The Application of the Most-Favoured-Nation Clause to the Dispute Settlement Provisions of Bilateral Investment Treaties: Domesticating the Trojan Horse

18 Pages Posted: 20 Jun 2008 Last revised: 14 Jan 2013

See all articles by Yannick Radi

Yannick Radi

University of Louvain (UCL) - School of Law

Date Written: September 1, 2007

Abstract

Contracting states bring a Trojan Horse into the city when providing for most-favoured-nation clauses (MFN clause) in bilateral investment treaties (BIT). This affects the general equilibrium of the treaties, as recent case law from investment arbitration tribunals illustrates. In these cases the controversial issue is the applicability of the MFN clause to the dispute settlement provisions of the BITs. Arbitration practice and mainstream literature so far have focussed on the specific nature of the dispute settlement mechanism, asking whether the MFN clause should cover it or not. This article analyses the arguments put forward so far on this issue, and argues that by reason of the effet utile the MFN clause always covers the dispute settlement mechanism, unless the opposite intention of the Contracting states can be demonstrated. Furthermore, this article considers that the prevailing focus on the entire mechanism is misleading. The main issue is in fact the scope of application of the MFN clause to the individual provisions on dispute settlement. Underlying this issue there is the tension between the MFN clause and the other provisions of BITs, whatever their procedural or substantive nature. This tension puts into question the rationality of providing for MFN clauses in bilateral investment treaties. But once such a clause is already adopted, this article suggests that the way to domesticate this Trojan Horse is to substitute conditional MFN clauses for the unconditional MFN clauses presently provided for in BITs.

Keywords: International investment law, international investment arbitration, bilateral investment treaty, most-favoured nation clause, dispute settlement mechanism

Suggested Citation

Radi, Yannick, The Application of the Most-Favoured-Nation Clause to the Dispute Settlement Provisions of Bilateral Investment Treaties: Domesticating the Trojan Horse (September 1, 2007). European Journal of International Law, Vol. 18, Issue 4, pp. 757-774, 2007, Available at SSRN: https://ssrn.com/abstract=1148638 or http://dx.doi.org/10.1093/ejil/chm031

Yannick Radi (Contact Author)

University of Louvain (UCL) - School of Law ( email )

University of Louvain (UCL) - School of Law
Place Montesquieu 2
Ottignies-Louvain-la-Neuve, 1348
Belgium

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
98
Abstract Views
913
rank
298,754
PlumX Metrics