I. What is an umbrella clause?
II. Imposition of additional layer of obligation
III. Why do umbrella clauses matter?
IV. Examples of umbrella clauses
V. Current issues
VI. Origin of umbrella clauses
VII. Notable decisions
VIII. Relevance of the Role of the State
IX. Privity
X. Conclusion

 

I. What is an Umbrella Clause?

 

I will begin with what an “umbrella” clause is.

 

Many bilateral investment treaties (or BITs) require a signatory State to observe the obligations it has undertaken with investors of the other Contracting State with regard to their investments. The obligations are characterised as being legal and most often are contractual in nature – the majority of the relevant cases concern contractual obligations. Clauses of this type are commonly known as "umbrella" clauses because they bring otherwise independent investment arrangements between a Contracting State adn private investors from the other Contracting State under the BIT's 'umbrella of protection'.1 Other names or metaphors used to describe the effect of the umbrella include the 'elevator', the 'mirror effect', the 'parallel effect', among others.