Enabling Private Ordering - the University of Minnesota Law School

2009] UMBRELLA CLAUSES 43
rules on attribution of conduct to the State under the
international law rules on State responsibility. 107 For instance,
with respect to the conduct of a State organ under Art. 4 of the
International Law Commission’s Articles on State
Responsibility, the relevance of the distinction between
commercial and sovereign acts has been expressly denied by the
Commission. As the official commentary on the Articles states:
“[i]t is irrelevant for the purposes of attribution that the conduct
of a State organ may be classified as ‘commercial’ or as ‘acta iure
gestionis.’” 108 The commentary further stresses that “entry into
or breach of a contract by a State organ is nonetheless an act of
the State for the purposes of article 4,” 109 just as traditional
sovereign conduct is.
Presumably, the idea underlying the distinction between
governmental and commercial conduct is that only sovereign
breaches of an investor-State contract constitute a political risk,
whereas commercial breaches are equally possible when
contracting with a private actor and thus do not increase the
risk of contracting with a sovereign. 110 Yet the difference
between the host State and normal private parties, even as
regards commercial breaches, is that the latter are not their
own judges in their own courts. Unlike private parties, the host
State is able to control the way the law is applied by its own
courts and is therefore not able to provide independent thirdparty
dispute settlement that would enable it to make credible
commitments. 111 The situation between contracts between
private parties and investor-State contracts is, therefore, not
comparable. 112
Interpreting umbrella clauses restrictively does not only
107. See also James Crawford, Treaty and Contract in Investment Arbitration,
TRANSNAT’L DISP. MGMT., Jan. 2008, at 6–7.
108. JAMES CRAWFORD, THE INTERNATIONAL LAW COMMISSION’S ARTICLES ON
STATE RESPONSIBILITY, 96 (2002).
109. Id. (citing Swedish Engine Drivers Union Case, 20 Eur. Ct. H.R. (ser. A) at
14 (1976); Schmidt and Dahlström, 21 Eur. Ct. H.R. (ser. A) at 15 (1976)). The ILC
commentary to the Articles on State Responsibility further adds that “[t]he
irrelevance of the classification of the acts of State organs as iure imperii or iure
gestionis was affirmed by all those members of the Sixth Committee who responded
to a specific question on this issue from the Commission . . . .” CRAWFORD, supra
note 108, at 96 n.118.
110. This proposition is, however, supported by those tribunals and
commentators that endorse the dualist distinction between the State as a regulator
and the State as a merchant.
111. See supra Part II.B.1
112. See Mayer, supra note 19, at 5.