-US Claims Tribunal.