Umbrella Clauses Research Articles

Interpretation of the Umbrella Clause in Bilateral Investment Treaties

Interpretation of the Umbrella Clause in Bilateral Investment Treaties

Legal Definition of Torture in an International Context, & States’ Obligations under the United Nations Convention Against Torture

The prohibition of torture is considered as a general principle of international law; States are obliged to respect this right and prevent infringing it. Throughout this paper, the concept of torture in an international context will be highlighted, stressing the main branches and instruments of international law that deals with torture, to at the end conclude a common definition. In the Introduction, a brief history of torture with different definitions and how it changed from being ordered by courts to being subject to an absolute prohibition will be provided. In Chapter 2, the concept of torture as a jus cogens will be outlined, going through the absolute non-derogable right of not being subject to torture; under human rights instruments such as the UDHR and the ICCPR. In addition, presenting torture under International Humanitarian Law, specifically under the Geneva Conventions and their Additional Protocols as a war crime. While also discussing the crime of torture under international criminal law as a crime against humanity and how the case law of the Nuremberg Trials, ICTY, and the ICTR contributed in shaping the legal framework of the prohibition. Chapter 3 will be dedicated to the United Nations Convention Against Torture as it is the specialized convention on torture. A thorough discussion will be presented on Article 1 that outlines the elements of the crime of torture and Article 2, that serves as the “Umbrella Clause” to the obligations of State parties of the Convention, in addition to setting the absolute non-derogable prohibition of torture. Chapter 4 will present the conclusions of this paper, and how the concept of torture differs under the UNCAT from other branches of international law. To at the end, present a concluded definition of torture that avoids ambiguity and arguments that try to derogate from this right. Going through these subjects, landmark judgments from international tribunals that helped ensuring the right not to be subject to torture will be highlighted, in addition to other international legal instruments. The travaux preparatoires of the UNCAT is very important to go through, it will help the reader stand at the position the drafters wanted from the Convention, and to avoid any misinterpretation of its provisions. Next to going through the General Comments issued by UN specialized bodies on relevant provisions when available, case law, and literature of specialized scholars in the field.

Global Treaties and Domestic Politics: Do BITs Constrain Fiscal Policy in Developing Countries?

Bilateral Investment Treaties (BITs) allow developing countries to trade some policy autonomy for improved access to internationally mobile capital. While the impact on capital flows is widely written about, BITs’ impact on policymaking is typically studied more narrowly in the context of regulatory policy and “regulatory chill”. We argue that the restraints that BITs place on governments also have important fiscal costs that should be accounted for. We locate those costs in two areas. First, many BITs have umbrella clauses that allow protected firms to challenge violations of side agreements that are typically more constraining than the BITs themselves and more likely to contain tax-specific constraints. Second, BITs undermine revenue generation by channeling economic activity into multinational corporations, which are among the least easily taxed part of the economy. Evidence from 105 developing countries from 1981 to 2009 supports our hypotheses, particularly as they relate to BITs with umbrella clauses.

Energy Charter Treaty – Standards of Investment Protection

Abstract The Energy Charter Treaty (ECT) in its Part III which regulates standards of protection guaranteed to foreign investors by the ECT States members, together with the Article 24 of the ECT, constitutes a kind of autonomous investment treatment within the ECT. The ECT provides for a very broad spectrum of standards of protection: fair and equitable treatment; most constant protection and security; prohibition of unreasonable or discriminatory measures; „umbrella clause”; national treatment; most favoured-nation standard and effective means to assert the claims. It can be said that at the time of its drafting the ECT enclosed all standards of protection as recognized in BITs and NAFTA. There have been more than 100 publicly known investment arbitration cases where the ECT was invoked, more than 30 of which concluded by arbitral awards. This comprehensive arbitral practice strongly influences the practice applying other IIAs and vice versa.

Attribution of Lawful Conduct in Investment Treaty Arbitration - The 'It' Problem Solved?

This essay offers an answer to the ongoing debate of whether lawful conduct of a State, such as the conclusion of a contract, may be attributed to that State pursuant to the rules of attribution codified in the ILC Articles on State Responsibility for Internationally Wrongful Acts. The author's view is that the answer to the question must be in the affirmative. It finds support in a three-pronged argument. The first prong of the argument recalls that the attribution of conduct is the first step that needs to be completed in view of asserting State responsibility. The second prong of the argument is that the ILC Articles, which contain a codification of internationally accepted customary rules of attribution, operate independently, as they are, first and foremost, an expression of customary international law. From this flows the third prong of the argument, which is that the rules of attribution do not exclusively apply to internationally wrongful conduct, but also to internationally lawful conduct. Having considered all aspects, the author concludes that the rules of attribution may apply also to contractual undertakings of States, provided that the conditions for attribution are fulfilled. Such conclusion is developed against the background of the contentious issues pertaining to the application and effect of umbrella clauses in investment treaty arbitration. In particular, it focuses on the question as to whether obligations contracted into by an emanation of a State are attributable to that very State for the purpose of finding a breach of an umbrella clause contained in the relevant bilateral investment treaty (the 'it' problem).

The Use of Most-Favoured-Nation Clauses to Import Substantive Treaty Provisions in International Investment Agreements

The present work considers the use of Most-Favoured-Nation (MFN) clauses within Bilateral Investment Treaties (BITs), or other International Investment Agreements (IIAs), to import provisions, not included in the IIA (such as fair and equitable treatment provisions or umbrella clauses), by investment arbitral tribunals. Many tribunals have allowed the use of MFN clauses for this purpose, imported the absent standard in the treaty, and have subsequently considered whether or not there was compliance with the imported provision. This study analyses whether this is a proper use of MFN clauses in IIAs. It first examines the practice of some investment tribunals of importing substantive provisions through MFN clauses. Secondly, it analyses whether MFN clauses can be used to import a substantive provision in order to include a new obligation and, at the same time, confer jurisdiction to decide on breaches of imported provisions. In doing so it explores the nature, scope, and limits of MFN clauses as well as the principle of consent to international jurisdiction. Thirdly, it considers how tribunals should proceed when faced with this type of argument, focusing on the interpretation of the elements of MFN clauses. It is suggested that typical MFN clauses included in IIAs should not be used to import treaty provisions.

Arbitral Lawmaking and State Power: An Empirical Analysis of Investment Arbitration

The paper focuses on arbitral lawmaking (the development of precedent-based frameworks of argumentation and justification), and state responses to that lawmaking (as registered in subsequent treaty-making). We compiled and analyzed information on: (i) all publicly-available awards (n=159) in which tribunals resolved disputes under the headings of expropriation and fair and equitable treatment, and under an umbrella clause; and (ii) investment treaties signed between 2002 and 2015 (n=398), when available in English. The paper reports three main findings. First, in most disputes, investors do not challenge general state measures; when they do, they are far less to prevail than when they contest acts specifically targeting their investments. Second, the evidence does not support the view that arbitral doctrine produces outcomes that are biased against states. In the vast majority of awards, tribunals take seriously the respondent state’s ‘right to regulate’ in the public interest. Third, the regime has not generated strong ‘backlash’ in any systemic sense. States continue to sign investment treaties; the mix of treaty protections on offer has remained remarkably stable; and new treaties have largely consolidated the case law that the most influential tribunals had already developed.

Umbrella Clauses and Widely-Formulated Arbitration Clauses: Discerning the Limits of icsid Jurisdiction

This article examines the scope and the limits of icsid arbitration involving umbrella or “observance of undertakings” clauses and widely-formulated arbitration clauses, both of which may provide investors with broad recourse to dispute settlement for disputes related to investment, as defined in the applicable bilateral investment treaty (bit). It does so by analysing the origins and rationale behind both clauses as well as how they operate in principle and in practice. It appears there is no jurisprudence constante concerning the application of either clause. However, a clearer picture is emerging in icsid jurisprudence of an effective, occasionally prospective, application of the umbrella clause and some limited deference to widely-formulated arbitration clauses. It is balanced by other icsid arbitral decisions that seek to limit the scope and application of the umbrella clause on a variety of grounds.

Burlington Resources, Inc v Republic of Ecuador: Enforcing Economic Stability Guarantees through an Umbrella Mechanism: ‘Caveat Upstream Petroleum Investor’?1

The enactment of Law 42 on Windfall Profit Taxation by Ecuador has drawn academic attention to whether, and to what extent, international investment treaties can effectively protect upstream petroleum contracts from the host State’s political interference. However, little attention has been paid to the interaction between economic stability guarantees and the umbrella clause, which was examined extensively by the Tribunal in Burlington Resources, Inc v Republic of Ecuador. This critical issue deserves more attention since it can guide the investors on how to secure their contractual rights against political risk in the context of upstream petroleum investment. This note analyses the interplay between an economic stability guarantee and the umbrella clause in the Burlington decision and assesses whether they can provide sufficient protection for the specific characteristics of upstream contracts.

UMBRELLA CLAUSES: UNCERTAIN CONTRACT PROTECTION UNDER IIAS

Umbrella clauses were designed to allow disputes over breach of contracts to be settled by an arbitration tribunal. However as the jurisprudence on the matter has evolved, investors cannot be certain on whether their claim based on such clauses will stand. Certainty of the application of law is essential on investment law; therefore it is indispensable that a iurisprudentia constante is reached so that investors can be sure whether they will be able to rely on them or not. Alternatively, if uniformity of interpretation is not reached, States should decide whether such clauses should be included or removed from BITs.

The Reach of International Investment Agreements: Kazakhstan and the Umbrella Clause

An umbrella clause is a provision through which the parties to an investment treaty undertake to observe any obligation they enter into with investors from the other state parties. Such a clause is included in numerous investment treaties, including the Energy Charter Treaty. Because of its imprecise language, this provision is potentially susceptible of indefinite expansion. In other words, it is difficult to determine to which obligations the clause applies and to which it does not. This brings us to two important questions. The first question is whether an umbrella clause may elevate a simple breach of national law to a breach of treaty under international law. The second questions is whether the umbrella clause's scope is limited to contractual commitments, or whether it also covers unilateral engagements made by states through legislative or regulatory acts. It is submitted here that, based on the clause's plain wording, its context, and the scarce existing case-law, the umbrella clause covers any commitment taken specifically with an investor. It would seem that legislative and regulatory acts might qualify as commitments taken specifically with an investor if a certain nexus is established between those acts and the individual investor.

Challenging Compliance with International Intellectual Property Norms in Investor–state Dispute Settlement

Enforcing intellectual property (IP) rights abroad is not easy—not least because international IP treaties do not create global rights that can be invoked in national courts. International investment law offers potential routes for overcoming these hurdles. Whenever investment treaties include IP rights as an investment and allow for investor–state dispute settlement (ISDS), investors can challenge host state measures affecting their IP rights in ISDS proceedings. As this article will show, this in turn offers a unique opportunity for invoking the standards of protection under international investment agreements (IIAs) to challenge host state compliance with international IP treaties. While challenging national IP regimes is an attractive option for right holders, these challenges potentially amount to a sea change for the international IP regime and cause serious concern for host states. I, however, argue that most of the routes pursued by right holders under IIAs are unlikely to be successful. Investment protection standards such as fair and equitable treatment, umbrella clauses, and most-favoured nation treatment should not be construed to allow invoking alleged breaches of international IP norms in ISDS. Some IIAs, however, contain clauses that subject expropriation claims against compulsory licenses and other IP limitations to a test of consistency with the international IP rules governing these limitations. As they offer the only feasible route for investors to challenge host state compliance with international IP treaties, I review the implications of these clauses, recent reform proposals, and suggest alternative mechanisms for aligning international IP and investment protection based on general international law.

Umbrella clauses: a trend towards its elimination

Since 2003, when the issue of its scope was discussed for the first time in SGS v Pakistan, the umbrella clause have been stressing parties, lawyers, and more importantly, arbitrators. Arguably one of the most controversial standards of protection in investment treaties, through the past decade many arbitral tribunals reached different conclusions concerning the interpretation of this clause. From questions of whether the umbrella clause can elevate a contractual breach into a treaty breach, to whether it can bind non signatories to the investment agreement (privity of contract issues), arbitral tribunals are yet to reach consensus on these matters, and such inconsistencies, sooner or later, have its consequences. States are beginning to leave umbrella clauses out of their treaties and model BITs, in an attempt to make sure that only international law principles are protected and not merely contractual obligations. This piece analyses the different decisions that are resulting in a trend towards an elimination of the umbrella clause as a standard of protection.

Putting a Square Peg into a Round Hole? Assessment of the "Umbrella Clause" from the Perspective of Public International Law

Putting a Square Peg into a Round Hole? Assessment of the "Umbrella Clause" from the Perspective of Public International Law

Parties to the 'Obligations' in the Obligations Observance ('Umbrella') Clause

The host State may conclude contracts with local subsidiaries of a foreign investor. Conversely, a foreign investor may conclude contracts with an entity established by the host State with a domestic legal personality distinct from the State. In either case, where there is no direct privity between the host State and the investor, is it possible for the investor to initiate treaty-based arbitration against the host State, alleging a violation of the obligations observance clause (umbrella clause) contained in the applicable investment treaty? In the former case, the investor is entitled to initiate arbitration against the host State, if the clause obliges the latter to observe obligations entered into ‘with regard to investments’, in light of the text and the effet utile of the clause. In the latter, the separate legal personality of the entity cannot by itself prevent the investor from invoking the obligations observance clause. However, the rules on attribution in the law of State responsibility, though often used by tribunals, cannot explain the applicability of the clause in this situation. The investor needs to establish that the entity represented the host State in entering into the obligation in question.

Rethinking Ethiopia’s Bilateral Investment Treaties in light of Recent Developments in International Investment Arbitration

International investment law is dynamic. As treaty practice and jurisprudence in the area constantly develop, global standards are always in the making. Rethinking Ethiopia’s Bilateral Investment Treaties (BITs) is thus a natural response to evaluate the status of the country’s obligations under the regime of global investment standards. This article briefly evaluates the concept of Most Favored Nation (MFN) treatment, in relation to the nature or purpose of MFN clauses and its interaction with dispute resolution provisions contained in BITs. In doing so, the article evaluates the different scenarios of ‘treaty shopping’ whereby an investor can possibly use BITs signed by Ethiopia and a state other than the investor’s home state, to benefit from treaty obligations entered by Ethiopia with other partners. A review of Ethiopian BITs indicate that in almost all of the BITs, the MFN clause is phrased in general terms and leaves leverageto raise competing interpretations and creating a matrix of obligations thereby stretching the country’s obligations under the respective agreements. This calls for revising the broad and incoherent application of the MFN standard contained in various BITs signed by Ethiopia with the aim to laying down a coherent investment treaty framework.Key words: Most Favored Nation, Bilateral Investment Treaties, InvestmentArbitration, Umbrella Clause, Standard of Treatment

The umbrella clause as a guarantee of the rights and legitimate interests of foreign investors

The umbrella clause as a guarantee of the rights and legitimate interests of foreign investors

Umbrella Clauses and Transfer Provisions in the (Invisible) EU Model BIT

The draft Investment Chapter of the CETA between the EU and Canada includes an umbrella clause, on EU's proposal. Nevertheless, the inclusion of such a clause appears to be quite uncertain. Furthermore, the wording of the umbrella clause, proposed by the EU, fails to address all uncertainties regarding the effects and scope of application of umbrella clauses still existing in jurisprudence. Conversely, the inclusion in the draft Investment Chapter of a transfer provision, accompanied with safeguard provisions in case of serious balance-of-payments difficulties and external financial difficulties, does not seem to be a contested issue among the Member States. A new development at the EU level might make investment protection matters more complicated, Following the opening of the negotiation on a free trade agreement with the US, some Member States oppose investment arbitration tout court at least in the prospective EU-US CETA.

Umbrella Clauses and Transfer Provisions in the (Invisible) EU Model BIT

The draft Investment Chapter of the Comprehensive Economic and Trade Agreement (ceta) between the European Union (eu) and Canada includes an umbrella clause, on eu’s proposal. Nevertheless, the inclusion in the final text of such a clause appears to be uncertain. Furthermore, the wording of the umbrella clause, proposed by the eu, fails to address all uncertainties regarding the effects and scope of application of umbrella clauses still existing in jurisprudence. Conversely, the inclusion in the draft Investment Chapter of a transfer provision, accompanied with safeguard provisions in case of serious balance-of-payments difficulties and external financial difficulties, does not seem to be a contested issue between the Member States and Canada. A new development at the eu level might make investment protection matters more complicated: following the opening of the negotiation on a free trade agreement with the us, some Member States (such as Germany) oppose investment arbitration tout court at least in the prospective eu-us ceta.

To What Extent can the U.S. BIT Model ( 2012 ) Approach Resolve Business Disputes ?

Bilateral Investment Treaty ( BIT ) | Foreign Direct Investment ( FDI ) | Trade-Related Investment Measures ( TRIMS ) | International Center for the Settlement of Investment Disputes ( ICSID ) | Investor-state Dispute Settlement ( ISDS ) | United Nations Conference on Trade and Development ( UNCTAD ) | Association of South-East Asian Nations ( ASEAN ) | Trans-Pacific Partnership (TPP) and Umbrella Clauses