Research On The Scope Of Unbrella Clause In Bilateral Investment Treaties

Umbrella clause, which is widely concluded in many BITs, is applied to prescribe that each contracting party shall observe certain commitments it has made to investors of the other contracting party. Lately, there are a series of arbitral cases regarding the application of umbrella clause in ICSID. However, tribunals of these cases adopted dramatically different approaches in the interpretation of umbrella clause and came into adverse conclusions. In recent years, in order to attract foreign investment, boost the development of economic, Some BITs which China has concluded with other foreign countries also included umbrella clause, which means that there is a good chance for China to be confronted with the risks of the vague effect of umbrella clause in the settlement of the investor-state conflicts. Therefore, the further study of the scope of umbrella clause is very important.The Paper is divided into four parts.The first part introduces the origin of umbrella clause and its treaty practice. Umbrella clause as a common provision of modern international investment treaties, not only has far-reaching influences to the investment host country's sovereignty and interests, but also has tremendous significance for foreign investors'rights and interests. The concept of umbrella clause dating back to Lauterpacht' suggestion on the Anglo-Iranian Oil Company dispute at 1954.The first international investment protection treaties concluded "umbrella clause" is "Draft Convention on Investments Abroad", and then, umbrella clause appears in many international investment treaties.The second part focuses on the theories and practices of the scope of umbrella clause, they are narrow interpretation, wide interpretation and reasonable restrict interpretation. Since the 50s of the 20th century, umbrella clause made into bilateral investment treaties formally, the controversy refers to the scope of umbrella clause never stop, but only stay in the theoretical level. Until 2003, the ICSID accepted the case of Pakistan, the umbrella clause experienced the test of practice for the first time. Later on, the ICSID accepted the case of the Philippines in 2004, these two cases can be said to be classic cases of applying umbrella clause. The arbitral tribunal has reached almost diametrically opposed arbitraents for the interpretation of the scope and effectiveness of the umbrella clause in such two similar cases, since then, the debate about the scope of umbrella clause initiated. However, Argentina Case in 2006 is a groundbreaking case to the problem of the scope of umbrella clause. In many cases involving umbrella clause, the arbitral tribunal's did not use reach a consistent comments on the scope of umbrella clause, as the whole, there are three methods on the interpretation of the scope of umbrella clause, they are narrow interpretation, wide interpretation and reasonable restrict interpretation.The third part focuses on researching the scope of umbrella clause. First of all, this paper analysizes the scope of umbrella clause with the rules of treaty interpretation in "Vienna Convention". In accordance with the principles of treaty interpretation, it is necessary to explain the specific terms of the treaty according the "ordinary meaning" in the treaty, therefore, "umbrella clause" should be interpretated combing with the original provisions of bilateral investment treaties, historical background and the intention of the Parties in good faith. As for there is not a uniform standard on the interpretations of the scope of umbrella clause in the international arbitration practice and in theory, reasonable restrict interpretation is reasonable compared with extremely narrow and wide interpretation.The fourth part focuses on analyzing the umbrella clause in Chinese bilateral investment agreement. Since there is not uniform standard on the problem of the scope of umbrella clause in the international community, and different standards have different effects on the host government and foreign investors. Although the purpose of the umbrella clause is to balance the interests between the host Government and foreign investors, the international arbitral practice shows that many arbitral tribunal and scholars inclined to protect the interests of foreign investors, which may adversely on the host government impact. China has signed a lot of bilateral investment treaties which including "umbrella clause", This part analyzes the existing problems and proposes appropriate countermeasures according with the provisions in China's bilateral investment treaties, and pointes out that China should use "umbrella clause" rationally. China should also make the differences application of this clause and set some limits.