This chapter explains the role played by reservations, the application of the rules of the Vienna Convention on the Law of Treaties, and practice in dealing with reservations. It defines reservations and distinguishes them from interpretative declarations and political declarations. It examines whether reservations are permissible or impermissible, including the test whether a reservation is incompatible with the object and purpose of the treaty. It also discusses the rules governing acceptance and objection, the legal effect of reservations, the question whether a prohibited reservation can be severed, and special cases such as human rights treaties, reservations relating to internal law, vague or general reservations, reference to Islamic law, late reservations, and the role of treaty monitoring bodies. It analyses the procedure for making or objecting to reservations or withdrawing them, and the functions of the depositary in relation to reservations.

This chapter considers the various functions of States in international commercial and investment arbitration, which are essentially twofold.First, States are legislators and the creators of the system, and they also assist its development through their conduct which informs the interpretation of relevant treaties, such as BITs.Secondly, States are also parties to such proceedings, usually as the respondent to a claim, but also possibly also as the claimant, as a counter-claimant, and as a non-party intervener.This chapter then considers issues faced by States when acting as the respondent, and discusses how States might best prepare for and handle such disputes, and it also identifies various procedural issues which are likely to arise in such arbitral proceedings.It concludes that States have a complex combination of roles in international arbitration, and that the challenges in responding to claims can be managed if States are willing to learn from the decades of experience which States now have of participating in international arbitration proceedings.