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confirm the verity that the host state is obliged to protect investment in the agreed

upon way, but not to purport the “automatic” responsibility of the host state for the

intentionally wrongful act against international law. Without any explicit obligation

given by the umbrella clause, any breach of obligation by the host state, does not

automatically lead to any violation of international law.

This is supported by the view taken by the former Secretary General of ICSID

Ibrahim Shihata, who recognizes that “treaties may furthermore elevate contractual

undertakings into international law obligations, [but only] by stipulating that a

breach by one State of a contract with a private party from the other State will also

constitute a breach of the treaty between the two States.”

This conclusion can also

be found in the very first ICSID case,

SGS Société Générale de Surveillance (SGS) v.

Pakistan,

where the umbrella clause itself, without any clearly stipulated sanction of

a host State, is obviously not automatically a breach of the international law, even

by any interpretation of the clause. The investor is, in fact, not eligible to claim any

violation of the investment agreement under international law.

It should therefore be indispensable to carefully examine and set out the proper

wording of the umbrella clause during its drafting and formulating into the BIT.

I.F.I. Shihata, “Applicable Law in International Arbitration: Specific Aspects in Case of the Involvement

of State Parties”, in I.F.I. Shihata and J.D. Wolfensohn (eds.),

The World Bank in a Changing World:

selected Essays and Lectures

, Vol. II, Brill Academic Publishers, Leiden, Netherlands, 1995, at 601 www.

trapl.cz.