Krithika Radhakrishnan and Ritwik Mukherjee write on the interpretation of Umbrella clauses in International Investment Arbitration.
International investment law finds its niche within the significant fields of international arbitration and trade law. The developing importance of foreign investments has grown in modern times and is facilitated by Bilateral Investment Treaties which exist between nations. These treaties have a double-sided objective– on one hand, they promote foreign investments in a host state, and on the other, they envisage to protect rights and interests of the investor who seeks to set up such an investment. A contentious issue, which has been a hot topic of debate over the past decade, pertains to the scope and extent of BIT protections. While one, the broad approach, advocates that BIT protections should be extended to contractual obligations, another approach adopts a more restrictive view and asserts that protections under the BIT must extend only to substantive obligations which arise from the treaty itself. The question of elevation of contractual breaches to a treaty breach is dependent on the presence of a so-called umbrella clause in the treaty. The method of interpretation of such a clause is a question which has been placed before several Tribunals, though no single consistent view has emerged as yet.
This paper will analyse the two decisions of ICSID Tribunals in the cases of Société Générale de Surveillance v. Islamic Republic of Pakistan and Société Générale de
Surveillance v. Republic of Philippines where the Tribunals opined opposing views– a restrictive view in the former and a broader approach in the latter– and will delve into the reasons as to which approach is more desirable.