Investor Presentaiton

120 INVESTOR-STATE DISPUTE SETTLEMENT: A SEQUEL In law of the host State as one of the sources of applicable law. 129 the first scenario, it is not clear what claims a State could submit against an investor as the latter is unlikely to have obligations under the treaty or international law. In the second scenario, allegations of breaches of host State law might more readily be brought before an investment tribunal regardless of whether the investor's duty to comply with domestic law is specifically mentioned in the treaty. 130 Umbrella clauses. Another situation might arise when an IIA contains an "observance of undertakings" clause, also called an "umbrella" clause." 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. An investment treaty tribunal hearing a claim brought under the umbrella clause will often effectively be hearing a breach of contract claim, which suggests that counterclaims with respect to the contract would appropriately be heard as well. Yet, if the umbrella clause is understood as imposing obligations only on the State (not on the investor), one could argue that the tribunal's jurisdiction encompasses the umbrella clause claim only to the extent it involved a breach by the State. To remedy this uncertainty, one option for treaty drafters is to replace a one-way umbrella clause with a two-way one; that is, one that requires both the State and the investor to observe their specific 129 For further discussion of applicable law, see section II.M. 130 See the discussion of umbrella clauses in section II.T. A typical umbrella clause is one found in Article 2.2 of the Bahrain-Turkmenistan BIT (2011): "Each Contracting Party shall observe any obligation it may have entered into with regard to investments of investors of the other Contracting Party." UNCTAD Series on International Investment Agreements II

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