The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization

111 American Journal of International Law 873 (2018)

45 Pages Posted: 1 Nov 2017 Last revised: 23 Mar 2019

See all articles by Simon Batifort

Simon Batifort

Curtis, Mallet-Prevost, Colt & Mosle; Brooklyn Law School

J. Benton Heath

NYU School of Law

Date Written: December 31, 2017

Abstract

This article critically examines the conventional wisdom that most-favored-nation (MFN) clauses in investment treaties can always be used to “import” substantive standards of treatment, such as fair and equitable treatment (FET), full protection and security (FPS), or protection from arbitrary or discriminatory measures, from one treaty to another. We argue that tribunals allowing this use of MFN clauses have generally relied on entrenched and unexamined presumptions as to the nature or essence of MFN clauses, and have ignored meaningful variations among clauses in investment agreements and other treaties. We also present evidence that the prevailing view of MFN clauses is being increasingly challenged by states in their capacities as litigants, non-disputing parties, and treaty drafters. And one recent tribunal award has firmly rejected an attempt to use MFN to import FET and other substantive standards. We conclude by encouraging reflection on the impact of this resistance to the conventional view and renewed attention to the specific terms of individual MFN clauses. By bringing our treaty-by-treaty, “bottom-up” approach into contact with the prevailing “top-down” presumptions about MFN importation, we hope to provoke a new debate—one which drives toward a more balanced approach to the interpretation of investment treaties.

Note: *Winner of the 2019 Smit-Lowenfeld Prize for Best Article in International Arbitration

Keywords: International law, investment law, investor-state dispute settlement, most favored nation, arbitration, treaties

Suggested Citation

Batifort, Simon and Heath, J. Benton, The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization (December 31, 2017). 111 American Journal of International Law 873 (2018). Available at SSRN: https://ssrn.com/abstract=3063009

Simon Batifort

Curtis, Mallet-Prevost, Colt & Mosle ( email )

101 Park Avenue
35th Floor
New York, NY 10178-0016
United States

Brooklyn Law School ( email )

250 Joralemon Street
Brooklyn, NY 11201
United States

J. Benton Heath (Contact Author)

NYU School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

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