Enabling Private Ordering - the University of Minnesota Law School

2009] UMBRELLA CLAUSES 69
creation of umbrella clauses as a mechanism that remedies
insufficiencies in the enforcement of contractual promises of the
host State vis-à-vis foreign investors.
Certainly, understanding the jurisdictional function of
umbrella clauses in such a broad fashion creates certain
problems of competing jurisdiction and enables forum shopping
by foreign investors who could potentially seize the contractual
forum in a first step and subsequently invoke the violation of
the umbrella clause in an investment treaty in case the first
proceedings did not yield the desired result. However, in order
to deny the investor a second bite at the apple, such situations
can arguably be dealt with efficiently by concepts such as abus
de droit, res judicata, or estoppel. 185 Likewise, judicial comity or
a broad understanding of lis pendens might constitute ways to
avoid parallel and/or subsequent proceedings. 186 On this basis,
one can also justify the decision of the majority in SGS v.
Philippines to stay the BIT proceedings in order to have the
Philippine Court decide the dispute already submitted by the
investor in accordance with the contractual forum selection and
square it with the contrary approach in Eureko v. Poland, where
the investor had not initiated proceedings in conformity with
the forum selection clause.
As a matter of principle, however, the decisions to stay
investment treaty arbitration in order to allow the forum chosen
by the parties to decide questions of contract interpretation and
breach, seems unconvincing not only in terms of the
multiplication of proceedings and the efficiency and expediency
of dispute resolution. It also is incompatible with the
classification of claims for the violation of umbrella clauses as
treaty claims. Accordingly, claims for the violation of umbrella
clauses should not be treated differently from claims for the
violation of other investment treaty provisions, such as fair and
equitable treatment or the concept of indirect expropriation.
185. See Yuval Shany, Contract Claims vs. Treaty Claims: Mapping Conflicts
between ICSID Decisions on Multisourced Investment Cases, 99 AM. J. INT’L L. 835,
849–51 (2005). Concepts of lis pendens of res judicata, by contrast, will not be
operative, because of the different nature of the contract claim and the claim for the
violation of the umbrella clause, even though the content of the host State’s
obligation is identical. SGS Société Générale de Surveillance S.A. v. Islamic Republic
of Pakistan, ICSID (W. Bank) Case No. ARB/01/13, Decision on Objections to
Jurisdiction, para. 182 (Aug. 6, 2003). For the arguments of the parties on this point,
see id. paras. 46, 52, 60–61, 111–17. Cf. Christer Söderlund, Lis Pendens, Res
Judicata and the Issue of Parallel Judicial Proceedings, 22 J. INT’L ARB. 301 (2005).
186. Shany, supra note 185, at 849–50.