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UMBRELLA CLAUSE ȃ ADDITIONAL PROTECTION OF INVESTMENT BY CLAUS…
of the investment and the Treaty.” However, the Tribunal did not say whether the
Tribunal would have found jurisdiction over purely contractual claims by virtue of
the umbrella clause in the BIT or not.
The ICSID case Société Générale de Surveillance S.A. v. The Republic of Paraguay 51
shows that the Respondent cited SGS v. Pakistan for the proposition that the
“commitment” protected by an umbrella clause does not include mere contracts.
However, as theTribunal had already decided in the Decision on Jurisdiction, Article 11
of the BIT provided no basis for excluding contracts from the scope of “commitments”
covered in the article. As stated in the Decision on Jurisdiction,52 the Tribunal was on
this point “parting ways with the decision in SGS v. Pakistan. ” Similarly, the Tribunal
disagreed with the Siemens award53 to the extent that it concluded that an abuse of
sovereign power was necessary to establish a breach of an umbrella clause. In so doing,
the Tribunal followed the reasoning of other ICSID tribunals that had concluded
that the umbrella clause may apply whether or not the exercise of sovereign power is
involved.54 In light of these conclusions, the parties’ discussion of whether Paraguay
took actions of a sovereign nature and, if so, whether such actions were an abuse of
government authority was irrelevant, according to the Arbitral Tribunal, i.e. in short,
if Paraguay failed to observe its contractual commitments, then it breached Article 11.
No further examination of whether Paraguay’s actions were properly characterized as
“sovereign” or “commercial” in nature than was for the Arbitral Tribunal necessary.55
In connection with the ICSID case Noble Ventures Inc. v. Romania56 another
situation can occur when there is a direct violation of bilateral investment treaties.
Once one party has violated its commitments, it is necessary to determine what contract
was actually broken – whether the bilateral investment agreement or the investment
agreement (commercial contract). While any breach of an investment agreement is
governed by the laws of the State specified therein (often the national law of the host
State, the breach of BITs fall directly within the scope of international law. Therefore, a
breach of an investment agreement between the investor and the host state, does not
under normal circumstances automatically constitute a breach of the BIT.
Another example is the case David Minnotte and Robert Lewis v. Republic of
Poland,57 where Poland entered into agreements with fractionation providers located
outside of its territory in attempting to satisfy the needs for blood-plasma derivative
51 Société Général de Surveillance S. A. v. The Republic of Paraguay, ICSID Case No. ARB/07/29 Award 10
February 2012.
52 See 169 in note 53.
53 Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/02/8, Award, 6 February 2007, para. 253;
54 Ibid. at 93 in note 53.
55 Ibid. at 95 in note 53.
56 Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11, Award 12. 10. 2005, available at: http://
57 David Minnotte and Robert Lewis v. Republic of Poland, ICSID (ADDITIONAL FACILITY) Case No.
ARB(AF)/10/1 Award 16 May 2014.