Investor Presentaiton
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otherwise fall within the scope of the IIA. An umbrella clause
requires a host State to respect any obligation assumed by it with
regard to a specific investment (for example, in an investment
contract). The clause thus brings contractual and other individual
obligations of the host State under the “umbrella" of the IIA,
making them potentially enforceable through ISDS.
Article 11 of the BIT between Pakistan and Switzerland (1995)
is illustrative:
"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."
1. Varying interpretations
The meaning and application of these clauses have been subject
to significant controversy. The clauses have the potential to bring
within the ambit of the treaty disputes relating to any undertaking a
State has made towards an investor, including a contractual
obligation, a legislative provision, or an offering circular. The last
decade of ISDS jurisprudence has not been consistent regarding the
significance and effects of umbrella clauses. While most arbitral
tribunals have agreed that umbrella clauses have the potential to
bring contract-based claims within the ambit of treaty-based
arbitration, other tribunals have rejected the argument that umbrella
clauses have the effect of elevating breaches of contract to a
violation of the applicable IIA. 203
According to one approach, an umbrella clause will elevate a
State's breach of contract to a violation of an IIA, thus enabling
203
For a survey of the varied approaches tribunals have taken towards
umbrella clauses, see UNCTAD, 2007a, pp. 28-30; Sinclair, 2009, p. 275;
UNCTAD, 2013a, pp. 16-17.
UNCTAD Series on International Investment Agreements IIView entire presentation