Enabling Private Ordering - the University of Minnesota Law School

86 MINNESOTA JOURNAL OF INT’L LAW [Vol. 18:1
clauses cover “[c]onsensual obligations . . . with regard to, and
as between, obligor and obligee,” 241 “contractual
arrangements,” 242 and “investment contracts.” 243
An umbrella clause does not, however, cover every
contractual obligation between foreign investor and host State.
Instead, the contract entered into by the host State has to
qualify as an investment in the sense of the applicable
investment treaty. Although this will often be the case with
respect to contracts between a foreigner and the State, the
notion of investment excludes non-investment-related contracts,
such as contracts about the sale of goods between an investor
and the host State, from the protection of investment treaties
and umbrella clauses. An investor selling and delivering goods,
such as school benches or railroad machinery across the border,
while entering into a contract with a foreign State, cannot avail
itself of the protection of an investment treaty, because transborder
sales contracts do not qualify as investment. 244 Instead, it
is necessary that there be at least some connection to the
territory of the host State in the form of an establishment 245 and
submission to the power of the host State. 246
The restriction of the protection of umbrella clauses to
investment-related contracts has also been recognized in the
arbitral jurisprudence. It has been referred to by several
tribunals that noted that umbrella clauses only protected
obligations or undertakings with regard to investments. 247 While
241. CMS Gas Transmission Co. v. Argentine Republic, ICSID (W. Bank) Case
No. ARB/01/8, Decision on Annulment, para. 95(b) (Sept. 25, 2007).
242. Eureko, Partial Award, supra note 6, para. 250.
243. Noble Ventures, ICSID Case No. ARB/01/11, at para. 51; see also 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, paras. 162–73
(Aug. 6, 2003) (supporting that contractual arrangements would fall under the scope
of application of an umbrella clause); cf. Cont’l Cas. Co. v. Argentine Republic,
ICSID (W. Bank) Case No. ARB/03/9, Award, para. 297 (Sept. 5, 2008).
244. See sources cited supra note Error! Bookmark not defined.
245. Cf. SGS v. Philippines, ICSID Case No. ARB/02/6, at para. 99.
246. Cf. Bayview Irrigation Dist. v. Mexico, ICSID Case No. ARB(AF)/05/1,
Award, paras. 93–103 (June 19, 2007); DOLZER & SCHREUER, supra note 233, at
60−71; Yves G. L. Wolters, The Meaning of “Investment” in Treaty Disputes:
Substantive or Jurisdictional?― Lessons from Nagel v. Czech Republic and S.D.
Myers v. Canada, 8 J. WORD INV. & TRADE 175, (2007); Farouk Yala, The Notion of
“Investment” in ICSID Case Law: a Drifting Jurisdictional Requirement? Some “Un-
Conventional” Thoughts on Salini, SGS and Mihaly, 22 J. INT’L ARB. 105, 117−20
(2005).
247. Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of
Ecuador, ICSID (W. Bank) Case No. ARB/04/19, Award, para. 325 (Aug. 18, 2008);
Enron Corp. and Ponderosa Assets L.P. v. Argentine Republic, ICSID (W. Bank)