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: Suggested Citation