Research On "Umbrella Clause" In Bilateral Investment Treaties

"Umbrella clause" can be seen in a number of BITs,under this clause the host country should abide by the provisions of its commitment to comply with any obligation to investors. The purpose of most investment treaties is inclined to develop and promote the protection of investors. However, the "umbrella clause" in different BITs are different, the differences not only cause different interpretations of the provision, but also constitute a potential inconsistency in the arbitral awards. In empowering investors the right to initiate international arbitration, the sovereign authority of the host country had been violated. "Umbrella clause" not only breaks through the traditional theory of international law practice, but also establish the bridge of the dispute settlement mechanism in the domestic and international law,The essence of "Umbrella clause" is to maximize the interests of investors, and the host country's sovereignty has been eroded. It means investors in accordance with the provisions of the country can elevate contract claim to treaty claim, investors can sue the host country not only in accordance with the contract dispute settlement,but also bring an international arbitration rely on the treaty dispute settlement. The traditional international law empowers the national sovereignty to be the highest authority, any other act can not go against the principle of national sovereignty. However, with the process of investment liberalization, in order to attract foreign investment, investment automatically are expanded or countries are forced to give up a number of sovereign powers. Accept the "umbrella clause" is the product of the developed countries, mainly in capital-importing countries in order to protect its own nationals or companies, for most developing countries were forced to voluntarily accept it. Although from the perspective of investment protection, it provides a mechanism that the judicial settlement of international arbitration for maintain the rights of investors, some defects of the provision that it would damage the host country's economic sovereignty can not be ignored. At the same time the concrete practice of the provision may further damage a country's sovereignty and plante a potential hazard for the country to be brought to arbitration due to the purpose explaination principle and the MFN principle in the international investment law.China's BITs almost contain the "umbrella clause", especially the BIT with Germany, the Netherlands and other developed countries that does not define the terms and scope of application of this provision, nor make a significant the MFN principle of safety and exceptions. While it has not yet brought our country to the international arbitration, but we can not dismiss the possibility that investors in accordance with the terms or the terms of China's MFN bring the arbitration and put China in an unfavorable environment. China is not only the capital-importing countries, but also the capital-exporting countries, should recognize the current status of the international investment and restore the concept of the sovereignty of the host country. China should also make the differences application of this clause and set some limits.In this paper, writer makes the historical analysis of causes and background of the emergence of "umbrella clause" , and does the empirical analysis through the arbitration cases of "umbrella clause" as well as the examples of countries in BITs or FTAs involving this clause or other relevant provisions. The content , functions and effectiveness of this clause are described and analyzed. Finally, on the basis of the advanced experience of foreign countries, the writer proposes some suggestions on the application and challenges of China's "umbrella clause".The introductory section gives the discription of the clause and the classical conceptions of it. The first part of this paper is an overview of the origin, the development of "umbrella clause" .And this part tells the theoretical and practical background as well as the practice in the world. The second part is the core of the article, namely the meaning of "umbrella clause", which involves the language features, mode of the provision; the scope of application, as well as an analysis of functionality and effectiveness of this clause. Part three analizes the potential defectsof the "umbrella clause" , and puts forward some viable solutions. Part four clarifies China's BITs and "umbrella clauses" in the China's view ,and puts forward some suggestions combined with the academic and practica results.