The Interpretation Of The “protective Umbrella Clause” In Bilateral Investment Agreements And Its Implications For China

Under the trend of economic globalization,economic dependence between countries is stronger and transnational investment activities are more frequent.Bilateral investment treaties are important ways to protect international investment.Many treaties include the umbrella clause,which ensures that the host government should observe the special commitments made to investors.Due to the different language used in the umbrella clause,investors may interpret that the umbrella clause could transform the purely contractual obligation into international obligation.Investors and host countries have different perspectives on this issue.The tribunals of the International Center for Settlement of Investment Disputes have made different awards on this dispute.In addition,the academic community also has extensive discussions on this controversial issue.At present,over 130 bilateral investment agreements that C hina has signed,at least 50 of them have included the "umbrella clause." Therefore,it is important for us to study the theory of the umbrella clause.In this study,the author tries to list the d ifferent scholars' opinions on which the “umbrella clause” could transform the contractual obligation into international obligation.The author also summarizes the relevant cases in the International Arbitration practice,especially the cases of the International Center for Investment Disputes.When the tribunal interprets the “umbrella clause”,they should adopt a balanced approach.It is important to interpret the meaning of this clause in the good faith(in accordance with Article 31(1)of the Vienna Convention).The umbrella clause does not extend its jurisdiction over any contract claims when such claims do not rely on a violation of the standards of protection of the BIT,unless some requirements are respected.State's action can be analyzed as a violation of the standards of protection embodied in a BIT if the State interferes with contractual rights.It is necessary to distinguish the State as a merchant from the State as a sovereign so that we could invoke this clause with appropriate restraint.Finally,on the basis of studying the umbrella clause in the bilateral investment treaties signed by China,it is necessary to restrict the scope of application of the “umbrella clause” in the re-signed and newly signed BIT.To prevent investors from abusing this clause,we should restrain the umbrella clause by using the restrictive words.Under the “the Belt and Road” initiative,China has played an important role in the international investment.Studying the relevant research on the “Umbrella Clause”,we could effectively protect our interests in the international investment and achieve a win-win situation.