Enabling Private Ordering - the University of Minnesota Law School

58 MINNESOTA JOURNAL OF INT’L LAW [Vol. 18:1
contractual arrangements under national and international law
and aimed at remedying the lack of effective dispute resolution
mechanisms in investor-State contracting. They were designed
and intended to remedy the blind spots that the dualist
framework created by separating the contractual bond between
host State and investor from contract protection under
international law. As such, they were not intended as a purely
declaratory clarification of customary international law to the
effect that contractual rights could form the object of an
expropriation, but intended to stabilize investor-State
cooperation more comprehensively against any form of ex post
opportunistic behavior of the host State by allowing for effective
third-party dispute settlement.
The historic perspective, in other words, seamlessly fits in
with understanding umbrella clauses as breaking with the
dualist framework of international law and providing an
enforcement mechanism for host State promises, independent of
whether breaches were of a sovereign or a commercial nature.
The restrictive approach to the interpretation of umbrella
clauses therefore disregards not only the importance of
enforcement of host State promises for efficient investor-State
cooperation, but also the historic evidence that general
international law and the precursors of modern-day umbrella
clauses have never understood the national/international law
divide as a dogma that could not be surmounted by treaty
provisions that either submitted contract claims to international
dispute resolution or contained provisions that transformed the
observance of such promises into a treaty obligation under
international law.
IV. THE EFFECT OF UMBRELLA CLAUSES ON INVESTOR-
STATE RELATIONS
The previous section argued that the function of umbrella
clauses consists in providing a forum for settling disputes about
breaches of investment-related promises by host States vis-à-vis
foreign investors independent of whether such breaches arise
from sovereign or commercial conduct of the State. A different
issue is, however, the question of what effect, if any, umbrella
clauses have on the content of the relationship between investor
and host State. This concerns the influence of umbrella clauses
on the substantive obligations of the parties to an investor-State
contract and the relationship between investment treaty