“Throughout the past half-century, the field of international investment law has been largely defined by the rise of bilateral investment treaties (BITs). Meant to replace traditional treaties of friendship, commerce, and navigation, these instruments are designed to encourage foreign investment by offering a baseline of substantive protection to investors entering a foreign state. The value of these treaties is especially potent for developing nations, where judicial systems often fail to measure up to investor expectations. Thus, to attract foreign investment, BITs normally permit claimants to bypass these questionable judicial systems and submit certain disputes to international arbitration. Most notably, arbitration is available through the International Centre for the Settlement of Investment Disputes (ICSID), which operates under the auspices of the World Bank. Currently, over 200 cases have been concluded under ICSID, with over 100 pending. Beyond the actual dispute resolution process itself, the pervasiveness of BITs cannot be overlooked: The United States currently has forty BITs in force, among approximately 2600 concluded worldwide. In the past decade, ICSID tribunals have struggled to determine the proper scope of certain clauses that purport to include contractual claims within the “umbrella” of a BIT’s protections. These “umbrella clauses” are considered innovative because, by general consensus, “mere violation” of a contract cannot trigger treaty protection under customary international law.”
Cite this article:
Kunwar Aditya Singh. Conflict of Treaty and Contract Forum in Investment Arbitration: The Umbrella Effect. Research J. Humanities and Social Sciences. 4(1): January-March, 2013, 119-123.