CYIL 2014

VOJTĚCH TRAPL CYIL 5 ȍ2014Ȏ a breach may simply be treated as a domestic commercial matter. As such, investors were often forced to resolve any disputes over their contracts with the host state in that state’s municipal courts and under its domestic laws, which were vulnerable to unilateral variation by the state. It was in this context that the umbrella clause first arose. Definition Although many countries rely on their own model agreements when negotiating individual BITs, BITs are remarkably similar in their organization and content. In general, BITs address four substantive issues: (1) conditions for the admission of foreign investors to the host State; (2) standards of treatment of foreign investors; (3) protection against expropriation; and (4) methods for resolving investment disputes. 2 BITs typically contain definitions of investments which are often broad, as well as definitions of investors. Many BITs cover both existing and future investments. Exceptionally, BITs can also have had the effect in the past of encouraging foreign investors before the treaty was executed. 3 The umbrella clause is agreed upon between the parties to the international treaty as a tool that would (additionally) protect an investor in the case a violation of a contract which is seen as an obligation or commitment by the state occurs, and when the dispute resolution is at stake in connection with international investments, while the investment as such is protected and supported by all other measures taken byincluded in the BIT. The umbrella clause is not stipulated in each BIT, and once agreed upon by the parties it does not have any uniform wording. On contrary, its wording varies from BIT to BIT. Therefore, the umbrella clause is always a particular rule constituted by the consent of the parties to the respective agreement and cannot be seen as a customary rule of general international law. The issue at hand is whether the umbrella clause should apply only in the case that the breach of an obligation could be considered as an internationally attributable breach of the contract by the state, and therefore the contract is itself internationalized under the umbrella clause, or whether each breach of a contract gives the investor the right to claim the responsibility of a state in any case. History The first institution of a similar nature to an umbrella clause occurred in 1954 in the Treaty settlement claims Anglo-Iranian Oil Company (Anglo-Iranian Oil Company , AIOC) in 1951. After years of negotiations in attempting to repair poorly 2 George M. von Mehren et al., Navigating Through Investor-State Arbitrations: An Overview of Bilateral Investment Treaty Claims, Dispute Resolution Journal , April 2004, pp. 69-70. 3 See Fedax N.V. v. Venezuela, Decision of the Tribunal on Objections to Jurisdiction, ICSID (W. Bank) Case No. ARB/96/3 (1997), “Most contemporary bilateral treaties of this kind refer to ‘every kind of asset’ or to ‘all assets.”

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