Umbrella Clauses Investment Agreements

Each of these issues has been dealt with by arbitration tribunals that have provided different answers. Take, for example, the pioneering SGS cases against Pakistan (ARB/01/13), the Philippines (ARB/02/6) and Paraguay (ARB/07/29). Each of these cases refers to almost identical umbrella clauses; However, each court interpreted the safeguard clause differently. In SGS v. Pakistan, the court found that “given a valid forum selection clause,” there was no need to increase claims in a contract based on contractual claims. Only a year later, the SGS court v. The Philippines found that a safeguard clause “gives foreign investors assurances as to the performance of the obligations that the host Member State has taken under its own legislation with respect to certain investments”; However, it decided to suspend arbitration until the Philippine courts decided on the amount of money owed by the government to SGS. Finally, in SGS v. Paraguay, the Tribunal adopted a different and broader interpretation, since the common meaning of the word commitment in the framework clause includes clear contractual obligations and that the clause “cannot be used as a basis for excluding contracts from the scope of the “obligations] provided for in the [framework clause].” The commitment clauses, i.e.

the framework clauses, aim to strengthen the contractual and other obligations of host Member States under the protection shield of an investment contract1. Neither the doctrine nor the jurisprudence have a common application of safeguard clauses that can be characterized as provisions contained in international investment agreements that require host countries to recognize their obligations under these clauses2. This article discusses the differences in case law regarding safeguard clauses in investment arbitration proceedings in order to consolidate the controversial issues raised in this case. In Indonesia, the Foreign Investment Regulation is previously governed by Foreign Investment Act 1 of 1967 as amended by Law 11 of 1970 amending and supplementing Foreign Investment Act 1 and Law 1.

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Jenny Smith