428 / 532
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CYIL 5 ȍ2014Ȏ
products.
58
In 1996 the US investors signed the 1996 Investors’ Agreement. This
agreement contained
inter alia
the mutual rights and obligations of its signatories
with respect to the management and operations of a Polish company, named
LFO.
59
In 2002 the Ministry of Health sent a notice to LFO terminating the 1997
Fractionation Agreement. The termination of this agreement was subsequently
confirmed to LFO by the Ministry’s letter.
60
On the question as to whether the
Respondent violated the ‘umbrella clause’ provision in the U.S.-Poland BIT due to
the alleged failure to supply blood plasma to LFO under the 1997 Fractionation
Agreement, the Arbitral Tribunal concluded that the last sentence of paragraph 6 of
Article II of the BIT in wording that “
Each [State] Party shall observe any obligation
it may have entered into with regard to investments”
was an example of a so-called
“umbrella clause” and that the Claimants did neithert show that there was any legal
obligation to supply the plasma on demand, nor that the failure to deliver it in 1998
or 1999 was wrongful.
61
It followed that there could be no violation of the umbrella
clause even if the umbrella clause were in principle applicable in this context.
62
Subject matter of the umbrella clause
Known amongst others as a clause
pacta sunt servanda
, the umbrella clause
is a treaty provision found in many BITs that requires each Contracting State to
observe all investment obligations it has assumed with respect to investors from the
other Contracting State.
63
Its purpose is to create an inter-state obligation to observe
investment agreements that investors may enforce when the BIT confers a direct right
of recourse to arbitration. More specifically, the history of the umbrella clause makes
clear that it was designed to allow for any breach of a relevant investment contract to be
resolved under the treaty in an international forum.
64
The effect of the umbrella clause
is not to transform the provisions of a State contract into international obligations.
However, it makes the respecting of such contracts an obligation under the treaty.
65
As to the method about how to formulate the umbrella clause in a BIT
,
the
international tribunal could also consider the location of the umbrella clause in the
BIT framework and the resulting potential impact on its subsequent interpretation
.
A number of countries
,
mostly of the Common Law system, such as Great Britain
,
the United States, New Zealand
,
Australia, as well as, for instance Japan, consider an
umbrella clause “Substantive protections”, while the states of the continental legal
58
Ibid.
at 34.
59
Ibid
. at 51.
60
Ibid
. at 108.
61
Ibid
. at 248.
62
Ibid. at
203.
63
Judith Gill,
et al.
, Contractual Claims and Bilateral Investment Treaties: A Comparative Review of the
SGS Cases, 21
J. Int’l Arb.
397, 403 n. 31 (2004) (finding that approximately 40% of a sample of BITs
taken from INVESTMENT TREATIES (ICSID ed., 2003) contained umbrella clauses).
64
J. Wong, Umbrella Clauses In Bilateral Investment Treaties, supra note 4, p. 143.
65
UNCTAD Study, Bilateral Investment Treaties (Graham & Trotman, NY, 1988), pp.) 55-6.