Umbrella Clauses as Public Law Concepts in Comparative Perspective

Stephan W. Schill

in International Investment Law and Comparative Public Law

Published in print October 2010 | ISBN: 9780199589104
Published online January 2011 | e-ISBN: 9780191595455 | DOI:
Umbrella Clauses as Public Law Concepts in Comparative Perspective

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This chapter deals with the function, scope, and effect of umbrella clauses in international investment treaties. It proposes to understand the clauses as breaking with customary international law and argues that their function consists in stabilizing investor-State relations by opening recourse to dispute settlement by arbitral tribunals for breaches of specific and individual promises made by the State. Umbrella clauses prevent host States from acting opportunistically in reneging on their initial promises whether through acts of a governmental or purely commercial nature. While reinforcing the principle of pacta sunt servanda as a fundamental basis for investor-State cooperation, they do not exclude, however, variations of contracts due to contingencies arising during the life of a contract, nor do they override the State's police power to regulate investor-State contracts in the public interest.

Keywords: umbrella clauses; police power; pacta sunt servanda; credible commitment; State contracts; opportunistic behaviour; sovereign and commercial conduct; enforcement

Chapter.  13709 words. 

Subjects: Constitutional and Administrative Law

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