Enabling Private Ordering - the University of Minnesota Law School

2009] UMBRELLA CLAUSES 89
investment dispute is therefore ill-founded. Instead, much of the
purely fiscal contracting of States will not fall under the notion
of investment and therefore be outside the scope of application
of an umbrella clause. Consequently, investment treaty
arbitration will not be available in case of breach of such
contracts.
B. UMBRELLA CLAUSE AND UNILATERAL PROMISES BY THE HOST
STATE
The scope of operation of umbrella clauses is, however, not
limited to contractual promises of the host State contained in
investor-State contracts. Instead, it arguably also encompasses
other specific promises the host State made in its national
legislation, by means of individual administrative instruments,
and the like. In fact, in many legal systems the State acts vis-àvis
private individuals and provides legal security and stability
for large-scale investment projects, not through contractual
arrangements, but by means of unilateral public law licenses
that are passed on the basis of a general law. In Germany, for
example, even the operation of public utilities, such as waste
landfills or nuclear power plants, is often not conducted on the
basis of investor-State contracts that set out the mutual rights
and obligations. Instead, the competent administrative agencies
unilaterally grant, based on the governing statutory law, a
license that authorizes the individual’s activity in question. 252
Similarly, specific promises to investors are sometimes directly
contained in domestic legislation, such as legislative promises
granting special tax benefits over a significant number of future
years for specific investments in order to encourage them.
The question therefore arises whether the breach of such
non-contractual promises can also give rise to the host State’s
liability for a violation of an umbrella clause or whether, in
turn, umbrella clauses are limited to breaches of investor-State
contracts in the strict sense of the term. The more convincing
arguments militate for a broad substantive coverage of umbrella
252. The public law instrument used in this context is an administrative act
(Verwaltungsakt), a unilateral decision that grants or imposes rights and duties
upon individuals in concrete cases. See Verwaltungsverfahrengesetz [VwVfG]
[Administrative Law Code], § 35. Contractual relationships between the State and
private enterprises, on the other hand, are rarer, although the German
Administrative Law contains the instrument of the public law contract and makes
use of it increasingly. See id. §§ 54–62.