The Paradoxical Effect of “Umbrella Clause” and African States Interference with International Investment Contract and Bits.

Abstract

One of the safeguards that African countries‟ investment treaties, including Tanzania, usually provide to international investors and their investments is “The umbrella clause,” which compels the host state of the investment to honor the obligations it has made to the foreign investor or its investment. This might be an extremely effective safeguard. However, the Umbrella clauses, on the other hand, have proven to be one of the most contentious clauses(s) in investment treaties, resulting in contradictory interpretations by tribunals and commentators that have yet to be resolved. Consequently, the conditions of international investment agreements agreed upon with foreign investors have been brazenly ignored, canceled, or altered by African state parties, including Tanzania. The rise in the number of investor-state disputes in Africa before various arbitral tribunals, which point to a widespread lack of compliance with treaty commitments, mostly by African host nations, demonstrates this. Thus, this study explains the concept of the umbrella clause and its interpretations conundrum, as well as provides the reasons for African governmental intervention with BITs and the underlying contracts with foreign investors, whereas reasons such as the Use of Model Treaties, Regulatory Sovereignty, Public Interest, Limitations to resolving disputes through international arbitration, Defenses to State Responsibility, Change in Circumstances, Local content regulations and Nationalization have been discussed in depth.