An umbrella clause generally reads as follows: "each party shall observe any obligation arising from a particular commitment it may have entered into with regard to a specific investment". We can infer from this statement that the aim of this clause is to protect any specific commitments by either party with respect to a given investment. This kind of clause is, for instance, aimed at protecting the investor against any contractual breaches, such as the variation of the terms of the contract, a wrongful termination of the contract, or the introduction of legislative measures having an impact on the performance of the contract. As underlined by Bishop et al., an umbrella clause does not amount to an unqualified guarantee but only applies when a party fails to observe "any obligation". Therefore the object designed to be protected by the clause are the obligations as arising from any commitment either of the contracting parties may have entered into.
[...] Umbrella Clauses and Transfers As you examine the SGS cases and the readings contained in the first excerpt from Bishop, et al, as well as the views of Schreuer, Sinclair and Gaillard, can you give a coherent account of what the “umbrella” clause in investment agreements ought to protect? Which of the SGS decisions do you agree with and why? An umbrella clause generally reads as follows: “each party shall observe any obligation arising from a particular commitment it may have entered into with regard to a specific investment”. [...]
[...] One more argument in favour of this position is that it appears as extremely complex and artificial to establish a distinction between contract claims and BIT claims and to present them in different forums. It goes without saying that the adjudication of all claims arising from an investment dispute in one forum is from far the best solution. Last but not least, this interpretation is the only one that is coherent with the historical background of the umbrella clauses and its logics as it was presented in Sinclair's article. Bibliography Bishop, [...]
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