Originally from World Arbitration And Mediation Review (WAMR)

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WHERE'S MY UMBRELLA?

AN "ORDINARY MEANING" APPROACH TO
ANSWERING THREE KEY QUESTIONS
THAT HAVE EMERGED FROM THE
"UMBRELLA CLAUSE" DEBATE
By Craig S. Miles*
I. INTRODUCTION
Over the last four years, arbitral tribunals have spilled much ink
debating the "proper" role and scope of the so-called "Umbrella Clause"
found in some bilateral investment treaties ("BITs").1 Although the precise
wording of such clauses varies, they typically provide in fairly broad and
perfunctory terms that the host State shall "observe" its "obligations"
entered into with regard to investments of nationals of the other State.2 In
many instances, these clauses do not, on their face, admit of much textual
ambiguity. As the Tribunal in Eureko v. Poland3 put it in analyzing the
plain language of a typical Umbrella Clause:4
The plain meaning -- the "ordinary meaning" -- of a provision
prescribing that a State "shall observe any obligations it may have
entered into" with regard to certain foreign investments is not
obscure. The phrase "shall observe" is imperative and categorical.