Defense budgets across NATO member states are at historic highs.1 The North Atlantic Treaty Organization ("NATO") is spending - and that means contracts. For manufacturers, technology providers, logistics companies, and everyone else in the wider defense supply chain, NATO is no longer a distant political institution but a significant commercial actor. With it comes a legal architecture unlike anything in ordinary commercial practice. NATO is, for most practical purposes, untouchable in national courts - and arbitration is the only option. Our first contribution covered its fundamentals: why arbitration works so well in the defense sector, and how to use it effectively. This installment addresses what changes when your counterparty is an international organization enjoying near-absolute immunity. We begin with the concept of immunity and why it matters for contractors (A.), before turning to arbitration as the only available dispute resolution mechanism - and its limits (B.). Finally, we address a practical hurdle that is easy to overlook but critical to get right: security clearance requirements for arbitrators and counsel (C.).
Contracts with NATO – the concept of immunity
To fulfill its collective defense mandate,2 NATO operates as a full international organization with its own legal personality.3 This enables NATO to enter into contracts, own property, and - in principle - sue and be sued. While major weapons platforms are generally procured by member states directly, NATO procures a wide range of goods and services through agencies such as the NATO Support and Procurement Agency (NSPA)4 and the NATO Communications and Information Agency (NCIA). In entering into such contracts, the nature and scope of a NATO agency's role may vary - including whether it acts as principal or as agent.
- The NCIA directly awarded a €5.3 million contract to Leonardo S.p.A., an Italian defense company, for the delivery and implementation of the next generation of ship-to-shore high-frequency communications.5 The contract is financed through NATO's common funding mechanism.6 The end beneficiary is NATO collectively, not any individual member nation on whose behalf NCIA would be acting as agent.
- In many multinational cooperative procurement programs however, NSPA contracts on behalf of one or more member states. This arrangement allows participating nations to benefit from economies of scale, streamlined procurement processes, and a unified contractual and legal framework - advantages that would be difficult to achieve through separate national acquisitions. A prominent example is the 2023 purchase of up to 1,000 Patriot Guidance Enhanced Missiles, an advanced air defense interceptor designed to counter tactical ballistic missiles, cruise missiles, and aircraft.7 Rather than a single identified state, NSPA acted on behalf of a coalition of four sovereign states - Germany, the Netherlands, Romania, and Spain - whose individual shares and obligations are aggregated into one overarching procurement instrument.
- Illustrating the evolving - and not always easily categorized - nature of these arrangements, in 2024, NSPA awarded the first-ever Counter-small Unmanned Aircraft Systems (C-sUAS) multinational procurement framework in NATO's history. The framework consolidates member nations' acquisition needs through a Support Partnership8 sponsored by Belgium. Under this framework agreement, leasing, acquisition, and integrated logistics options are combined, enabling participating nations to trial equipment before committing to full purchases.
As these examples illustrate, NATO's role as a commercial actor is growing. However, the more actively NATO engages in commercial life - whether as principal or as agent - the more likely disputes become. It is precisely this intersection of contractual capacity and dispute exposure that makes the question of immunity so important for private contractors. This is because, as an international organization, NATO and its agencies enjoy immunity from the jurisdiction of national courts.9 The rationale is functional: immunity safeguards the Alliance's independence by preventing any single member state from leveraging its domestic courts or enforcement mechanisms to exert undue influence over the organization.10
However, unlike state immunity - which generally does not extend to commercial transactions - the immunity of international organizations is in practice treated as absolute,11 shielding even routine contractual disputes from domestic court jurisdiction.12 This was recently confirmed by a Dutch Court of Appeal, which upheld the absolute functional immunity of two NATO entities even in the absence of a reasonable alternative means of dispute resolution.13
Contractors who fail to structure their arrangements with these constraints in mind risk finding themselves without an effective remedy - making early, transaction-specific legal guidance indispensable.
Arbitration as the only path - and its limits
Notwithstanding the above, access to justice is a requirement of constitutional law and fundamental human rights, particularly under the European Convention on Human Rights.14 Where immunity bars access to domestic courts, states are obliged to ensure that an adequate alternative dispute resolution mechanism is available. Arbitration can fill the gap.15
The NATO Headquarters General Terms and Conditions (2019)16 and the NSPA General Provisions for Fixed-Price Contracts (Services) (2023)17 both provide for ad hoc arbitration conducted in accordance with the rules of the International Chamber of Commerce (ICC) - as distinct from institutional arbitration administered by the ICC itself. Many comments could be made regarding potential issues arising from the wording of these standard form clauses. For example, neither the ICC Rules18 nor the contracts themselves say anything about immunity. That silence raises a question of considerable practical importance: does the very agreement to arbitrate constitute a waiver of NATO's immunity from the tribunal's jurisdiction? On the one hand, Article V of the Ottawa Agreement requires an express waiver for NATO to lose its immunity from legal process - and since neither the contracts nor the applicable rules contain such a waiver, immunity arguably remains intact. On the other, an arbitration clause is a voluntary submission to a private dispute resolution process; it would be difficult to reconcile an agreement to arbitrate with a subsequent invocation of immunity to prevent the tribunal from exercising the very jurisdiction it was asked to exercise. This is a nuanced area, and contractors should be aware that the question remains open.
The NSPA General Provisions for Fixed-Price Contracts (Materiel) (2025)19 add a further layer of complexity. It adopts the PCA Arbitration Rules 2012,20 which contain a built-in mechanism regarding jurisdictional immunity: under Article 1(2), agreement to arbitrate under the PCA Rules is deemed to constitute a waiver of jurisdictional immunity, while enforcement immunity is preserved absent an explicit waiver. Clause 11.7 of the NSPA General Provisions for Fixed-Price Contracts (Materiel) sits alongside that mechanism. It expressly provides that "nothing in this provision, or the Contract, shall be interpreted as a waiver of any privileges or immunities accorded to any Party hereto with respect to any procedure before the court or tribunal of any State […]." Crucially, Clause 11.7 is directed exclusively at proceedings before State courts and tribunals—it does not, on its face, address the arbitral proceedings themselves. There is therefore an argument that Clause 11.7 does not override the waiver that the PCA Rules automatically trigger upon agreement to arbitrate, whereas NATO's immunities before national courts - including in any enforcement or challenge proceedings - remain firmly preserved.21
In light of the foregoing, it is strongly recommended to ensure that a binding arbitration agreement is in place that deals with these issues.
It must further be recalled that immunity from execution operates independently of immunity from jurisdiction. That said, in practice, most awards do appear to be complied with voluntarily.22 But voluntary compliance is not a legal entitlement, and this risk should be addressed early and before the agreement is signed.
Security clearance for arbitrators and counsel
Notwithstanding these potential legal pitfalls highlighted above, contracting with a NATO agency is undoubtedly a significant commercial opportunity. Once qualified, however, immunity and enforcement, are not the only structural challenges contractors face. The arbitration process itself is shaped by a further constraint often overlooked: security clearance requirements for arbitrators, counsel, and - in some cases - the entire legal team.
NATO's standard contract terms impose nationality and security requirements on anyone involved in the arbitration. Under the NSPA General Provisions for Fixed-Price Contracts (Services) (2023), arbitrators must hold the nationality of a NATO member state and comply with NATO security rules (Clause 13.4). Non-NATO nationals are excluded from access to classified documents (Clause 13.5). The 2025 Materiel provisions go further: NATO security rules may restrict the communication of classified information to anyone who is not a national of a NATO member state (Clause 11.3) - meaning the restriction can extend beyond arbitrators to encompass the contractor's entire team, legal and non-legal. The cumulative effect of these requirements is significant. The pool of eligible arbitrators is substantially narrowed: a non-NATO national - such as the archetypical Swiss or Singaporean chair often appointed in international arbitrations - is excluded from the outset. Even among nationals of NATO member states, only those who already hold the requisite level of security clearance, or who are in a position to obtain it within the procedural timeframe, can realistically be considered.
Security clearance is obtained through a vetting procedure administered by each member state. In Germany, the governing statute is the Sicherheitsüberprüfungsgesetz ("SÜG"), which provides for three levels of clearance depending on the sensitivity of the information involved.23 The process is thorough: it covers foreign contacts, criminal history, financial circumstances, and in some cases close personal relationships.24 Dual nationals - where one nationality is non-NATO - are not automatically excluded, but clearance is assessed on a case-by-case basis.25
Importantly, clearance may be required not just for lead counsel but for every team member involved in the case. Contractors should engage with the relevant national security authority at the earliest opportunity - this is a prerequisite to effective representation, not an afterthought, which may often conflict with procedural timelines.
Conclusion
Arbitrating against NATO is not like arbitrating against a private counterparty. The language of the standard form clauses, the immunity framework, and the security clearance requirements each present distinct challenges - and together, they fundamentally alter the risk profile of any NATO procurement contract. None of these issues are insurmountable, but all of them must be identified, understood, and addressed before the contract is signed. Early legal advice - from counsel with the right experience - is essential.
1 Defence Expenditure of NATO Countries (2014-2025) as per June 3, 2025, accessible via: https://www.nato.int/content/dam/nato/webready/documents/finance/def-exp-2025-en.pdf; last access: May 12, 2026.
2 NATO is an intergovernmental military alliance established by the North Atlantic Treaty, signed in Washington on April 4, 1949. Its 32 member states have committed, under Article 5 of that Treaty, to treat an armed attack against one as an attack against all, see: https://www.nato.int/en/what-we-do/introduction-to-nato/collective-defence-and-article-5; last access: May 12, 2026.
3 Article IV Agreement on the Status of the North Atlantic Treaty Organization, National Representatives and International Staff signed in Ottawa September 20, 1951 ("Ottawa Agreement"); accessible via: https://www.nato.int/en/about-us/official-texts-and-resources/official-texts/1951/09/20/agreement; last access: May 12, 2026.
4 NSPA is NATO's main services provider, delivering a broad spectrum of integrated capabilities for the Alliance, its member nations and partners, bringing together NATO's logistics support and procurement activities; accessible via: https://www.nato.int/en/about-us/organization/nato-structure/nato-support-and-procurement-agency-nspa; last access: May 12, 2026.
5 This system enables NATO naval forces to communicate independently of satellites, see: https://www.ncia.nato.int/about-us/newsroom/agency-awards-contract-for-shiptoshore-communications-equipment; last access: May 12, 2026.
6 An explanation of NATO's various funding mechanisms is provided via: https://www.nato.int/en/what-we-do/introduction-to-nato/funding-nato; last access: May 12, 2026.
7 https://www.nato.int/en/news-and-events/articles/news/2024/01/03/nato-to-buy-1000-patriot-missiles-to-enhance-allies-air-defences; last access: May 12, 2026.
8 https://defenceredefined.com.cy/nspa-awards-first-c-suas-multinational-contract-in-natos-history/; last access: May 12, 2026.
9 Article V Ottawa Agreement; per Article XII Ottawa Agreement, member states' representatives to NATO and their staff are granted "the immunities and privileges accorded to diplomatic representatives and their official staff of comparable rank".
10 On the rationale for the jurisdictional immunity of international organizations, see Reinisch, "Settlement of Disputes to which International Organizations are Parties" (2023), pp. 1–30; Ortiz, "Dispute Settlement Between International Organizations and Private Parties Through International Arbitration," Nordic Journal of International Law 94 (2025), pp. 422–440.
11 Reinisch, "Arbitrating disputes with international organizations and some access to justice issues," King's Law Journal (2023), pp. 546–561, p. 547; Ortiz, "Dispute Settlement Between International Organizations and Private Parties Through International Arbitration," Nordic Journal of International Law 94 (2025), p. 426.
12 Any waiver of NATO's immunity under the Ottawa Agreement requires express, case-by-case authorization and, critically, can never extend to measures of execution or detention of property, Article V Ottawa Agreement.
13 Supreme Headquarters Allied Powers Europe et al v Supreme Site Service GmbH et al., Court of Appeal's-Hertogenbosch, Judgment of December 10, 2019, full decision (Durch) available via: https://uitspraken.rechtspraak.nl/details?id=ECLI:NL:GHSHE:2019:4464; last access: May 12, 2026.
14 Article 6 European Convention on Human Rights; Reinisch, King's Law Journal (2023), pp. 554–556; Ortiz, "Dispute Settlement Between International Organizations and Private Parties Through International Arbitration," Nordic Journal of International Law 94 (2025), pp. 426–428.
15 In the landmark case Waite and Kennedy v. Germany and Beer and Regan v. Germany (ECtHR, February 18, 1999), the European Court of Human Rights held that a material factor in assessing whether the grant of immunity is permissible under the ECHR is whether the applicants had available to them "reasonable alternative means to protect effectively their rights." The Court reasoned that it is not enough simply to offer arbitration in some form: the mechanism must provide fair trial guarantees comparable to those available in national courts.
16 General procurement of goods and services by NATO Headquarters. The terms govern contracts entered into directly by NATO HQ for the supply of materiel and services required for its operations. The arbitration clause is found in Clause 15 — Disputes. Accessible via: https://www.nato.int/content/dam/nato/webready/documents/finance/procurement-HQ-General-Terms-Conditions.pdf; last access: May 12, 2026.
17 Procurement of services—including maintenance, repair, technical support, and related services—by NSPA; The arbitration provision is contained in Clause 13 — Disputes. Accessible via: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwjYt5Gx5e2TAxWN1wIHHaDvKa0QFnoECBsQAQ&url=https%3A%2F%2Fwww.nspa.nato.int%2Fresources%2Fsite1%2FGeneral%2Fbusiness%2Fprocurement%2FGeneral%2520info%2FGP_FP_Services.pdf&usg=AOvVaw0-yNi0O6QVuSSfUyaFyHag&opi=89978449; last access: May 12, 2026.
18 2021 Arbitration Rules of the International Chamber of Commerce; accessible via: https://iccwbo.org/dispute-resolution/dispute-resolution-services/arbitration/rules-procedure/2021-arbitration-rules/#block-accordion-35; last access: May 12, 2026.
19 As with the 2015 version, this document governs the procurement of physical materiel by NSPA on behalf of NATO member nations and NATO bodies. The 2025 version represents a significant update to the 2015 General Provisions, introducing the PCA Arbitration Rules 2012 as the default procedural framework. The arbitration provision is contained in Clause 11 — Disputes; accessible via: https://www.nspa.nato.int/resources/site1/General/business/procurement/General%20info/GP-FP-Materiel-2025-12-08.pdf?__cf_chl_tk=5xfX1wgj1YLKlC21MdsC5h2YoeeI0VxT8KeDxYBnNLU-1776257870-1.0.1.1-IW3JHFLxe9sZRRJiMzStmMptkZb2YtvdokUZNL3vqAA; last access: May 12, 2026.
20 The PCA Arbitration Rules 2012 (with Optional Protocols adopted in 2024) are the PCA's newest set of procedural rules, which parties may use for the arbitration of disputes involving various combinations of states, state-controlled entities, intergovernmental organizations, and private parties; accessible via: https://pca-cpa.org/en/services/arbitration-services/pca-arbitration-rules/; last access: May 12, 2026.
21 Ortiz, "Dispute Settlement Between International Organizations and Private Parties Through International Arbitration," Nordic Journal of International Law 94 (2025), p. 436.
22 Reinisch, "Settlement of Disputes to which International Organizations are Parties" (2023), p. 560.
23 The three levels are: (i) a simple security clearance (einfache Sicherheitsüberprüfung, § 8 SÜG) for access to VS-VERTRAULICH (confidential) information; (ii) an extended security clearance (erweiterte Sicherheitsüberprüfung, § 9 SÜG) for access to GEHEIM (secret) information or a large volume of VS-VERTRAULICH material; and (iii) an extended security clearance with security investigations (erweiterte Sicherheitsüberprüfung mit Sicherheitsermittlungen, § 10 SÜG) for access to STRENG GEHEIM (top secret) information or a large volume of GEHEIM material.
24 Specifically, §§ 11–16 SÜG set out the scope of the security check (Sicherheitsüberprüfung) at each level. For the simple clearance (§ 8 SÜG), the review covers the applicant's own personal data, including any foreign contacts (§ 11 SÜG). The extended clearance (§ 9 SÜG) additionally encompasses the applicant's cohabitating partner and a review of financial circumstances (§ 12 SÜG). The extended clearance with security investigations (§ 10 SÜG) further includes personal interviews and a broader inquiry into the applicant's social environment and close personal relationships (§ 13 SÜG).
25 This follows from § 5 SÜG, which sets out the general grounds for a security risk (Sicherheitsrisiko). A security risk exists where there are actual indications giving rise to doubts as to the reliability of the person concerned, including a particular vulnerability to foreign intelligence approaches or blackmail, or doubts as to the person's commitment to the free democratic basic order (freiheitliche demokratische Grundordnung) as defined in the German Constitution (Grundgesetz). Dual nationality is not listed as an independent ground for refusal; rather, it is one factor the authority may weigh in its overall assessment of divided loyalties.
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