THE REACH OF INTERNATIONAL INVESTMENT AGREETHE REACH OF INTERNATIONAL INVESTMENT AGREEMENTS: KAZAKHSTAN AND THE UMBRELLA CLAUSE

Abstract

An umbrella clause is a provision through which the parties to an investment treaty undertake to observe any obligation they enter into with investors from the other state parties. Such a clause is included in numerous investment treaties, including the Energy Charter Treaty. Because of its imprecise language, this provision is potentially susceptible of indefinite expansion. In other words, it is difficult to determine to which obligations the clause applies and to which it does not. This brings us to two important questions. The first question is whether an umbrella clause may elevate a simple breach of national law to a breach of treaty under international law. The second questions is whether the umbrella clause's scope is limited to contractual commitments, or whether it also covers unilateral engagements made by states through legislative or regulatory acts. It is submitted here that, based on the clause's plain wording, its context, and the scarce existing case-law, the umbrella clause covers any commitment taken specifically with an investor. It would seem that legislative and regulatory acts might qualify as commitments taken specifically with an investor if a certain nexus is established between those acts and the individual investor.