Parties to the �obligations� in the obligations observance (�umbrella�) clause

shotaro hamamoto;

The host State may conclude contracts with local subsidiaries of a foreign investor. Conversely, a foreign investor may conclude contracts with an entity established by the host State with a domestic legal personality distinct from the State. In either case, where there is no direct privity between the host State and the investor, is it possible for the investor to initiate treaty-based arbitration against the host State, alleging a violation of the obligations observance clause (umbrella clause) contained in the applicable investment treaty? In the former case, the investor is entitled to initiate arbitration against the host State, if the clause obliges the latter to observe obligations entered into �with regard to investments�, in light of the text and
the effet utile of the clause. In the latter, the separate legal personality of the entity cannot by itself prevent the investor from invoking the obligations observance clause. However, the rules on attribution in the law of State responsibility, though often used
by tribunals, cannot explain the applicability of the clause in this situation. The investor needs to establish that the entity represented the host State in entering into the obligation in question.