Originally from Reflections on International Arbitration - Essays in Honour of Professor George Bermann

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The fine boundaries between the parties’ obligations under international and domestic law, under public and private law or under law and contract are a fascinating legal area, particularly when one of the parties is a State or a State entity. One of the issues arising from this tricky legal junction that has attracted much attention from the doctrine over the last decade, due to its increased presence in the international case law, is the ‘Umbrella Clause’. However, as frequently as Umbrella Clauses apparently are applied in recent investment arbitration case law, there is a reverse situation that is present in our legal reality and it is – unjustifiably – insufficiently analyzed, a genuine elephant in the room, somehow unnoticed by legal literature, although existent. I named this clause the ‘Reverse Umbrella Clause’ and the purpose of this note is to introduce it to its readers.

Conventionally, the term Umbrella Clause describes the provisions of investment treaties referring to the obligation of a State to observe all their obligations, under the applicable municipal law, including their contractual obligations. To name one example, the last sentence of Article 10(1) of the Energy Charter Treaty makes it an obligation of each Contracting Party “to observe any obligations it has entered into with an Investor or an Investment of an Investor of any other contracting party”.