Enabling Private Ordering - the University of Minnesota Law School

84 MINNESOTA JOURNAL OF INT’L LAW [Vol. 18:1
compensation. 233 The same should equally apply to the
termination of investor-State contracts, given that it is widely
accepted that rights under an investor-State contract constitute
property rights that are protected under customary
international law. 234 However, just as the host State can exercise
its right of eminent domain in respect of property rights, it
should be able to terminate contracts, provided there is a public
interest at play and that the termination does not constitute a
discriminatory act against the investor in question.
V. THE SCOPE OF UMBRELLA CLAUSES
Not only the function of umbrella clauses and their impact
on the substantive relations between foreign investors and host
States have troubled arbitral tribunals. Another central point of
debate in the jurisprudence on umbrella clauses is the scope of
application ratione materiae of the clauses. The Tribunal in SGS
v. Pakistan, for example, was decisive in denying that the clause
in question constituted an umbrella clause because this:
would [have] amoun[ted] to incorporating by reference an unlimited
number of State contracts, as well as other municipal law instruments
setting out State commitments including unilateral commitments to
an investor of the other Contracting Party. Any alleged violation of
those contracts and other instruments would be treated as a breach of
the BIT. 235
Similarly, the Tribunal in El Paso v. Argentina considered
that a broad interpretation of an umbrella clause would indeed
cover “the violation of any legal obligation of a State, and not
only of any contractual obligation with respect to investment.” 236
Other tribunals underscore the breadth of the type of
“commitments” covered by umbrella clauses. The Tribunal in
Enron v. Argentina, for example, considered that “[u]nder its
ordinary meaning the phrase ‘any obligation’ refers to
obligations regardless of their nature. Tribunals interpreting
233. See RUDOLF DOLZER & CHRISTOPH SCHREUER, PRINCIPLES OF
INTERNATIONAL INVESTMENT LAW, 89−92 (2008).
234. See Schwebel, supra note 65, 409−11; Jennings, supra note 58, at 173 n.5
(both citing various cases confirming that contractual rights can form the object of
expropriation).
235. 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.
168 (Aug. 6, 2003).
236. El Paso Energy Int’l Co. v. Argentine Republic, ICSID (W. Bank) Case No.
ARB/03/15, Decision on Jurisdiction, paras. 71–88 (Apr. 27, 2006).