CYIL 2014

UMBRELLA CLAUSE ȃ ADDITIONAL PROTECTION OF INVESTMENT BY CLAUS… Treaty protection, which was not the case. The connection between the Contract and the Treaty was the missing link that prevents any such effect. This might have been perfectly different in other cases where that link were found to exist, but certainly was not the case here . 35 The ICSID Tribunal in CMS v. Argentina 36 found, in connection with Article II(2)(c) of the Argentina-United States BIT, which provides that each party “ shall observe any obligation it may have entered into with regard to investments ”, that the umbrella clause applied to some but not all contractual obligations when relying inter alia on the SGS cases and Joy Mining v. Egypt . 37 The Tribunal determined that the umbrella clause distinguished between “commercial disputes” and those “disputes arising from the breach of treaty standards and their respective causes of action”, 38 and that the umbrella clause applied only to the latter, which “likely” included situations involving “significant interference by government or public agencies with the rights of the investors.” 39 In contrast to Joy Mining and CMS , however, other decisions have observed more generally that the umbrella clause extends to contractual obligations without excluding particular categories of contractual obligations from its scope. 40 The Arbitral Tribunal in Consorzio Groupement L.E.S.I.-DIPENTA v. Algeria stated that “the effect of [umbrella] clauses is to transform the violations of the State’s contractual commitments into violations of the treaty and by this to give jurisdiction to the Tribunal over the matter”. Indeed, the decision held that, when the umbrella clause is phrased in the imperative, it then must be held to apply without exception to all contractual obligations. 41 In Eureko B.V. v. Poland, 42 the Tribunal commented on the umbrella clause in the Netherlands-Poland BIT, in which Article 3.5 of the Treaty provides that each Contracting Party “ shall observe any obligations it may have entered into with regard to investments of investors of the other Contracting Party ”. A clause of such substance is called “the umbrella clause”. Thus, insofar as the Government of Poland entered into obligations vis- à -vis Eureko with regard to the latter’s investments, and insofar as the Tribunal found that the Respondent acted in breach of those obligations, it stood, prima facie, in violation of Article 3.5 of the Treaty. 43 The plain or ‘ordinary meaning’ of a provision prescribing that a State ‘shall observe any obligations it may have entered into’ with regard to certain foreign investments is quite clear. The 35 Joy Mining , ICSID Case No. ARB/03/11 at 81. 36 CMS Gas Transmission Co. v. Argentine Republic, Award, ICSID Case No. ARB/01/8 (2005), at 299-301. 37 Ibid note 39 at 296. 38 Ibid at 300. 39 Ibid at 299. 40 Joy Mining Machinery Limited v. Arab Republic of Egypt , ICSID Case No. ARB/03/11. 41 Consortium Groupement L.E.S. I.- DIPENTA v. République algérienne démocratique et populaire, ICSID Case No. ARB/03/08. 42 Ibid in note 4. 43 Ibid 244 in note 4.

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