Abstract
This chapter provides an overview of umbrella clauses in investment protection treaties; it also seeks to set out the evolution of umbrella clauses in investment treaties and explores the treaty tribunals’ interpretative process in umbrella clauses-related treaty disputes.
The views of the author do not represent the views of Fangda Partners or of the Hong Kong University; all mistakes and omissions are mine. I am grateful for the invaluable contribution to this paper by my colleagues at Fangda Partners in Hong Kong John Zhou and Junqing Chao.
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Notes
- 1.
See, Potts JB (2011) Stabilizing the role of umbrella clauses in bilateral investment treaties: intent, reliance, and internationalization. Va J Int Law 51:1005; see also Duke Energy, ICSID Case No. ARB/04/19, ¶ 319–320
- 2.
See, UNCTAD report on State Contracts: “A “State contract” can be defined as a contract made between the State, or an entity of the State, which, for present purposes, may be defined as any organization created by statute within a State that is given control over an economic activity, and a foreign national or a legal person of foreign nationality. State contracts can cover a wide range of issues, including loan agreements, purchase contracts for supplies or services, contracts of employment, or large infrastructure projects, such as the construction of highways, ports or dams. One of the commonest forms of State contracts is the natural resource exploitation contract, sometimes referred to as a “concession agreement”, though this is not a strict term of art (Brownlie, 2003, p. 522). Such agreements feature prominently in the natural resource sectors of developing countries. Historically, these sectors have provided the most important source of income for the domestic economy and have often been State controlled, so that foreign entrants into the sector had to make contracts with the State entity in control.”
- 3.
State Contracts, UNCTAD Reports (2004) Available at https://unctad.org/en/docs/iteiit200411_en.pdf
- 4.
See, ICSID Case Load Statistics (2019) Available at https://icsid.worldbank.org/en/Documents/resources/ICSID%20Web%20Stats%202019-1(English).pdf
- 5.
Ibid.
- 6.
Ho J (2018) State responsibility for breaches of investment contracts. CUP Press EBA Program, p 238 and footnotes
- 7.
Depending on the wording of the umbrella clause, it is at least arguable that umbrella clauses might extend treaty coverage not only to State contracts, but also to non-contractual obligations: “the language of the provision is so broad that it could be interpreted to cover all kinds of obligations, explicit or implied, contractual or non-contractual, undertaken with respect to investment generally. A provision of this kind might possibly alter the legal regime and make the agreement subject to the rules of international law,” – UNCTAD (1998) Bilateral investment treaties in the mid-1990s. United Nations, p 56
- 8.
Sinclair A (2004) The origins of the umbrella clause in the international law of investment protection, a speech delivered at BIICL Third Conference of the Investment Treaty Forum on 10 September 2004.
- 9.
Lim CL. Is the umbrella clause not just another Treaty Clause? – Essays in honour of Professor Sornarajah.
- 10.
At this juncture, it is important to note the tension between contract claims and treaty claims that umbrella clauses bring about. This tension becomes of paramount importance when it comes to applicable law issues. As the Vivendi Annulment Committee found, “Each of these claims will be determined by reference to its own proper or applicable law—in the case of the BIT, by international law; in the case of the Concession Contract, by the proper law of the contract, in other words, the law of Tucumán. For example, in the case of a claim based on a treaty, international law rules of attribution apply, with the result that the state of Argentina is internationally responsible for the acts of its provincial authorities. By contrast, the state of Argentina is not liable for the performance of contracts entered into by Tucumán, which possesses separate legal personality under its own law and is responsible for the performance of its own contracts.” - Compañiá de Aguas del Aconquija SA and Vivendi Universal v Argentina, ICSID Case No. ARB/97/3, Decision on Annulment, 3 July 2002, para 96.
- 11.
State Contracts (2004) UNCTAD series on issues in international investment agreements
- 12.
Ibid., IIA issues paper series, p 6.
- 13.
See, de Souza Fleury RP (2017) Closing the umbrella: a dark future for umbrella clauses? Kluwer Arbitration Blog, 13 October. Available at http://arbitrationblog.kluwerarbitration.com/2017/10/13/closing-umbrella-dark-future-umbrella-clauses/
- 14.
See, EU-Vietnam FTA, Chapter 8, Article 14.
- 15.
See, EU-Singapore FTA, Chap. 9, Art. 9.4.
- 16.
See, Kyrgyzstan-Austria BIT, Art. 11.1.
- 17.
See, China-UK BIT, Article 2(2).
- 18.
See, China-Mali BIT, Article 10(2).
- 19.
See, EDF and others v Argentina (ICSID Case No. ARB/03/23), Award dated 11 June 2010, para 929.
- 20.
See, reporting by IAReporter available through subscription at https://www.iareporter.com/articles/revealed-tribunal-hearing-claims-against-kazakhstan-refuses-to-construe-local-litigation-requirement-as-binding-but-shows-deference-to-states-need-for-post-soviet-transition-and-sees-no-breach-of/
- 21.
See, Gustav F W Hamester GmbH & Co KG v Republic of Ghana, ICSID Case No. ARB/07/24, Award dated 18 June 2010, para 348.
- 22.
Ibid., para 349
- 23.
See, Ioannis Kardassopoulos and Ron Fuchs v Republic of Georgia, ICSID Case Nos. ARB/05/18 and ARB/07/15, Award dated 3 March 2010, paras 273–280.
- 24.
See, Feit M. Attribution and the umbrella clause – is there way out of the deadlock? Available at http://minnjil.org/wp-content/uploads/2015/07/Feit.docx.pdf
- 25.
- 26.
Sornarajah M. International law on foreign investment, 3rd edn., p 304
- 27.
Sornarajah M. (1992) Law of international joint ventures. Longman, Spore, p 298
- 28.
Lim CL. Is the umbrella clause not just another treaty clause? – Essays in honour of Professor Sornarajah
- 29.
Lim CL. Is the umbrella clause not just another treaty clause? – Essays in honour of Professor Sornarajah, p 357
- 30.
Brownlie I (2008) Principles of public international law, 7th edn. Oxford University Press, Oxford, pp 549–550
- 31.
Ibid.
- 32.
Draft Convention on Investments Abroad, 1959, Article II.
- 33.
Draft OECD convention on the protection of foreign property, 12 October 1967. Aailable at http://www.oecd.org/investment/internationalinvestmentagreements/39286571.pdf
- 34.
Germany-Pakistan BIT.
- 35.
Italy-Jordan BIT, at the heart of Salini v Jordan.
- 36.
Switzerland-China BIT of 2009 (currently in force), Article 8.
- 37.
Figure cited in Gill, Gearing, Birt (2004) Contractual claims and bilateral investment treaties: a comparative review of the SGS cases. J Int Arb 21:5. 397 at footnote 31
- 38.
Lim CL. Is the umbrella clause not just another treaty clause? – Essays in honour of Professor Sornarajah.
- 39.
SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13 (Decision on Objections to Jurisdiction).
- 40.
Article 11 of the Switzerland-Pakistan BUT provides that “Either Contracting Party shall constantly guarantee the observance of the commitments it has entered into with respect to the investments of the investors of the other Contracting Party”.
- 41.
SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, ICSID Case No. ARB/02/6 (Decision on Objections to Jurisdiction and Separate Declaration)
- 42.
Lim CL. Is the umbrella clause not just another treaty clause? – Essays in honour of Professor Sornarajah.
- 43.
Lim CL. Is the umbrella clause not just another treaty clause? – Essays in honour of Professor Sornarajah, p 355
- 44.
CMS Gas Transmission Co. v. Republic of Argentina, ICSID Case No. ARB/01/8
- 45.
ICSID Case No. ARB/01/8, Decision on Annulment, 25 September 2007, para 95.
- 46.
As quoted in Lim CL. Is the umbrella clause not just another treaty clause? – Essays in honour of Professor Sornarajah, p 355
- 47.
Noble Ventures v Romania, ICSID Case No. ARB/01/11, Award, para 52.
- 48.
Joy Mining Machinery Limited v. Egypt, ICSID Case No. ARB/03/11 (United Kingdom/Egypt BIT), Award on Jurisdiction, 6 August 2004, paras 78–79.
- 49.
Legal Opinion of M. Sornarajah in El Paso v Argentina, ICSID Case No. ARB/03/15, 5 March 2007, para 12.
- 50.
See, Austria-Kyrgyzstan BIT, Article 11.
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Boltenko, O. (2021). The Umbrella Revolution: State Contracts and Umbrella Clauses in Contemporary Investment Law. In: Chaisse, J., Choukroune, L., Jusoh, S. (eds) Handbook of International Investment Law and Policy. Springer, Singapore. https://doi.org/10.1007/978-981-13-3615-7_54
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