Umbrella Clauses In Bilateral Investment Treaties

International investment is perceived as the most controversial subject in international law. The most recent controversy in this respect is the question of the so-called “umbrella clause” in the bilateral investment treaties (BITs). As more and more treaties contain this clause, and more investment disputes are being settled through international arbitration, the controversy over this subject becomes more visible in international level. The issue is whether a clause in a BIT, requiring the State to observe all its commitments vis-à-vis the investors, is capable of elevating the State’s undertakings in private investment contracts to the level of treaty undertakings. A number of international arbitral awards have been issued with detailed treatment of this question. The majority of such awards have shown little inclination to give a positive answer to the question. The present article examines the “clause” and the related international case-law, in detail. The Iranian BITs containing the “clause” is also discussed in this article.