Umbrella Clauses and Their Policy Implications

Hague Yearbook of International Law, Martinus Nijhoff Publishers, Vol. 24, pp. 313-357 (2011)

Posted: 21 Dec 2014

Date Written: November 20, 2011

Abstract

The main purpose of this paper is to re-examine investor-state relations through the lens of an umbrella clause. Umbrella clauses introduce an additional substantive obligation, i.e. the treaty obligation to abide by investment related obligations/commitments. The discussion aims to shed additional light on the proper meaning of umbrella clauses by primarily focusing on what obligations/commitments are covered through umbrella clauses and how investment arbitral tribunals have dealt with them. In this context, the paper discusses the following specific issues: Do umbrella clauses apply to all types of contracts or just to certain contracts? Does an umbrella clause extend to non-contractual undertakings? Does an umbrella clause protect against all types of state interference with investments? Dissatisfaction with tribunals’ interpretation of this provision has prompted some states to revise their policies towards more restrictive approaches. On the other side, any approach that limits the investors’ protection would not be welcomed by foreign investors. Thus, the pros and cons of these approaches are also discussed.

Keywords: international investment law, investor-state arbitration, umbrella clause, BITs

JEL Classification: K33

Suggested Citation

Begic Sarkinovic, Taida, Umbrella Clauses and Their Policy Implications (November 20, 2011). Hague Yearbook of International Law, Martinus Nijhoff Publishers, Vol. 24, pp. 313-357 (2011), Available at SSRN: https://ssrn.com/abstract=2540819

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