Analysis of Legal Effects of Umbrella Clauses on Bilateral Foreign Investment Treaties

Abstract

Umbrella clause sometimes referred to as being loyal to commitment, obligation consideration clause or good-will clause in contracts is a kind of clause present in many bilateral foreign investment treaties and Multi-lateral Energy Charter as well. Despite the fact that umbrella clauses contained in treaties are quite similar and alike, their exact expressions might be a bit different from a treaty to another bilateral foreign investment. This difference among expressions and vocabularies could be the root cause of their various interpretations. Umbrella clause is a legal means set by capital-exporting countries in bilateral investment treaties to support foreign investors and promote the violation from agreement provision to bilateral treaty provisions and consequently modify the source of trials.