Independent BIT Standard or Mere Affirmative Commitment? The Umbrella Clause Interpreted

in Austrian Review of International and European Law Online
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Independent BIT Standard or Mere Affirmative Commitment? The Umbrella Clause Interpreted

in Austrian Review of International and European Law Online

References

1 See Art. 10 (1) last sentence of the 1994 Energy Charter Treaty, 34 ILM 381, at 389; the North American Free Trade Agreement, by contrast, does not contain a sanctity of contract clause. 2 Art. 1 of the Draft Articles on Diplomatic Protection, adopted by the International Law Commission in 2006, puts it as follows: "diplomatic protection consists of the invocation by a State [...] of the responsibility of another State for an injury caused by an internationally wrongful act of that State to a natural or legal person that is a national of the former State" [emphasis added]. Draft Articles on Diplomatic Protection, adopted on second reading, International Law Commission, Report on the work of its fifty-eight session, UNGAOR Supplement No. 10 (A/61/10), chapter IV.

3 S. M. Schwebel, "On Whether the Breach by a State of a Contract With an Alien Is a Breach of International Law", in Press Syndicate of the University of Cambridge (ed.), Justice in International Law, Selected Writings of Stephen M. Schwebel, Judge of the International Court of Justice 425 (1994). 4 For a more detailed analysis of the historical origins of the umbrella clause and their emergence in BITs read A. C. Sinclair, "The Origins of the Umbrella Clause in the International Law of Investment Protection", 20 Arbitration International 411 (2004). 5 SGS Societe Generate de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13, Decision on Jurisdiction, 6 August 2003, 8 ICSID Reports 406 (2005). 6 SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 163.

7 SGS Societe Generale de Surveillance S.A. v. Republic of the Philippines, ICSID Case No. ARB/02/6, Decision on Jurisdiction, 29 January 2004, 8 ICSID Reports 518 (2005). 8 C. Schreuer, "Investment Treaty Arbitration and Jurisdiction over Contract Claims - the Vivendi I Case Considered", in: T. Weiler (ed.), International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, BITs & Customary International Law 281, at 299 (2005).

9 SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 157. The wording of the clause can be found at para. 158. 10 Compafíía de Aguas del Aconquija, S. A. and Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/97/3, Award, 21 November 2000, 5 ICSID Reports 296 (2002). " Vivendi I, Award, supra note 10, at para. 41. 12 Ibid., at para. 81. " See, e.g., Salini Costruttori SpA and Italstrade SpA v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction, 23 July 2001, 6 ICSID Reports 398, at paras. 59, 61 and 62 (2004); SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 161 or SGS v. Philippines, Decision on Jurisdiction, supra note 7, at paras. 130-135.

14 E. Gaillard, "Investment Treaty Arbitration and Jurisdiction Over Contract Claims - The SGS Cases Considered", in: T. Weiler (ed.), International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, BITs & Customary International Law 325, at 328 (2005). 15 See Salini v. Morocco, Decision on Jurisdiction, supra note 13, at para. 63; SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 190 (a); SGS v. Philippines, Decision on Jurisdiction, supra note 7, at para. 177 (a). 16 Gaillard, supra note 14, at 328. 17 See, e.g., the Tribunal in SGS v. Pakistan, Decision on Jurisdiction, supra note 5, which declined jurisdiction over contract claims (at para. 161) whereas the Tribunals in Salini v. Morocco, Decision on Jurisdiction, supra note 13, (at paras. 59 and 61) and SGS v. Philippines, Decision on Jurisdiction, supra note 7 (at para. 135), upheld it. 18 Schreuer, supra note 8, at 295. 19 Ibid. 20 Ibid. [emphasis added].

21 Ibid., at 295-296. 22 Ibid., at 296. 23 Ibid. 24 Ibid. 25 Art. 8 (1) of the French-Argentine BIT; for the full wording see Vivendi I, Award, supra note 10, Appendix 1 A. 26 For more detail on this matter see Schreuer, supra note 8, at 296-299 and Gaillard, supra note 14, at 331-336. 27 Schreuer, supra note 8, at 299. 28 See, e.g., F. A. Mann, "British Treaties for the Promotion and Protection of Investments", 52 British Year Book of International Law 241, at 245 (1981); M. Sornarajah, The International Law on Foreign Investment 248 (2004); Vandevelde, United States Investment Treaties: Policy and Practice 78 (1992). See, e.g., SGS v. Philippines, Decision on Jurisdiction, supra note 7, at para. 128; Consorzio Groupement L.E.S.I. - DIPENTA v. Democratic and Popular Republic of Algeria, ICSID Case No. ARB/03/08, Award, 10 January 2005, available at http://www.worldbank.org/icsid/cases/leso- sentence-fr.pdf, at para. 25; Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/O1/11, Award, 12 October 2005, available at http://www.investmentclaims.com/decisions/Noble-Ventures- Final-Award.pdf, at para. 62; LG&E Energy Corp., LG&E Capital Corp., LG&E International

Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability, 3 October 2006, available at http://www.worldbank.org/icsid/cases/pdf/ARB02 l_LGE-Decision-on-Liability- en.pdf, at para. 175., Eureko B.V. v. Republic of Poland, Ad Hoc Investment Treaty Case, Partial Award on Liability, 19 August 2005, available at http://www.investmentclaims.com/decisions/ Eureko-Poland-LiabilityAward.pdf., at para. 260. 30 Tecnicas Medioambientales TECMED S.A. v. The United Mexican States, ICSID Case No. ARB (AF)/00/2, Award, 29 May 2003, 10 ICSID Reports 134, at para. 90 (2006). " Ibid., at paras. 95-151.

'z Noble Ventures, Award, supra note 29, at para. 53. '3 See, e.g., SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 156. " See, e.g., ibid., at para. 160 or El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, Decision on Jurisdiction, 27 April 2006, available at http://www. worldbank.org/icsid/cases/ARB0315-DOJ-E.pdf, at para. 70. 'S BIT available at http://www.unctad.org/sections/dite/iia/docs/bits/netherlands_belize.pdf,

'6 Salini v. Morocco, Decision on Jurisdiction, supra note 13, at para. 59.

37 Ibid. '$ Ibid., at para. 61. 39 SGS v. Philippines, Decision on Jurisdiction, supra note 7, at para. 134. 40 Ibid.., at para. 135. 41 Although upholding jurisdiction over contract claims, the Tribunal did not go into the merits of these claims but stayed the proceedings. It drew this consequence from the distinction of the concepts of jurisdiction and admissibility (see paras. 136-155, specifically para. 154). This decision was compared with the one in Vivendi I, Award, supra note 10, and analysed in, e.g., Schreuer, supra note 8, at 293 et seq. 42 SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 161. a3 Ibid., at para. 162.

" Art. 8(1) of the BIT between Angola and the United Kingdom, available at http://www.unctad. org/sections/dite/iia/docs/bits/uk_angola.pdf [emphases added]. For a similar dispute settlement provision in a different BIT see Art. 9 of the Albano-Bulgarian BIT, available at http://www. unctad.org/sections/dite/iia/docs/bits/albania bulgaria.pdf. as Compania de Aguas del Aconquija, S. A. and Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment, 3 July 2002, 6 ICSID Reports 340 (2004). "� Gaillard, supra note 14, at 336. 47 See quotation accompanied by supra note 27.

'8 Whether the tribunal accepts jurisdiction over the contract claim is, as suggested in Section I. E., a different matter. '9 Art. 11 of the Swiss-Pakistan BIT; see SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 163. 50 SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 164.

51 Ibid., at para. 166. sz C. Schreuer, "Travelling the BIT Route: of Waiting Periods, Umbrella Clauses and Forks in the Road", 5 The Journal of World Investment & Trade 231, at 253 (2004). 53 For more detail on this issue see P. Daillier/A. Pellet, Droit lnternational Public, 263 et seq. (2002). 54 SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 172.

ss Ibid. [emphases added]. sb SGS v. Philippines, Decision on Jurisdiction, supra note 7, at para. 125. 57 Eureko v. Poland, Partial Award on Liability, supra note 29, at para. 244. s8 1969 Vienna Convention on the Law of Treaties, 8 ILM 679 (1969). 59 Eureko v. Poland, Partial Award on Liability, supra note 29, at para. 247; similarly in Noble Ventures, Award, supra note 29, at para. 50. 60 Eureko v. Poland, Partial Award on Liability, supra note 29, at para. 247.

61 Ibid., at para. 246. 62 Ibid., at para. 248. 63 Ibid., at para. 244. 64 See also El Paso v. Argentina, Decision on Jurisdiction, supra note 34, at para. 72.

bs Note attached to the Letter of the Swiss Secretariat for Economic Affairs to the ICSID Deputy- Secretariat General dated 1 October 2003, in 19 Mealey's International Arbitration Reports (February 2004). 66 SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 167; see also El Paso v. Argentina, Decision on Jurisdiction, supra note 34, at para. 77.

67 1928 Treaty between the United States and other Powers providing for the renunciation of war as an instrument of national policy, 1 Bruns, Politische Vertrdge, at 248 (1936). 68 For a statement underlining that this treaty created an entirely new legal situation, see Roscher, Der Briand-Kellogg-Pakt von 1928, at 281 (2004). 69 SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 168. 10 Ibid. 71 Schreuer, supra note 52, at 152; this statement was also cited by the Tribunal in Eureko v. Poland, Partial Award on Liability, supra note 29, at para. 258.

'2 El Paso v. Argentina, Decision on Jurisdiction, supra note 34, at para. 76; see also Pan American Energy LLC and BP Argentina Exploration Company v. Argentine Republic, ICSID Case No. ARB/03/13, Decision on Preliminary Objections, 27 July 2006, available at http://www. investmentclaims.com/decisions/PanAmerican BP-Argentina-Jurisdiction.pdf, at para. 105. " SGS v. Philippines, Decision on Jurisdiction, supra note 7, at para. 117. " LG&E v. Argentina, Decision on Liability, supra note 29, at para. 174; for more detail see section IV.A.

75 All other tribunals which noted that the umbrella clause's wording was -in principle- susceptible of applying also to this kind of obligations, in the end interpreted the umbrella clause in an extremely restrictive way; see, e.g., SGS v. Pakistan, Decision on Jurisdiction, supra note 5, El Paso v. Argentina Decision on Jurisdiction, supra note 34, Pan American v. Argentina, Decision on Preliminary Objections, supra note 72.

'b As outlined in part IV, it is very likely that umbrella clauses do not apply to "obligations" under municipal law since the municipal law as such will seldom constitute an "obligation".

" Art. 11 of the PSI Agreement; for the full wording see SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 15. 11 SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 160. " Ibid., at para. 168. ° Eureko v. Poland, Partial Award on Liability, supra note 29: Dissenting Opinion of J. Rajski, at para. 11.

81 This was already emphasized in chapters II. D. 2. and II. E. 3. above. $z According to Art. 42 (1) of the ICSID Convention (1966 Convention on the Settlement of Investment Disputes between States and Nationals of other States, 4 ILM 532 (1965)), in absence of agreement as to the applicable law, "the Tribunal shall apply the law of the Contracting State party to the dispute [...] and such rules of international law as may be applicable". Art. 42 (1) refers to the domestic law of the host state. It seems very consistent that this question should be decided on the basis of the host state's municipal law. See also SGS v. Philippines, Decision on Jurisdiction, supra note 7, at paras. 126 and 128.

83 For an overview of the issue, see A. Reinisch, "The Use and Limits of Res Judicata and Lis Pendens as Procedural Tools to Avoid Conflicting Dispute Settlement Outcomes", 3 The Law and Practice of International Courts and Tribunals 33-77 (2004). ' SGS v. Pakistan, Decision on Jurisdiction, supra note 5, at para. 170. $5 SGS v. Philippines, Decision on Jurisdiction, supra note 7, at para. 124 [emphases added and footnotes omitted].

86 Schreuer, supra note 52, at 253. 8 Eureko v. Poland, Partial Award on Liability, supra note 29, at para. 259 [emphasis added]. e$ Mann, supra note 28, at 245 [emphases added].

$9 Ibid., 246 [emphasis added]. '° Ibid. [emphases added]. " SGS v. Philippines, Decision on Jurisdiction, supra note 7, at para. 115 [emphasis added]. 9z Ibid., at para. 117 [emphases added].

93 Ibid., at para. 121 [emphases added]. '4 Noble Ventures, Award, supra note 29, at para. 51. 9s Ibid. lbid., at para. 61.

97 LG&E v. Argentina, Decision on Liability, supra note 29, at para. 169. 9g Ibid., at para. 170 [emphases added]. " See note 50 in LG&E v. Argentina, Decision on Liability, supra note 29, at para. 174. '°° LG&E v. Argentina, Decision on Liability, supra note 29, at para. 174 [emphases added and footnote omitted].

101 Mann, supra note 28, at 246 [emphases added]. 102 Ibid. 103 Eureko v. Poland, Partial Award on Liability, supra note 29, at para. 251 [emphases added].

104 Art. 7 of the BIT between Austria and Cape Verde, available at http://www.unctad.org/sections/ dite/iia/docs/bits/austria-capeverde.pdf [emphasis added].

105 This was asserted, e.g., by the Claimant in Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/01/12, Decision on Jurisdiction, 8 December 2003, 10 ICSID Report 416, at para. 382 (2006). See, e.g., infra notes 51 and 64.

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