CYIL 2014

UMBRELLA CLAUSE ȃ ADDITIONAL PROTECTION OF INVESTMENT BY CLAUS… all breaches of each State’s contracts with investors of the other State are forthwith converted into and to be treated as breaches of the BIT. The Tribunal stressed that, in this case, there was no clear and persuasive evidence that such was in fact the intention of both Switzerland and Pakistan in adopting Article 11 of the BIT. So, in the circumstances of this case, SGS’s claim about Article 11 of the BIT was rejected. 22 The Tribunal determined that it had jurisdiction over those SGS claims based on BIT provisions establishing substantive standards of treatment (the “BIT claims”), including BIT provisions which related respectively to the promotion of investments, the protection of investments, and expropriation. 23 In the other ICSID case Société Générale de Surveillance S. A. v. Philippines , as to the jurisdiction under the “umbrella clause”, SGS alleged that it made an investment in accordance with Article X(2) of the BIT in the territory of the Philippines. The Philippines failed to pay for services due under the CISS Agreement and therefore were in breach of Article X(2) of the BIT. The Philippines denied that Article X(2) had such an effect, relying inter alia on the decision of the SGS v. Pakistan Tribunal. 24 The Philippines invoked the drafting history of the BIT as well as the texts of the draft exchanged on various earlier occasions, which were claimed to clearly show that the Parties’ intention was to emphasize their commitment to comply with the substantive treatment obligations assumed under the BIT and submitted also on the base of Article 31(1) of the Vienna Convention, which requires that treaties shall be interpreted in good faith and in the light of their object and purpose. The Philippines suggested that SGS’s contention could not be upheld unless there was clear evidence of the contracting Parties’ intention to produce such an unequal bargain, which had notbeen shown. 25 The Philippines pointed out that the actual text of Article X is titled “Other Commitments”. Article X(1) is a kind of “without prejudice” clause, providing that legislative provisions or international law rules more favorable to an investor shall to that extent “prevail over this Agreement”. It deals with the relation between commitments under the BIT and distinct commitments under host State law or under other rules of international law. It does not appear to impose any additional obligation on the host State in the framework of the BIT. 26 In the view of the Arbitral Tribunal, the text of Article X(2) of the Switzerland-Philippines BIT is different to that in the SGS v. Pakistan case and reads: “ Each Contracting Party shall observe any obligation it has assumed with regard to specific investments in its territory by investors of the other Contracting Party. ” Interpreting the actual text of Article X(2), it would appear to clearly state that each Contracting Party shall observe any legal obligation it has assumed, or will in the future assume, with regard to specific investments (here “CISS Agreement”) 27 covered by the BIT. Article X(2) was adopted within the

22 Ibid at 173. 23 Ibid at 96. 24 Ibid at 113. 25 Ibid at 77. 26 Ibid at 114. 27 Note by author.

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