CYIL 2014

VOJTĚCH TRAPL CYIL 5 ȍ2014Ȏ confirm the verity that the host state is obliged to protect investment in the agreed upon way, but not to purport the “automatic” responsibility of the host state for the intentionally wrongful act against international law. Without any explicit obligation given by the umbrella clause, any breach of obligation by the host state, does not automatically lead to any violation of international law. This is supported by the view taken by the former Secretary General of ICSID Ibrahim Shihata, who recognizes that “treaties may furthermore elevate contractual undertakings into international law obligations, [but only] by stipulating that a breach by one State of a contract with a private party from the other State will also constitute a breach of the treaty between the two States.” 89 This conclusion can also be found in the very first ICSID case, SGS Société Générale de Surveillance (SGS) v. Pakistan, where the umbrella clause itself, without any clearly stipulated sanction of a host State, is obviously not automatically a breach of the international law, even by any interpretation of the clause. The investor is, in fact, not eligible to claim any violation of the investment agreement under international law. It should therefore be indispensable to carefully examine and set out the proper wording of the umbrella clause during its drafting and formulating into the BIT.

89 I.F.I. Shihata, “Applicable Law in International Arbitration: Specific Aspects in Case of the Involvement of State Parties”, in I.F.I. Shihata and J.D. Wolfensohn (eds.), The World Bank in a Changing World: selected Essays and Lectures , Vol. II, Brill Academic Publishers, Leiden, Netherlands, 1995, at 601 www. trapl.cz.

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