NEWSLETTER-2017

197 ARBITRATION LAW The Awards Reducing the Effect of the Umbrella Clauses In SGS v. Pakistan 10 , the pre-shipment inspection services con- tract concluded among the Claimant and Pakistan containing forum selection for Pakistani courts was unilaterally terminated by Pakistan. However, the Claimant commenced arbitral proceedings before the International Center for Settlement of Investment Disputes under the BIT between Pakistan and Switzerland. The Tribunal had given a widely criticized decision and ruled that the umbrella clause is not effective on the breach of contract between the parties. The tribunal reasoned its decision that although the Tribunal acknowledges that States may agree in a BIT that coverts all breaches of States’ contracts into breaches of the BIT, in this case, there is no clear, nor persuasive, evidence showing that this was the actual intention of both states while adopting the umbrella clause in the BIT. 11 Similar arguments were raised by the tribunals in El Paso v. Ar- gentina 12 , Pan America v. Argentina 13 , CMS v. Argentina 14 and Sempra v. Argentina 15 that had added a distinction between the sovereign and merchant status of the states to their reasoning. The tribunals under- lined that the umbrella clauses in investment arbitrations shall only 10 SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan , De- cision on Jurisdiction, ICSID Case No. ARB/01/13, available at: https://icsid. worldbank.org/en/Pages/cases/casedetail.aspx?CaseNo=ARB /01/13. 11 SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan , par. 173;Christopher Screuer, “ Travelling the BIT Route – of Waiting Periods, Um- brella Clauses, Forks in the Road, ” The Journal of World Investment and Trade, Vol: 5, No: 2, p. 252, available at: http://www.univie.ac.at/intlaw/pdf/68.pdf; Zenginkuzucu, p. 174. 12 El Paso Energy International Company v. Argentine Republic, Decision on Juris- diction, ICSID Case No. ARB/03/15, available at: https://icsid.worldbank.org/en/ Pages/cases/casedetail.aspx?CaseNo=ARB/03/15. 13 Pan American Energy LLC and BP Argentina Exploration Company v. Argen- tine Republic , Decision on Preliminary Objections, ICSID Case No. ARB/03/13, available at: https://www.italaw.com/cases/808. 14 CMS Gas Transmission Company v. Argentine Republic , Award, ICSID Case No. ARB/01/8, available at: https://icsid.worldbank.org/en/Pages/cases/casedetail. aspx?CaseNo=ARB/01/8; Zenginkuzucu, p.182. 15 Sempra Energy International v. Argentine Republic, Award, ICSID Case No. ARB/02/16, available at: https://icsid.worldbank.org/en/Pages/cases/casedetail. aspx?CaseNo=ARB/02/16.