The Boundaries of Most Favored Nation Treatment in International Investment Law
University of Leicester Law School
March 22, 2011
33 Michigan Journal of International Law 537 (2012)
The operation of MFN clauses in international investment agreements is one of the most controversial areas of international investment law, and is currently dominated by a teleological approach called the "non-discrimination" interpretation. According to this approach MFN clauses should be interpreted in the manner that would result in the greatest degree of competitive equality in a market. It is argued here that this interpretation is both mistaken and causes serious problems in the international investment context, due to the limitations it places on the policy-making freedom of States.
The article includes both a discussion of the history of MFN clauses and an analysis of the functioning of MFN clauses in international investment agreements. It argues that close attention to the history of MFN clauses shows that they have never been adopted by States as a "non-discrimination" clause. In addition, a proper appreciation of their function within international investment agreements identifies certain structural limitations on their operation, that remain in place even when they have an effect that is inconsistent with market equalisation. Consequently, the "non-discrimination" interpretation must be rejected.
Number of Pages in PDF File: 50
Date posted: March 23, 2011 ; Last revised: August 17, 2012