Research On The Umbrella Clause Scope Of Application In Bilateral Investment Treaties

With the explosion of international investment in various countries and regions,the footprint of investment disputes is spreading across the globe,and the increase in international investment disputes has led to more eyes being directed to bilateral investment agreements(BITs),as the provisions therein can help settle the score.International dispute resolution in relation to investment has evolved from diplomatic means between countries to legal dispute resolution,mainly through investment arbitration.In order to protect the interests of investors,some contracting parties have included umbrella clauses in the BIT,requiring them to comply with their investment commitments to investors,and since 2005,ICSID’s nearly opposite arbitral awards in two cases involving umbrella clauses have led to heated discussions on the disputes related to umbrella clauses,among which the scope of application of umbrella clauses has been the most heated and long-lasting.A review of the BITs concluded by China reveals that most of the BITs concluded since 2000 contain umbrella clauses,which have undergone significant changes in terms of their location,the form of commitments,and the exclusion of commercial nature,as well as differences in the wording of umbrella clauses,so I choose to examine the umbrella clauses in BITs.Umbrella clauses have been invoked in a number of investment disputes before international arbitral institutions.However,the scope of application is too large to weaken the sovereignty of the host country and too small to protect the interests of the investors,and the lack of a uniform standard for the scope of application of the umbrella clause has led to inconsistent interpretation of the umbrella clause by arbitral tribunals,even to the extent that the cases are similar but the conclusions are left.Due to such differences in practice,the scope of application of the umbrella clause has aroused concern and discussion in academic circles,and this controversial issue is still inconclusive.This paper focuses on the scope of application of contractual obligations in the scope of application of umbrella clauses in BITs and the relationship between umbrella clauses and MFN clauses.By analyzing the relevant academic theories and practical cases of international investment tribunals,the paper attempts to propose a solution to the problem of expanding and limiting the application of the contractual obligations of the umbrella clause in BITs and the restrictive conditions of the umbrella clause introduced through the MFN clause.Finally,it attempts to find a response to the dispute over the scope of application of the umbrella clause when China concludes BITs and faces related arbitration in the light of China’s contracting practice and reality.Chapter One,"Overview of Umbrella Clauses in BITs",introduces the functions of umbrella clauses.Firstly,it introduces the functions and evolution of umbrella clauses,and analyzes the commonalities and differences in the formulation of umbrella clauses.Secondly,based on the contracting practices of major developed countries,the different attitudes and values of sovereign states towards the scope of application of umbrella clauses are analyzed and summarized,leading to the controversial issue of the scope of application of umbrella clauses.The following chapter,"Major Controversies on the Scope of Application of Umbrella Clauses".The first analyzes the main controversy over the scope of application of umbrella clauses in individual BITs,i.e.,the controversy over the extended application of contractual obligations versus the restricted application.Through the controversies in theory and practice,the underlying reasons for the controversies,the comparison of the views of different arbitral tribunals,and the analysis of their tendencies for different situations.Next,the controversy over the scope of application of the umbrella clause in the two BITs is analyzed.We analyze the different arbitration practices in which the MFN clause has been invoked to introduce the umbrella clause and summarize its restrictive conditions,pointing out that the restrictive conditions of the dichotomy of substance and procedure and the restrictive conditions of "similar circumstances" are both improper interpretations of the operation mechanism of the multilateralization function of the MFN clause,while the "the ejusdem generis principle" is not only clarifies the operation mechanism of the multilateralization function of the MFN clause,but also provides reasonable restrictions on the multilateralization function of the MFN clause.The third chapter "the solution to the dispute over the scope of application of the umbrella clause".On the one hand,to clarify the criteria for judging the application of the contractual obligations of the umbrella clause,and to solve the dispute between the expanded use of contractual obligations and the restricted application.The criteria for judging the application of contractual obligations under the umbrella clause are constructed from three aspects: the relationship between specific contractual obligations and investments,the identity of the state’s committed acts,and the nature of the state’s performance/breach of contract.On another hand,it proposes to strictly apply the restrictive standard of "the ejusdem generis principle" to resolve the dispute over the restrictive conditions of using MFN clause to introduce the umbrella clause.Chapter Four,"China’s Proposal on the Scope of Application of the Umbrella Clause".It summarizes the umbrella clauses in the BITs currently concluded by China,and proposes that China should limit the application of umbrella clauses when concluding BITs in the future,and be cautious about the scope of application of umbrella clauses in concluded investment agreements through treaty interpretation rules supplemented by joint interpretation.