Scientific Essay from the year 2012 in the subject Law - European and International Law, Intellectual Properties, grade: 87/100 (High Distinction), University of New South Wales, Sydney, course: International Investment Law, language: English, abstract: In recent years umbrella clauses have become a frequent vehicle for safeguarding investment contracts and their interpretation a major challenge for the competent tribunals. In contrast to the common view umbrella clauses do not blur the distinction between international and municipal law provided that exactly this fundamental distinction is observed in the process of interpretation. This paper advocates a restrictive interpretation of umbrella clauses in order to achieve a balance between the interests of involved actors. In line with the wording and the original function of investment treaties it is argued that only sovereign conduct of the host state may constitute a violation of the umbrella clause obligation.