The state-to-state option is one that is not really satisfactory to business. Too many different political variables enter into state-to-state resolution. It may be that my particular claim is not worth the state's jeopardizing its other relationships with the state I'm going to complain against. That has long been seen as unsatisfactory.
That's one reason that arbitration has always been used so much. This whole idea of a private party being able to go against the state, which is a relatively new one that has come out of these BITs, has been so popular because it has allowed private businesses to undertake their own claims against the government they feel has wounded them.