CYIL 2014

UMBRELLA CLAUSE ȃ ADDITIONAL PROTECTION OF INVESTMENT BY CLAUS… legal consequences do not per se occur. Even if the host state has not observed “any obligations it has entered into with an investor” and this amounts to an unlawful act by the state in connection with the investment agreement in its quality iure gestionis, (i.e. as a commercial or trade partner) the remedy could not be found under international law when the umbrella clause is in this regard silent to the effect and BIT does not provide any provision to that purpose. This is hardly any way to purport the effects of the umbrella clause by the theory of so-called “automatic breach of international law”. According to the principles of the Vienna Convention on the Law of Treaties and the jurisprudence to that extent, interpretation cannot be used to insert into the plain text of the treaty, as well the commercial contract and investment agreement, any other provision and rule that the text itself, through a respective provision, does not assign. The umbrella clause is not a customary rule of general international law. Rather, it is a particular rule of international law, i.e. given exclusively by the will of parties to the Treaty. This consideration leads to the conclusion that if the umbrella clause does not explicitly stipulate the agreement between two sovereign subjects of international law, for example in a possible explicit wording such as “ a violation of the umbrella clause by the host state is unconditionally a breach of international law ”, then no interpretation of the umbrella clause can, and even must not, substitute for any lack in the provisions of the BIT as far as concerns the umbrella clause. The umbrella clause, in its restricted wording without a clear will of the states on the legal consequences in case of its breach, is therefore not able of establishing any obligation to remedy. This premise was acknowledged in a letter to ICSID of 1 October 2003, where the Swiss Government stated that it was “alarmed about the very narrow interpretation given to the meaning of [the umbrella clause] by the Tribunal, which not only runs counter to the intention of Switzerland when concluding the Treaty but is quite evidently neither supported by the meaning of similar articles in BITs concluded by other countries nor by academic comments on such provisions”. 88 From this letter of the Swiss government one can ascertain that the attempt at a broad interpretation of a narrowly redacted text of an umbrella clause did not invoke any consequences as a breach of an investment agreement, and the international law, because any such interpretation is not able to substitute for the lack of a respective provision of the BIT despite the ensuing proclamation of the government. Despite the fact that the investment protections provided by a given range of other standard provisions of the Agreement on the Promotion and Protection of Investments (BIT), as agreed upon between States, are capable of protecting the investor and its investment, the umbrella clause should be a confirmation of a parallel obligation, without any legal outcome of international responsibility, of a host state. The purpose of a narrow umbrella clause should be simply to supplement and

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88 Ibid at 254.