Inconsistency Crisis and Reformative Proposals of Investor-state Arbitration System- Umbrella Clauses Considered

The main purpose of investment treaties is to provide guarantees and protections for the investors in order to maintain the flow of foreign direct investment. As a consequence, when disputed, an adjudicator confronts a dilemma of figuring out the actual intention that the parties consented to. As for umbrella clauses are concerned, an interpreter falls into a loop to attain whether the parties consented to prioritize investor’s interest and elevate any contractual breach to the level of a treaty breach, or to consider the state’s regulatory power. The root could be traced to the interpretation process itself. Human conduct differs from one another even in response to similar incidents. This is attributed to the fact that it is affected by many factors, such as previous experience, culture and traditions that may differ from one another. Likewise, interpretation, a human conduct as such, cannot be predicted even to similar texts. Moreover, even interpreters use the same tools and principles, they may reach contradictory outcomes. This paper argues that the interpretation process will always have its way to conclude different outcomes. However, instituting a centralized court for foreign investment disputes with an appellate body assigned with review of legal merits, composed of tenured, state-appointed judges, alongside with inserting public law concepts in investment adjudication can mitigate the political symptoms of the system and its inconsistent awards