Most Favoured Nation (MFN) clauses in International Investment Agreements (IIAs) play an important role in promoting fairness and non-discrimination among foreign investors. MFN clauses oblige the host state to treat investors of one state no less favorably than it treats investors of any other state. These clauses are becoming increasingly common in international investment agreements and are often found in the dispute settlement provisions of such agreements. In this article, we will discuss the applicability of MFN clauses to dispute settlement in IIAs.
The purpose of MFN clauses in IIAs is to ensure that foreign investors receive the same treatment as investors from other countries. This means that if a host state provides a certain level of protection or treatment to investors from one state, it must also provide the same level of protection or treatment to investors from any other state that is a party to the IIA. This principle of non-discrimination is designed to ensure that foreign investors are not subject to arbitrary or discriminatory treatment.
In the context of dispute settlement, MFN clauses are used to extend the benefits of one IIA to another. For example, if a host state has agreed to provide a certain level of protection to investors from one state in one IIA, and then subsequently signs another IIA with a different state that offers greater protection, the MFN clause in the second IIA may be used to extend the higher level of protection to the investors of the first state.
However, the applicability of MFN clauses to dispute settlement in IIAs is not always clear. Some IIAs explicitly exclude the application of MFN clauses to dispute settlement, while others are silent on the issue. The question of whether MFN clauses can be applied to dispute settlement in IIAs has been the subject of much debate and controversy in recent years.
One view is that MFN clauses should be interpreted narrowly and should not be used to extend the dispute settlement provisions of one IIA to another. This view is based on the argument that dispute settlement is a sensitive issue that should be left to the discretion of the parties involved in each IIA. Furthermore, it is argued that extending the dispute settlement provisions of one IIA to another through an MFN clause could result in forum shopping, whereby investors choose the most favorable forum for dispute resolution.
On the other hand, some argue that MFN clauses should be interpreted broadly and should be used to extend the dispute settlement provisions of one IIA to another. This view is based on the argument that the purpose of MFN clauses is to ensure non-discriminatory treatment of foreign investors, and that extending the dispute settlement provisions of one IIA to another through an MFN clause is consistent with this principle.
In practice, the application of MFN clauses to dispute settlement in IIAs is highly dependent on the specific language of the clause and the intention of the parties involved in each IIA. As such, the interpretation of MFN clauses in IIAs will continue to be a contentious issue and will likely be the subject of future disputes.
