Enabling Private Ordering - the University of Minnesota Law School

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64 MINNESOTA JOURNAL OF INT’L LAW [Vol. 18:1 binding exclusive jurisdiction clause in a contract should be respected, unless overridden by another valid provision.” 169 It considered that “the BIT did not purport to override the exclusive jurisdiction clause in the [investor-State contract], or to give SGS an alternative route for the resolution of contractual claims which it was bound to submit to the Philippine courts under that Agreement.” 170 As a consequence, the Tribunal in SGS v. Philippines decided to stay the treaty-based proceedings in view of the proceedings that were already pending in Philippine courts. It thus gave effect to the premise that a breach of the umbrella clause would require that a breach of the underlying investor-State contract was not remedied in accordance with the dispute settlement mechanism the parties chose. The majority of tribunals, by contrast, take the opposite approach and view, like the dissenting opinion in SGS v. Philippines, the host State’s consent to arbitration under the BIT as a forum that can be seized alternatively to any contractually selected forum. 171 In Eureko v. Poland, for example, the Tribunal accepted its jurisdiction based on an umbrella clause for a dispute about the breach of an investor- State agreement relating to the privatization of a State-owned insurance company, although the agreement contained a forum selection clause in favor of Polish courts. The Tribunal reasoned that since the violation of an umbrella clause constituted a treaty-based cause of action, the contractual forum selection could not exclude treaty-based arbitration. 172 In its support, the Tribunal relied on the settled arbitral jurisprudence that contractual forum selection clauses could not derogate from the jurisdiction of treaty-based tribunals for claims based on the breach of treaty. 173 Unlike in SGS v. Philippines, the contractual 169. SGS v. Philippines, ICSID Case No. ARB/02/6, at para. 138. See generally id. paras. 136–55. 170. Id. para. 143; see also id. para. 141 (explaining that a “framework treaty, intended by the States Parties to support and supplement, not to override or replace, the actually negotiated investment arrangements made between the investor and the host State”). 171. Id. paras. 4–5 (Crivellaro, dissenting). 172. Eureko, supra note 6, paras. 92–114, 250. 173. See Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID (W. Bank) Case No. ARB/03/29, Decision on Jurisdiction, paras. 264–73 (Nov. 14, 2005); Impregilo S.p.A. v. Islamic Republic of Pakistan, ICSID (W. Bank) Case No. ARB/02/17, Decision on Jurisdiction, para. 286–90 (Apr. 22, 2005); SGS v. Pakistan, ICSID Case No. ARB/01/13, at para. 161; Compañia de Aguas del Aconquija, S.A. and Vivendi Universal v. Argentine Republic, ICSID (W. Bank) Case
2009] UMBRELLA CLAUSES 65 forum in the case at hand had not been seized prior to investment arbitration. Furthermore, in Noble Ventures v. Romania, the Tribunal accepted, despite the existence of a forum selection clause, jurisdiction over the alleged breach of the terms of a privatization agreement for a State-owned steel mill that was concluded between the foreign investor and a State instrumentality. 174 In addition, a number of further decisions discarded the objection to the tribunals’ jurisdiction based on the primacy of a forum selection clause between the foreign investor and the host State in cases where a violation of an umbrella clause was invoked. 175 These tribunals therefore assumed that treaty-based arbitration took primacy over a forum selection clause in case the violation of an umbrella clause was alleged. Several arguments, however, support the view that a contractual forum selection clause cannot override the consent to arbitration under a BIT when the investor invokes a violation of the umbrella clause and therefore brings a claim based on the international responsibility of the host State for the breach of its promise. First, a violation of an umbrella clause has to be qualified as a violation of an inter-State obligation. Consequently, its cause of action is based on an international treaty, not on the breach of an investor-State contract. It constitutes a treaty claim, not a contract claim. Accordingly, the firmly established jurisprudence that contractual forum No. ARB/97/3, Decision on Annulment, paras. 75 (July 3, 2002); Compañía de Aguas del Aconquija, S.A. & Compagnie Générale des Eau v. Argentine Republic, ICSID (W. Bank) Case No. ARB/97/3, Award, paras. 53–55 (Nov. 21, 2000); Lanco Int’l Inc. v. Argentina, ICSID (W. Bank) Case No. ARB/97/6, Decision on Jurisdiction paras. 21-28 (Dec. 8, 1998). The dissenting opinion in Eureko v. Poland, by contrast, took the contrary position and criticized the majority’s solution, noting that “by opening a wide door to foreign parties to commercial contracts concluded with a State-owned company to switch their contractual disputes from normal jurisdiction of international commercial arbitration tribunals or state courts to BIT Tribunals.” Eureko, supra note 6, para. 11 (Rajski, dissenting). 174. Noble Ventures, Inc. v. Romania, ICSID (W. Bank) Case No. ARB/01/11, Award, para. 2 (Oct. 12, 2005). 175. See Camuzzi Int’l S.A. v. Argentine Republic, ICSID (W. Bank) Case No. ARB/03/7, Decision on Jurisdiction, paras. 105–19. (June 10, 2005); AES Corp. v. Argentine Republic, ICSID (W. Bank) Case No. ARB/02/17, Decision on Jurisdiction, paras. 90–99 (May 26, 2005); Enron Corp. and Ponderosa Assets L.P. v. Argentine Republic, ICSID (W. Bank) Case No. ARB/01/13, Decision on Jurisdiction, para. 89– 94 (Jan. 14, 2004); Azurix Corp. v. Argentine Republic, ICSID (W. Bank) Case No. ARB/01/12, Decision on Jurisdiction, paras. 75–81 (Dec. 8, 2003); CMS Gas Transmission Co. v. Republic of Argentina, ICSID (W. Bank) Case No. ARB/01/8, Decision on Objections to Jurisdiction, paras. 70–76 (July 17, 2003).
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