The aim of this research is to search for a greater legal certainty in the interpretation of the Observance of Undertakings or umbrella clause in a Bilateral Investment Treaty. In doing so, it will look into the history and origin of the clause, the theories given by academicians, the language of the clause in the different BITs, and the interpretations of the clause as given by the different Tribunals of the International Centre for Settlement of Investment Disputes. The conclusion of the research involves answering two basic questions related to the umbrella clause, which are as follows: 1. What is the exact scope of an umbrella clause? 2. Does the umbrella clause elevate contractual claims to a treaty level? This paper argues that historically, the clause was introduced as a measure of safeguard to prevent the foreign investor from suffering due to unilateral acts of atrocity by the host State, by taking investment and investment related contracts to an international forum. To arrive at the exact ambit of the clause, I have analysed the language of the clause, through its various nuances, in order to know which specific contracts can be brought within the purview of the clause. Next I have looked at the different Tribunal decisions that have interpreted the clause from different perspectives. Some of them have taken a restrictive approach, which says that the clause gives jurisdiction to an international forum only when coupled with some other substantive treaty claim. Some other Tribunals have, on the other hand, decided that the clause internationalises contract claims by elevating them to a treaty level. There are even others who have advocated keeping the contract and treaty claims as parallel remedies. My conclusion is that there are problems in both the restrictive as well as the parallel claims approach. The restrictive approach nullifies the entire objective of the clause. Giving parallel remedies to the foreign investor will create problems of jurisdictional overlap and the possibility of double recovery. The correct interpretation of the clause is that it gives the foreign investor a choice – either to pursue his claim in the contractual forum, whereby the proper law of the contract will become applicable; or to treat it as a breach of Treaty and go to the international forum provided by it, whereby the claim shall be determined according to the rules of international law. Taking either course will disbar him from pursuing the other course of action, and thereby will help create certainty in this legal area of conflict.