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Umbrella Clauses and Investment Contracts under Chinese BITS: Are the Latter Covered by the Former?

Umbrella Clauses and Investment Contracts... 1. INTRODUCTION Recent arbitration practice shows that the umbrella clause has become one of the most challenging provisions in bilateral investment treaties (BITS). The clause takes its name from its main objective, namely bringing obligations of a host state to foreign investors under the protective umbrella of an applicable BIT or a multilateral investment treaty.1 The umbrella clause can have far-reaching implications, the exact boundary of which is yet to be delimitated. Recent conflicting decisions by different arbitration tribunals on this matter suggest that the extent to which such clauses might "elevate" contractual obligations between a host state and a foreign investor to the level of treaty obligations is far from settled. Umbrella clauses arguably cover both contractual and non-contractual obligations.2 However, it is undisputed that this clause is most closely associated with investment contracts, namely state contracts or "concession agreements." Guaranteeing rights under state contracts is arguably the primary purpose of the clause.3 Hence it is better to address the two issues together. China has now entered into more than 120 BITS and at least 50 of them have an umbrella clause. Meanwhile, there has been extensive practice of investment contract in China, particularly in the context http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of World Investment and Trade Brill

Umbrella Clauses and Investment Contracts under Chinese BITS: Are the Latter Covered by the Former?

Journal of World Investment and Trade , Volume 11 (2): 161 – Jan 1, 2010

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Publisher
Brill
Copyright
Copyright © Koninklijke Brill NV, Leiden, The Netherlands
ISSN
1660-7112
eISSN
2211-9000
DOI
10.1163/221190010X00013
Publisher site
See Article on Publisher Site

Abstract

1. INTRODUCTION Recent arbitration practice shows that the umbrella clause has become one of the most challenging provisions in bilateral investment treaties (BITS). The clause takes its name from its main objective, namely bringing obligations of a host state to foreign investors under the protective umbrella of an applicable BIT or a multilateral investment treaty.1 The umbrella clause can have far-reaching implications, the exact boundary of which is yet to be delimitated. Recent conflicting decisions by different arbitration tribunals on this matter suggest that the extent to which such clauses might "elevate" contractual obligations between a host state and a foreign investor to the level of treaty obligations is far from settled. Umbrella clauses arguably cover both contractual and non-contractual obligations.2 However, it is undisputed that this clause is most closely associated with investment contracts, namely state contracts or "concession agreements." Guaranteeing rights under state contracts is arguably the primary purpose of the clause.3 Hence it is better to address the two issues together. China has now entered into more than 120 BITS and at least 50 of them have an umbrella clause. Meanwhile, there has been extensive practice of investment contract in China, particularly in the context

Journal

Journal of World Investment and TradeBrill

Published: Jan 1, 2010

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