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The Oxford Handbook of International Investment Law edited by Muchlinski, Peter T; Ortino, Federico; Schreuer, Christoph

Part II Substantive Issues, Ch.10 Most-Favoured-Nation Treatment

Pia Acconci

From: The Oxford Handbook of International Investment Law

Edited By: Peter T Muchlinski, Federico Ortino, Christoph Schreuer

From: Investment Claims (http://oxia.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved.  Subscriber: null; date: 23 October 2019

Subject(s):
Most-favoured-nation treatment (MFN) — BITs (Bilateral Investment Treaties) — Settlement of disputes

(p. 363) Chapter 10  Most-Favoured-Nation Treatment

  1. (1)  The Essential Features of the MFN Standard 365

  2. (2)  The MFN Treatment Standard as a Treaty Clause 367

    1. (a)  The MFN Clause in BITs 370

    2. (b)  The MFN Clause in other International Instruments 373

  3. (3)  The International Case-Law Applying the MFN Standard 381

    1. (a)  Substantive Treatment 381

    2. (b)  Procedural Matters 387

  4. Concluding Remarks 401

(p. 364) With increasing globalization, and with most developing countries no longer advocating the establishment of a New International Economic Order (NIEO), the so-called ‘open-door policy’ on foreign investment has become widespread and the non-discrimination principle is generally more accepted than in the past. The two typical non-discriminatory treatment standards, that is most-favoured-nation and national treatment, are usually included in international treaties, whether bilateral or multilateral, concluded in the field of foreign investment. As is well known, the most-favoured-nation standard takes the rights granted by the host state to foreign investors of other countries as a benchmark, whereas under the national treatment standard the foreign investor is entitled to be treated as a host state national would be.1 These are both relative standards, that is, variable and comparative, as they presuppose comparison with the way other foreign investments (most-favoured-nation treatment, MFN) and national ones (national treatment) are dealt with by the host state in a like situation. Their aim is to ensure uniformity and equality of the treatment granted by a host state and to balance competition in this country's market. This chapter will assess how the most-favoured-nation treatment standard has come to be regularly included in international instruments and treaties concerning foreign investment. After outlining the special features of this standard in international investment law, it will examine the relevant cases2 that have, inter alia, dealt with claims for applying such a standard differently from what many states and scholars were expecting. Then, the chapter will evaluate whether or not this case-law is actually altering the present international scenario for foreign investment, as one could think in light of the debate which arose from the ICSID Awards in the Maffezini and other subsequent cases.3

(p. 365) (1)  The Essential Features of the MFN Standard

Commonly, uniformity and equality are deemed appropriate terms to define what consequences are supposed to derive from reference to the non-discrimination principle.4 Undoubtedly, this does not mean that such a principle obliges a host state to grant an ‘equal or identical treatment’ to all investors operating on its territory. A host state can grant different treatment to investors from different foreign states, if they are in a different objective situation. That is why investment treaties often include the ‘in like situations’ or ‘in like circumstances’ requirement in their most-favoured-nation treatment clauses. This means that such clauses apply only to investors and investment that are ‘in like situations’ or ‘in like circumstances’.5 Reference to this requirement underlines the comparative nature of the non-discriminatory treatment standards and the key role of comparators. As the ultimate goal of the non-discrimination principle is to make foreign investors from different countries and national investors compete on the same level, it is enough that a host state accords foreign investors a ‘“treatment no less favourable” than that accorded to the “most favoured” third nation … and to [its] nationals’,6 provided that the ejusdem generis principle is satisfied.

The ejusdem generis principle requires that the international treaty including a most-favoured-nation clause (so-called ‘basic treaty’) deals with the same subject-matter as the international treaty providing for the most favourable treatment (so-called ‘third-party treaty’).7 Otherwise, in conformity with general rules of international law, the ‘third-party treaty’ is res inter alios acta in respect of the state which, under the ‘basic treaty’, is the beneficiary of the most-favoured-nation treatment.8

(p. 366) From a foreign investor's point of view, both the non-discriminatory standards, being variable, do not, however, ensure certainty of treatment. In order to achieve the highest level of protection possible, modern international treaties concerning foreign investment prescribe that a contracting state has to grant another contracting state's investors most-favoured-nation treatment or national treatment, ‘whichever is the more favourable’. In addition, these treaties often refer to both such standards combined with other different treatment standards, such as fair and equitable treatment. This is a non-contingent standard, that is, invariable and absolute, since it is independent of the treatment accorded by the same country to other investors.

The 1994 Dutch Model BIT provides a typical formulation of how the possible different treatment standards can be combined. By Article 3 (1) and (2):

1.  Each Contracting Party shall ensure fair and equitable treatment of the investments of nationals of the other Contracting Party and shall not impair, by unreasonable or discriminatory measures, the operation, management, maintenance, use, enjoyment or disposal thereof by those nationals. Each Contracting Party shall accord to such investments full physical security and protection.

2.  More particularly, each Contracting Party shall accord to such investments treatment which in any case shall not be less favourable than that accorded either to the investments of its own nationals or to investments of any third State, whichever is more favourable to the national concerned.9

Most-favoured-nation treatment cannot apply if only investors of the same country have invested in another country. In such a case there is no possibility of comparing the treatments granted by the same country to foreign investors coming from different countries. Thus, fair and equitable treatment becomes a very important reference standard.10 This is probably one of the main reasons why the latter is often considered more typical of the field of foreign investments than the most-favoured-nation treatment standard, whose functioning in such a field has indeed been quite a neglected issue so far.

Recently, some claimants and scholars have, however, started to be interested in this issue. Actually, applying the most-favoured-nation treatment standard has become one of the most controversial issues in international investment law, (p. 367) especially since the 2000 ICSID Award in the Maffezini case. As will be seen, the ICSID tribunal established that, by including a most-favoured-nation standard clause in an investment treaty, uniformity can be achieved as regards not only substantive treaty rules but also procedural ones, particularly those concerning dispute settlement and consent to arbitration. Afterwards, other ICSID tribunals interpreted and applied this treatment standard extensively, causing much public debate at an international law level.11 Notably, the line of reasoning adopted by these tribunals has contributed to the ongoing debate on ICSID and its possible reform. In fact, ICSID is criticized by some developed and developing countries that are no longer satisfied with the increasingly frequent recourse to its arbitration by private investors, resulting in increasingly complex amounts of inconsistent case-law.

(2)  The MFN Treatment Standard as a Treaty Clause

Most-favoured-nation treatment is provided for in a treaty clause. In effect, there are no rules of general international law in this respect.12 This was also the view of the UN International Law Commission which, in 1978, proposed some Draft Articles on Most-Favoured-Nation Clauses to the UN General Assembly to promote negotiations for a pertinent multilateral agreement within the UN.13 These negotiations did not take place. The 1969 Vienna Convention on the Law of Treaties would have been the key reference point for such negotiations, since the most-favoured-nation treatment standard is provided for in a treaty clause. The relevance of such a Convention (p. 368) would have derived from the fact that, at least partly, it incorporates rules of general international law on the Law of Treaties.14

With respect to international agreements providing for the most-favoured-nation treatment standard in the field of foreign investment, bilateral investment treaties (BITs) must be distinguished from multilateral ones, especially from recent regional ones, which mostly establish free trade areas. Whereas BITs tend to focus on treatment and protection of private investments,15 recent multilateral agreements also tend to ensure progressive liberalization and promotion of trade and investment. Therefore, these agreements, inter alia, deal with matters such as market access, right of establishment, performance requirements, government procurement, and transparency. However, multilateral agreements have only a limited geographical and sectoral coverage and provide more exceptions than BITs. Furthermore, as far as specific treatment standards are concerned, such agreements generally follow the typical formulation of corresponding BITs provisions. Thus, BITs remain basic for evaluating chief trends in present international investment law. In particular, these bilateral treaties, being great in number and being widely applied by international arbitral tribunals, are a very important means to understand the main issues of modern international investment law, such as that related to the functioning of the most-favoured-nation treatment standard.

Implementing treaty obligations concerning treatment standards generally means protecting the foreign investor against non-commercial risks, that is, against any action of the host state authorities that may impair his/her legal position and economic activity. Eventually, the observance of these obligations ensures that, during the normal life of an investment, the relationship between a host state and a foreign investor remains almost uneventful.

As a rule, the most-favoured-nation clauses included in investment treaties are formulated as unconditional because these clauses are often unrestricted as well as automatically and immediately applicable to investments made by nationals of each contracting state. These clauses are also indeterminate since they are unlimited ratione materiae, ratione personae, and ratione temporis. Furthermore, such clauses are usually reciprocal since they refer to mutual relationships among all contracting states of the investment treaty taken into consideration. On the other hand, since foreign investment is also a field in which states ‘wish to retain their sovereign rights … in line with the traditional diversity of their economic structures’,16 investment treaties tend to provide for exceptions and reservations to the (p. 369) most-favoured-nation treatment standard.17 By so doing, a balance can be achieved between the non-discrimination principle and possible diverging interests at stake.

Note that to some extent a host state can control the treatment standard accorded to foreign investors under non-discriminatory standards.18 Specifically, with respect to the most-favoured-nation treatment standard, this state's control derives from the fact that it can decide the treatment granted to the most favoured nation. Thus, a host state can, at least in principle, limit the scope of most-favoured-nation treatment clauses which are included in its international treaties. Mostly, the level of treatment, that is, the content of the rights accorded, is not spelled out directly. Instead these rights are to be inferred from the actual texts of the treaty clauses which provide the treatment standards, and which must be interpreted in conformity with the international rules on treaty interpretation, and from the provisions of other pertinent legal instruments.19 Thus, as there are a very great number of treaties and instruments in the field of foreign investment, determining the field of application of the pertinent most-favoured-nation clauses can be hard. Such a field of application can vary both ratione materiae and ratione personae.

Particular problems may arise from the fact that the scope of these clauses may be different from treaty to treaty. Although the main difference between most-favoured-nation treaty clauses is whether or not they apply only at the post-entry stage or also at the pre-entry stage, there are other important distinctions. For example, some treaties do not limit the functioning of their most-favoured-nation clauses at all, whereas other treaties confine it to specific matters. Hence, it is relevant to examine what sorts of clauses are in principle included in international treaties concluded in the field of foreign investment.20

(p. 370) (a)  The MFN Clause in BITs

BITs typically include a most-favoured-nation clause which runs as follows:

Neither Contracting Party shall subject investments in its territory owned or controlled by nationals or companies of the other Contracting Party to treatment less favourable than it accords in equivalent circumstances … to nationals or companies of any third State.21

In general, the object of the most-favoured-nation BIT clause is the investment rather than the investor. Anyway, some clauses refer to both22 or only to investors.23 As a rule, most-favoured-nation BIT clauses are unconditional, reciprocal, and indeterminate, although different clauses may be detected. For example, the most-favoured-nation clauses of a few German BITs cover only ‘similar treaties’ of one contracting Party.24 Besides, some BITs do not refer to the ‘in like [or equivalent] circumstances’ requirement.25 Most BITs refer to treatment standards, including the most-favoured-nation standard, only with respect to the post-establishment phase. In fact, as already pointed out, BIT treatment clauses tend not to deal with admission and establishment matters. This is due to the fact that BITs per se do not grant a general right to make foreign investments. American, and some recent Canadian, BITs are significantly different in this respect, as they also include a most-favoured-nation commitment as regards market access.26 A similar undertaking is also provided by (p. 371) the 1988 BIT between Japan and China.27 In any case, most of the treaty obligations concerning treatment standards cover ‘the management, maintenance, use or enjoyment of investments’28 or ‘activities in connection with investments’29 or ‘activities associated with investments.’30 Furthermore, beyond an indefinite most-favoured-nation clause, many BITs include other most-favoured-nation clauses in relation to specific matters.

Notably, some BITs include a most-favoured-nation treatment clause concerning transfers of payments or in general ‘returns on investments’. These clauses may run as follows: … the contracting States undertake to accord to transfers … a treatment as favourable as that accorded to transfers originating from investments made by investors of a third State.31

There are also specific treaty clauses which provide for the most-favoured-nation standard to ensure equality of treatment of foreign investments as regards the consequences of expropriations, nationalizations, or any other similar measure that a host state may, directly or indirectly, adopt and/or the consequences of war or similar events which may occur in a host state. To this end, some BITs include a clause, according to which ‘nationals or companies of either Contracting Party shall enjoy most-favoured-nation treatment in the territory of the other Contracting Party in respect of the matters provided for in this Article’.32

Some BITs refer to both non-discriminatory treatment standards only as regards determining the consequences of war or similar events which may occur in a host state. In this regard, a typical clause is the following:

Each Party shall accord national and most favoured nation treatment to covered investments as regards any measure relating to losses that investments suffer in its territory owing (p. 372) to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance, or similar events.33

As will be seen, some of these BIT clauses have been applied by ICSID tribunals to compensate foreign investors for damages caused by domestic riots and acts of violence which occurred in host states.34

Moreover, some BITs include a clause to ensure automatic adjustments of their treatment standards, which may provide that:

If the legislation of either Contracting Party or obligations under international law existing at present or established hereafter between the Contracting Parties in addition to this Treaty contain a regulation, whether general or specific, entitling investments by nationals or companies of the other Contracting Party to a treatment more favourable than is provided for by this Treaty, such regulation shall to the extent that is more favourable prevail over this Treaty.35

At any rate, investment treaties do include some exceptions to the applicability of the non-discriminatory treatment standards, even if these standards are often provided in clauses which at first sight are indeterminate, reciprocal, and unconditional. These exceptions may be justified by a host country's desire to retain control over foreign investors or by a host country's propensity for a progressive, rather than immediate, liberalization. There are general exceptions concerning public policy matters, such as public order, health, and national security, which often apply to all the provisions of a BIT. Other common exceptions to the treatment standards aim at ensuring the priority of international obligations that the contracting states of an investment treaty may have taken in other fields, such as regional economic integration36 and taxation.37 Some US BITs provide for an exception in relation to protecting intellectual property (p. 373) rights. For example, many US BITs include a clause according to which: …‘the obligations … do not apply to procedures provided in multilateral agreements concluded under the auspices of the World Intellectual Property Organization relating to the acquisition or maintenance of intellectual property rights’.38

In order to avoid possible free-riding behaviour within the GATT framework, the Protocol to the 1992 US-Russia BIT provides for a specific exception which reads as follows:

… the exclusion from the most-favored-nation treatment obligations shall apply also to advantages accorded by the United States by virtue of its binding obligations under any multilateral international agreement concluded under the framework of the GATT after the signature of this Treaty ….39

On the other hand, the 1995 BIT between Canada and Trinidad and Tobago excludes from the functioning of its most-favoured-nation clause possible more favourable obligations which one of the Contracting States may take ‘within the framework of the GATT or its successor organization and liberalizing trade in services’.40 Furthermore, some US BITs specify that,

the Government of the United States of America may adopt or maintain exceptions to the obligation to accord national and most favored nation treatment to covered investments in the sectors or with respect to the matters specified below: fisheries; air and maritime transport, and related activities; banking, insurance, securities, and other financial services; and minerals leases on government land.41

Thus the drafting of the MFN clause tends to follow a similar pattern with some adaptations. However, the approach taken in BITs should be contrasted with that taken to MFN clauses in other international instruments to which attention now turns.

(b)  The MFN Clause in other International Instruments

The most-favoured-nation clause appears in the NAFTA Agreement and in other international treaties concluded by states of the Western hemisphere to establish (p. 374) free trade areas or customs unions. The NAFTA Agreement provides for the most-favoured-nation treatment, whereas the 1989 US-Canada Free Trade Agreement did not include any clause in this respect. This is a remarkable fact, given that the NAFTA can be seen as a successor to the US-Canada Agreement.42 Under Article 1103 of the NAFTA Agreement, each party ‘shall accord’ most-favoured-nation treatment to both ‘investors of another Party’ and ‘investments of investors of another Party’ with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments. This most-favoured-nation clause is unconditional, reciprocal, and indeterminate. This clause also refers to the ‘in like circumstances’ requirement.43 Notably, such a clause covers both the pre-entry and the post-entry stage. Nevertheless, in conformity with Article 1108 of the NAFTA Agreement, the functioning of this most-favoured-nation clause is subject to present and also possibly future reservations made by a party, as regards sectors and regulations set out in the relevant Annexes to the Agreement itself.

After concluding the NAFTA Agreement, the USA tried to promote its wide acceptance by most of the other states of the American continent with the purpose of negotiating a broad free trade agreement of the Americas (FTAA) by the end of 2005. This US attempt has not succeeded so far.

As a matter of fact, several of the other states of the Western hemisphere have concluded separate free trade agreements instead of joining the NAFTA Agreement. Recently, even the USA has largely abandoned an FTAA strategy in favour of concluding separate free trade agreements with some states of the American continent.

The free trade agreements among states of the Western hemisphere provide for most-favoured-nation treatment. In this respect, they generally include unconditional, reciprocal, and indeterminate clauses. Such agreements also tend to refer to the ‘in like circumstances’ requirement. Some of the agreements at hand provide for the most-favoured-nation treatment without resembling the pertinent NAFTA provisions. Actually, these agreements include slightly less detailed most-favoured-nation clauses, which prescribe only that, ‘Each Party shall grant investors of another Party, and to their investments, treatment no less favorable than that it accords, in like circumstances, to investors, and their investments, of another Party or of a non-Party’.44

(p. 375) Usually, such clauses do not apply to the pre-entry stage. In most cases, both the investors and the investments are their object. They also refer to the ‘in like circumstances’ requirement. Some of these most-favoured-nation clauses are applicable to determine the extent of a contracting state's obligations in the event of war or similar circumstances which may occur in its territory and cause losses for investors of another contracting state.45

Regarding exceptions, often the agreements at hand exclude possible different treatment standards provided in international treaties concerning regional integration and taxation matters,46 or only the latter,47 from the functioning of their most-favoured-nation clauses. The Colombia-Mexico-Venezuela Free Trade Agreement specifies that its provisions concerning definitions to be applied for the purposes of its chapter on investment, that is, its provisions on the field of application, are excluded from the functioning of its most-favoured-nation clause.48

Several free trade agreements concluded among states of the American continent include a similar clause to that of the NAFTA Agreement.49 Therefore, these agreements accord the most-favoured-nation treatment to both ‘investors of another Party’ and ‘investments of investors of another Party’ in the pre-entry and the post-entry stage. Besides, such agreements refer to the ‘in like circumstances’ requirement and to present, and also possibly future, reservations made by a Party as regards sectors and regulations set out in their relevant Annexes.50

(p. 376) To present a complete picture, it is worth mentioning that the 2003 Draft Agreement establishing the Free Trade Area of the Americas (FTAA) provides a most-favoured-nation clause which is, in principle, very similar to that of the NAFTA Agreement.51 This Draft Agreement also includes most-favoured-nation treatment in relation to determining the consequences of war or similar events which may occur in a party.52 Furthermore, the Draft Agreement specifies that ‘While recognizing the generality of the MFN principle, a smaller economy may be exempted from same in those circumstances where it extends more favourable treatment to investors/investments from other smaller economies in the Hemisphere’.53

As regards possible general exceptions, the Draft Agreement refers to typical exceptions concerning public policy matters54 and any different treatment standards provided by other international treaties with respect to taxation and regional economic integration matters.55 Moreover, it includes a specific exception according to which its most-favoured-nation clause does not cover ‘the privileges, advantages or benefits derived from agreements whose purpose is to facilitate border relations’.56At any rate, under the Draft Agreement, the functioning of its most-favoured-nation clause is subject to present and possibly future reservations made by a party as regards matters set out in their relevant Annexes.57

Interestingly enough, some states of the Western hemisphere also concluded free trade treaties with states of other continents. These treaties closely resemble the free trade agreements concluded inter se. As a consequence, some of these treaties include most-favoured-nation clauses similar to that of the NAFTA Agreement,58 whereas others incorporate slightly less detailed most-favoured-nation clauses which essentially apply only at the post-establishment stage.59

Finally, the Mercosur Protocols of Colonia (1993) and Buenos Aires (1994), which aim at promoting and protecting investments respectively from member states and from third states, also provide for the most-favoured-nation treatment (p. 377) of those investments.60 These Protocols include an unconditional, reciprocal, and indeterminate clause, which applies only to investments and to the post-entry stage. Such clauses do not refer to the ‘in like situations’ requirement. So, they are less restrictive than the most-favoured-nation treatment clauses which are usually included in investment treaties. The most-favoured-nation treatment clauses at hand do not cover possibly different treatment standards included in international agreements concerning taxation matters.61

The most-favoured-nation clause is also included in two important international sectoral agreements concluded in 1994 to foster economic cooperation through inter alia foreign investment. These are the GATS Agreement and the Energy Charter Treaty. The GATS Agreement can be considered the first multilateral agreement on foreign investment, albeit limited to the service sector. This Agreement includes a general obligation to grant most-favoured-nation treatment to foreign services providers of WTO members. Its Article II states:

With respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country.

This clause is, in principle, unconditional, reciprocal, and indeterminate. It covers both investments and investors in services and refers to the ‘in like situations’ requirement. Furthermore, the functioning of such a clause is supported by the important procedural protection of the mandatory intergovernmental dispute settlement system of the WTO.62

Nevertheless, the formulation of the clause in question is not completely clear, essentially because of the expression ‘any measure covered by this Agreement’. Apparently, the drafters thought that combining Articles I and XXVIII of the GATS Agreement was enough to define this expression, as both such Articles include the necessary definitions to understand the Agreement, especially as regards the concept of ‘trade in services’. However, as regards foreign investment in particular, understanding the expression ‘any measure covered by this Agreement’ means to (p. 378) deal with further issues of interpretation, first with that of determining how ‘trade in services’ can be carried out ‘through commercial presence’.63

Note also that Article II(2) of the Agreement allows a Member to ‘maintain a measure inconsistent with’ the most-favoured-nation treatment commitment if ‘such a measure is listed and meets the conditions’ laid down by the Annex on Article II exceptions. In any case, these possible exceptions are supposed to be temporary.64 Remarkably, the apparently neutral, that is unconditional, reciprocal, and indeterminate, structure of the GATS most-favoured-nation treatment commitment may also be undermined by Article II(3) of the Agreement, which reads as follows:

The provisions of this Agreement shall not be so construed as to prevent any Member from conferring or according advantages to adjacent countries in order to facilitate exchanges limited to contiguous frontier zones of services that are both locally produced and consumed.

As a whole, applying the GATS most-favoured-nation clause to foreign investment may bring about problems of interpretation which may prevent the GATS Agreement from being the main legal reference point in this regard at an international law level.

Another multilateral, although sectoral, investment agreement that is believed to have a significant role in the field of foreign investment is the Energy Charter Treaty. Its Article 10(3) provides that each contracting party must accord to investors of other contracting parties a treatment which ‘is no less favourable than that which it accords to its own investors or to investors of any other Contracting Party or any third State, whichever is the most favourable’. Under Article 10(7) this treatment also covers ‘investments … and their related activities including management, maintenance, use, enjoyment or disposal’. Besides, the Treaty includes most-favoured-nation treatment in the context of determining the consequences for a state party if a war or other similar events in its territory cause losses for an investor of another state party.65 However, as is well known, the Treaty's provisions on investment are of limited effect. Article 10(4) prescribes that ‘A supplementary treaty shall … oblige (p. 379) each party thereto to accord to investors of other parties, as regards the making of investments in its area, the treatment described in paragraph (3) …’. Therefore, the Energy Charter Treaty spells out only general principles on making investments, while legally binding principles in this respect are to be incorporated in a supplementary treaty which has not yet been concluded.66 As a result, the most-favoured-nation clause in the Energy Charter Treaty cannot be considered unconditional, although it is reciprocal and indeterminate. In addition, this clause does not refer to the ‘in like circumstances’ requirement and covers only the post-establishment phase. Furthermore, in conformity with Article 10(10), the most-favoured-nation treatment ‘shall not apply to the protection of intellectual property’. Moreover, in the light of Article 21, in particular paragraph 1, the most-favoured-nation treatment is not to be applied to taxation matters.

The Energy Charter Treaty, at Article 24, also provides some exceptions to the most-favoured-nation treatment. Apart from general exceptions concerning public policy matters, such as protecting health and essential security interests, this article includes two specific exceptions. Most-favoured-nation treatment does not cover ‘any preferential treatment’ included either (i) in international agreements establishing free-trade areas or customs unions or (ii) in international agreements, whether bilateral or multilateral, concerning economic cooperation between states that were constituent parts of the former Union of Soviet Socialist Republics pending the establishment of their mutual economic relations on a definitive basis.

The most-favoured-nation clause also appears in non-binding international instruments, in particular the 1992 World Bank Guidelines for the Treatment of Foreign Investment and the 1994 APEC Non-Binding Investment Principles.67 The 1992 World Bank Guidelines on the Treatment of Foreign Direct Investment aim at outlining the relationship between a foreign investor and a host country on non-binding terms, in order to promote and establish the best legal framework possible for foreign direct investment. As regards treatment standards, the third Guideline, inter alia, recommends host states to grant non-discriminatory treatment to foreign investors on the grounds of nationality, and in any case to accord the same treatment to investors on a most-favoured-nation basis. For a similar purpose of promoting (p. 380) the best legal framework possible for economic development and particularly for foreign direct investment, the 1994 APEC Non-Binding Investment Principles also recommend that:

Member economies will extend to investors from any economy treatment in relation to the establishment, expansion and operation of their investments that is no less favourable than that accorded to investors from any other economy in like situations, without prejudice to relevant international obligations and principles.

Notably, these Principles incorporate a broad most-favoured-nation clause, which is unconditional, reciprocal, and indeterminate. It also covers both the pre-entry and post-entry stages and refers to the ‘in like situations’ requirement.

The 1998 Framework Agreement on the ASEAN Investment Area also includes a broad most-favoured-nation clause, which is unconditional, reciprocal, and indeterminate. This clause covers both the pre-entry and post-entry stages. However, it does not refer to the ‘in like situations’ requirement. Remarkably, differently from the 1992 World Bank Guidelines and the APEC Non-Binding Principles, this international instrument is binding at an international law level and, as will shortly be seen, the functioning of its most-favoured-nation clause was at stake in the first investment arbitration case held within the ASEAN, that is, the Yaung Chi Oo case.68

Finally, the most-favoured-nation clause was also included in the Draft Multilateral Investment Agreement (MAI). As is well known, at first the MAI negotiations were supposed to result in a broad and comprehensive agreement on foreign investment which included high standards with respect to liberalization, protection, and dispute settlement. The non-discrimination principle would have had an important role in this regard. In fact, the OECD member states agreed to include the most-favoured-nation and national treatment standards in the Draft Agreement which they approved in 1998. As regards the most-favoured-nation treatment standard, the pertinent provision ran as follows:

Each Contracting Party shall accord to investors of another Contracting Party and to their investments, treatment no less favourable than the treatment it accords [in like circumstances] to investors of any other Contracting Party or of a non-Contracting Party, and to the investments of investors of any other Contracting Party or of a non-Contracting Party, with respect to the establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment, and sale or other disposition of investments.69

Thus, the most-favoured-nation treatment standard was to be applied both to the pre-entry and post-entry stages. It was also supposed to cover both de jure and (p. 381) de facto discrimination. Furthermore, such a standard was to be applied both to investors and to investments. Moreover, the Draft Agreement specified that in any case the best of the two non-discriminatory standards had to be accorded if there were a difference between them.70

A highly debated issue was whether or not reference to such standards had to be qualified by the ‘in like situations’ requirement. Some states asserted that reference to this requirement would have been open to abuse; whereas others argued that such a requirement would clearly have shown the comparative nature of the most-favoured-nation treatment standard.71 The Draft Agreement, to accommodate possible diverging interests, provided for exceptions and reservations to the two non-discriminatory standards. There were general exceptions concerning policy matters, such as national security and public order. Some states, like Canada, claimed for specific exceptions with respect to cultural matters.72 The reservations mainly concerned sectors which the OECD member states wanted to exclude from the functioning of the MAI most-favoured-nation clause.

(3)  The International Case-Law Applying the MFN Standard

(a)  Substantive Treatment

Typically, the most-favoured-nation treatment clause is concerned with how a state deals with foreign goods and persons when they enter its territory and thereafter. As a matter of fact, in the field of foreign investment, this has essentially meant evaluating how a host state treats foreign investors and/or investments during the post-establishment phase. This issue occurs when the relationship between a host state and a foreign investor becomes inimic and a dispute arises. Thus, the issue of evaluating how a most-favoured-nation treatment treaty clause functions is usually addressed by arbitration tribunals.

(p. 382) The first set of ICSID cases to be considered under this heading deals with the application of the most-favoured-nation treaty clause in relation to liability standards. The first case of this kind is AAPL v Sri Lanka.73As is well known, this case was also the first based on an ICSID arbitration clause included in a BIT, specifically in the 1980 BIT between the UK and Sri Lanka. It arose out of a claim for compensation against the respondent state arising out of damage caused to the claimant's investment as a result of insurgent activity connected with the continuing civil conflict in Sri Lanka. Article 3 of the BIT contained a most-favoured-nation treatment clause which, according to the claimant, made it possible to apply the liability standards incorporated in the 1981 BIT between Switzerland and Sri Lanka, as they were more favourable than those contained in the UK-Sri Lanka BIT.74 The ICSID Tribunal rejected this claim, by establishing that … ‘it is not proven that the Sri Lanka/Switzerland Treaty contains rules more favourable than those provided for under the Sri Lanka/U.K. Treaty, and hence, Article 3 of the latter Treaty cannot be justifiably invoked in the present case’.75

In the CMS v Argentina case the claimant relied on the most-favoured-nation treatment clause included in the 1991 BIT between the USA and Argentina to maintain that the liability standards incorporated in other Argentinian BITs could apply, as they were more favourable than those contained in the US-Argentina BIT.76

Specifically, according to the claimant, the reason why the liability standards of other Argentinian BITs were more favourable was that they did not include any exception, unlike the US-Argentina BIT.77 The tribunal rejected this assertion since it was ‘not convinced that the clause [had] any role to play in this case’.78 The tribunal established that such an assertion, ‘would in any event fail under the ejusdem generis rule, as rightly argued by the Respondent’.79 The Tribunal did not explain further why it came to such a conclusion. Specifically, the Tribunal did not deal in more depth with the issue of the ejusdem generis principle.

The second issue covered by case-law under this heading concerns applying the most-favoured-nation standard to treatment connected with the fair and equitable treatment standard. It is submitted that the relationship between non-discrimination and fair and equitable treatment standards is not based on hierarchy. Hence, the latter should not be seen as an ‘overarching’ standard that would (p. 383) encompass other treatment standards including non-discrimination standards.80 Certainly, as already said, the fair and equitable treatment standard seems to be more typical of the field of foreign investment than non-discrimination standards, especially the most-favoured-nation standard, and it has been given much more attention and used more by claimants. Nevertheless, things have been changing in the last decade. Most of the modern international instruments and treaties in the field of foreign investment refer to the most-favoured-nation treatment standard. Therefore, this typical standard of international trade law is now common in international investment law. This is mainly due to the increasing importance of foreign investments in the process of global economic integration; to the growing complementarity between trade and investment; to the changing geographic pattern of foreign investment flows; to the increasing competition among governments to attract foreign investments; and to the need to enhance the predictability, coherence, and transparency of the international legal framework for foreign investments. Remarkably, most-favoured-nation treatment has become quite relevant due to the rapid changes which have taken place in many developing countries and due to the progressive liberalization which these countries have been undergoing, even through concluding investment treaties inter se.81 Thus, the issue of applying the most-favoured-nation standard to substantive matters of treatment in connection with the fair and equitable treatment standard can arise.82

For the first time, this issue arose in two NAFTA cases: the Pope & Talbot and ADF cases. In Pope & Talbot v Canada no disputing party had directly invoked Article 1103 of the NAFTA Agreement, which provides for the most-favoured-nation treatment standard. The claimant had only based its claim on Article 1105, which refers to ‘treatment in accordance with international law, including fair and equitable treatment and full protection and security’.83 To assess whether or not this claim was grounded, the tribunal interpreted ‘the language of Art. 1105 consistently with the (p. 384) language in the BITs’.84 In this way the tribunal ascertained that NAFTA State Parties usually accorded fair treatment to national as well as to foreign investors. Thus, the tribunal denied that Article 1105 could cover only ‘egregious misconduct’, as Canada had asserted.85 According to the tribunal, any unfair treatment was unlawful under Article 1105 of the NAFTA Agreement. The tribunal came to this decision for not only ‘the context, object and purpose of NAFTA,86’ but also ‘a practical reason’.87 The tribunal stressed that, as an alternative to recourse to Article 1105, investors and investments could obtain fairness through the national treatment and most-favoured-nation clauses provided for respectively by Articles 1102 and 1103 of the NAFTA Agreement. The tribunal underlined that it ‘was unwilling to attribute to the NAFTA Parties an intention that would lead to such a patently absurd result’.88 As a matter of fact, the tribunal decided that Article 1105 had been violated.

In the subsequent Award on Damages, the tribunal confirmed this decision, while linking it to the binding Interpretative Note on Article 1105 issued in the meantime by the NAFTA Free Trade Commission (FTC). The tribunal did not deal with possible violations of Articles 1102 and 1103 of the NAFTA Agreement, since paragraph 3 of the Note provided that a breach of Article 1105 did not automatically derive from ascertaining a breach of another provision of the NAFTA Agreement or of a different international agreement. Therefore, in the Award on Damages, the Tribunal concluded that ‘… it was unnecessary to consider issues relating to Articles 1102 or 1103 …’.89

In the ADF v The United States of America case the claim was based, inter alia, on Article 1103 of the NAFTA Agreement, after the binding Interpretative Note on Article 1105 had been issued by the NAFTA FTC. According to the claimant, the USA had breached this article by denying a treatment in conformity with treatment standards included in two particular US BITs which were ‘… more favorable than the minimum standard of treatment associated with the customary international law by the FTC …’.90 The tribunal rejected this claim. Albeit the tribunal dealt with ‘the Investor's reading of the “fair and equitable treatment” language’ in the (p. 385) two US BITs in question,91 it upheld the respondent's objection to jurisdiction.92 According to this objection, in conformity with Article 1108(7)(a) of the NAFTA Agreement, Article 1103 could not be applied to ‘a case (like the instant one) involving governmental procurement by a Party’.93 The ADF case concerned a dispute which had arisen from some bids issued by the Department of Transportation of the Commonwealth of Virginia to construct and deliver a series of new lanes, ramps, and lane dividers to a section of a highway junction located in Northern Virginia.94

Furthermore, in the Lucchetti v Peru case the claim concerned how the respondent state, Peru, had applied the fair and equitable, national treatment and most-favoured-nation treatment standards. According to the claimant, Peru had breached all of its treatment obligations provided in the 2000 BIT between Chile and Peru.95 However, the ICSID tribunal did not deal with these issues, as it definitively declined jurisdiction. A successful attempt to rely on a most-favoured-nation BIT clause to benefit from better treatment provided in other BITs has, on the contrary, been made in the MTD v Chile case.96 The ICSID tribunal upheld the claimant's request to refer to the treatment clauses included in the 1994 BIT between Chile and Croatia and in the 1993 BIT between Denmark and Chile, through the functioning of the most-favoured-nation clause provided in the 1992 BIT between Chile and Malaysia.97 As a consequence, the tribunal accorded an extensive application of the fair and equitable obligation included in the Chile and Malaysia BIT. Specifically, the tribunal decided that such an obligation also covered the obligation to award permits after approval of an investment and to fulfil contractual obligations, as the BIT between Chile and Croatia and the BIT between Denmark and Chile provided for. The tribunal came to this decision in the light of the broad scope of the most-favoured-nation clause of the Chile and Malaysia BIT.98

Another successful attempt to link the fair and equitable treatment standard with a most-favoured-nation clause provided in a BIT was made in the Bayindir v Pakistan case.99 The basic treaty, the 1995 Turkey and Pakistan BIT, did not expressly (p. 386) include a fair and equitable treatment clause. The claimant, however asserted that it was entitled to such treatment through the most-favoured-nation clause included in the same BIT. Despite Pakistan's objections, the ICSID tribunal accepted this request and upheld its jurisdiction. The tribunal came to this decision as other BITs concluded by Pakistan contained ‘an explicit fair and equitable treatment clause’.100 In any case, the claimant had also contended a direct violation of the most-favoured-nation clause included in the Turkey and Pakistan BIT.101 This claim was based on the selective tendering in favour of local contractors which Pakistan had allegedly organized to replace Bayindir for the completion of the investment.102 The tribunal also upheld its jurisdiction on this point.103

On the other hand, the subsequent Telenor v Hungary case104 represents an unsuccessful attempt to achieve a similar conclusion. The claimant did not succeed in extending, through the most-favoured-nation clause included in the basic treaty (the 1991 Norway and Hungary BIT), consent to ICSID arbitration to disputes other than those listed in the same treaty. Under the dispute settlement clause contained in the Norway and Hungary BIT, there was ICSID jurisdiction only over disputes arising from expropriation claims. Telenor's claim also concerned the respondent state's alleged breach of the obligation to provide fair and equitable treatment prescribed by the same BIT. In this regard, the claimant referred to the most-favoured-nation BIT clause as a ‘procedural link’, which entitles it to invoke the widest of the dispute resolution clauses under other BITs entered into by Hungary with other states.105 Hungary objected to this claim by contending that ‘the most-favoured-nation clause [was] limited to substantive rights and cannot be invoked to extend the jurisdiction of the Tribunal beyond that conferred by … the Hungary-Norway BIT’.106

The ICSID tribunal mentioned Maffezini, Siemens, Gas Natural, and Suez, which, as will shortly be seen,107 are important cases that adopted an extensive construction of the most-favoured-nation clause.108 The tribunal also referred to the Plama and Salini cases which, as will also be seen,109 adopted a narrower approach to such a clause.110 Due to the lack of ‘clear language’ concerning ‘the intention of the parties’, the tribunal decided to adopt the same approach as the Plama tribunal and to (p. 387) attribute absolute relevance to the intention clearly expressed by the contracting states.111 To justify its decision the Tribunal referred to Article 31 of the 1969 Vienna Convention on Treaties,112 to the fact that, as already underlined by the Plama tribunal, ‘… the effect of the wide interpretation of the MFN clause is to expose the host State to treaty shopping by the investor …’,113 to the fact that ‘… the wide interpretation also generates both uncertainty and instability …’,114 and to the fact that ‘… what has to be applied is not some abstract principle of investment protection in favour of a putative investor who is not a party to the BIT …, but the intention of the States who are the contracting parties', as the Tribunal's ‘… task is to interpret the BIT …’.115 Since the basic treaty clearly limited arbitration to expropriation claims,116 the tribunal declined its jurisdiction over claims different from these specific categories of disputes, such as Telenor's contention about alleged breach of the treaty obligation to provide fair and equitable treatment.117

(b)  Procedural Matters

Some BITs, such as those espoused by the United Kingdom, clearly specify that their most-favoured-nation treatment clauses are to be applied also to dispute settlement. However, investment treaties generally do not include such a provision, although they provide broad most-favoured-nation treatment clauses whose field of application apparently extends to all matters covered by the treaty under discussion. This feature of investment treaties caused no problem until the 2000 ICSID Decision on the Maffezini case.118 This case, as other subsequent ones, was about applying a most-favoured-nation BIT clause in order to avoid observing the so-called ‘eighteen months in domestic courts’ requirement which was provided by the same BIT. Under this requirement, an investment dispute between a contracting state of a BIT and a national of the other contracting state can be settled through arbitration only after its settlement through domestic courts of the disputing contracting state has been sought for a period of 18 months. In Maffezini, and other subsequent cases, the ICSID tribunals established that a most-favoured-nation BIT clause could be applied to uphold ICSID jurisdiction, without observing the ‘eighteen months in domestic courts’ requirement imposed by the same BIT, by means of extending (p. 388) consent to ICSID arbitration provided in other BITs concluded by the disputing contracting state.

In other ICSID cases, the issue of applying a most-favoured-nation BIT clause to dispute settlement arose on different grounds. Specifically, in some cases, ICSID jurisdiction through a most-favoured-nation BIT clause was requested for breaches of contract rights (‘contract-based claims’) in the light of consent to ICSID arbitration for such claims (umbrella clauses) included in other BITs of the respondent state. In these cases, the ICSID tribunals did not uphold jurisdiction. It is submitted that these tribunals, inter alia, aimed to avoid the result of the ICSID tribunal's decision in Maffezini becoming a widely accepted approach to the issue at hand.119 As will be seen, the ICSID tribunal appointed to judge the Plama case clearly made this point. It dealt with the issue in more general terms in order to deny that an extension of consent to arbitration was, in principle, possible through a most-favoured-nation treaty clause.120

Turning to the specifics of the cases, in Maffezini the tribunal upheld an interpretation of the most-favoured-nation treatment clause provided in the 1991 BIT between Spain and Argentina that allowed the application of the dispute settlement clause included in the 1991 BIT between Spain and Chile, since this clause was more favourable for the claimant investor.121 The Spain-Chile clause on dispute settlement did not provide for prior referral to host state domestic courts, as the Spain-Argentina clause did. Accordingly, the foreign investor could bring a claim before ICSID at once. The respondent state, Spain, had maintained that ‘since it is the purpose of the most favored nation clause to avoid discrimination, such discrimination (p. 389) can only take place in connection with material economic treatment and not with regard to procedural matters’.122

As a consequence, the ICSID tribunal dealt with the issue of applying the ejusdem generis principle to the case, by investigating whether ‘the provisions on dispute settlement contained in a third-party treaty can be considered to be reasonably’ incorporated through the most-favoured-nation treatment clause included in a basic agreement ‘and, hence, whether they can be regarded as a subject matter covered by the clause’.123

In this regard, the ICSID tribunal referred to some past cases indirectly concerning such an issue, in particular to the decision issued by the Commission of Arbitration in the Ambatielos case,124 which had specifically acknowledged that a most-favoured-nation treatment clause might also cover the ‘administration of justice’, as long as the ejusdem generis principle was satisfied. According to the Commission, this depended on the actual text of the clause taken into consideration and on the intention of the contracting parties, as deduced from a reasonable interpretation of the Treaty.125

The ICSID tribunal noted the fact that a clear intention in this respect was quite uncommon, as far as investment treaties were concerned. Indeed, apart from UK BITs, other BITs and investment treaties tend not to include any evident provision in this regard. The Spain-Argentina BIT is no different. Its most-favoured-nation clause only prescribes that ‘in all matters’ covered by the Agreement, contracting state investors are to be treated no less favourably than ‘investors of a third country’. Thus, the tribunal had to establish whether the omission of reference to dispute settlement was intended by the parties or could reasonably be inferred from the practice followed by the parties in their treatment of foreign investors and their own investors.126

Having underlined that ‘today dispute settlement arrangements are inextricably related to the protection of foreign investors’,127 the tribunal concluded that, if the third-party treaty regulated the same subject-matter as the basic treaty, the most-favoured-nation clause in question also covered dispute settlement without breaching the ejusdem generis principle.128 The tribunal came to this decision in the light of both Spain's overall positive attitude to direct arbitration and the text (p. 390) of the typical most-favoured-nation clauses incorporated in Spanish BITs.129 The Tribunal underlined that the application of the most-favoured-nation clause to dispute settlement arrangements in the context of investment treaties might result in the harmonization and enlargement of the scope of such arrangements.130 Spain had instead objected that ‘… it would have to be proved that the submission of the dispute to Spanish jurisdiction is less advantageous to the investor than its submission to ICSID arbitration’.131 In any event, the tribunal also took into account the fact that the investment treaty and thus its most-favoured-nation clause could have been based on ‘public policy considerations’. Such ‘considerations’ would correspond to ‘some important limits’ and would mean that the contracting states wanted to narrow the scope of the clause itself.132 As a consequence, the most-favoured-nation treaty clause could not be applied to extend consent to ICSID arbitration provided in other investment treaties of the respondent contracting state. The tribunal specified that ‘public policy considerations’ are certainly at stake if consent to arbitration is subject to ‘the exhaustion of local remedies’, if the investment treaty ‘includes the so-called fork in the road’ stipulation, if the treaty in question ‘provides for a particular arbitration forum’ or the Contracting States ‘have agreed to a highly institutionalized system of arbitration that incorporates precise rules of procedure’.133 The tribunal denied that any of these possible limits to the functioning of a most-favoured-nation clause was ‘present in the instant case’.134 Remarkably, by so doing, the tribunal made a distinction between ‘the exhaustion of local remedies’ and the ‘eighteen months in domestic courts’ requirements.135

However, by referring to such limits, the tribunal was cautioning against any abuse of its peculiar decision on the Maffezini case. This caution also emerges from the fact that the Tribunal felt it necessary to clarify that:

… a distinction has to be made between the legitimate extension of rights and benefits by means of the operation of the clause, on the one hand, and disruptive treaty-shopping that would play havoc with the policy objectives of underlying specific treaty provisions, on the other hand.136

(p. 391) As will be seen, the tribunal's reference to some exceptions to its general conclusion on the issue at hand has been criticized as unclear and indeterminate by the ICSID tribunal in the Plama case.

Arguably, some scholars pointed out that, apart from the first one, all of the exceptions considered by the tribunal in the Maffezini case relate to ‘the discernible will of both parties’ to the BIT and, therefore, they confirm ‘the maxim according to which a specific regulation supersedes a more general provision’.137 This would mean that ‘the Maffezini decision treats the contractual stipulation in the base agreement as a specific stipulation overriding the more general provisions of the MFN clause’.138 Moreover, according to the same authors, the particular reasoning adopted by the ICSID tribunal in the Tecmed award, aimed at dismissing the claimant's request to apply the pertinent BIT retroactively, would add ‘a further situation to the four expressly set forth in Maffezini’ (so-called ‘Tecmed addendum to Maffezini’).139

In Tecmed, the claimant, by expressly referring to the Maffezini decision, had relied on the most-favoured-nation clause contained in the applicable BIT (the 1995 Spain and Mexico BIT) in order to make possible the ‘retroactive application’ of this BIT and then, again through its most-favoured-nation treatment clause, the application of the more favourable treatment provided in the 1998 Austria and Mexico BIT.140 The ICSID tribunal dismissed this claimant's request. In fact, it established that such a request mainly concerned the applicable ‘substantive protection regime’, ‘rather than matters of procedure or jurisdiction’.141 According to the tribunal, the most-favoured-nation BIT clause had no role in this regard, since the chief point to be considered related to ‘the core of matters’ which the contracting states had specifically negotiated.142 In brief, in the tribunal's view, ‘the core of matters’ covered by an agreement is outside the functioning of the most-favoured-nation clause included in the same agreement, as such a core reflects the negotiations which took place between the contracting states. Thus, according to the so-called ‘Tecmed addendum to Maffezini’, ‘whether or not the subject contract contains language on these core issues, an arbitral tribunal will have to resolve them in a way other than by resorting to a MFN clause’.143

(p. 392) The reasoning followed by the ICSID tribunal in the Maffezini case, as regards the functioning of a most-favoured-nation treaty clause in connection with procedural issues, inspired conclusions reached by other ICSID tribunals. This clearly emerges from the Siemens case, where the ICSID tribunal dealt with a very similar issue to that at the centre of Maffezini. In this case, the issue was also whether, through the functioning of the most-favoured-nation clause included in the 1991 BIT between Germany and Argentina (the basic treaty), the claimant could refer to the treatment prescribed by the dispute settlement clause of another BIT (the 1991 Argentina-Chile BIT) and hence bring the claim directly to arbitration, rather than pursuing host state domestic court remedies for 18 months before so doing.144

The ICSID Tribunal rejected Argentina's objections and upheld jurisdiction. Although the most-favoured-nation clause in question only referred to the term ‘treatment’ and the expression ‘activities related to the investment’ without specifying anything with respect to dispute settlement, the tribunal determined that the most-favoured-nation clause was broad enough to include dispute settlement.145 The tribunal clarified that the Germany-Argentina BIT had to be interpreted in conformity with Article 31 of the 1969 Vienna Convention on the Law of Treaties, and thus in the light of its object and purpose, which were undoubtedly promoting and protecting private investments.146 Furthermore, the tribunal took into consideration the Anglo-Iranian Oil Co,147 Rights of Nationals of the United States of America in Morocco,148 and Ambatielos 149 cases which, according to Argentina, showed that dispute settlement per se was outside the functioning of a most-favoured-nation clause. The tribunal did not accept this objection. On the other hand, it argued that such cases were not in line with Argentina's assertion and pointed out that nowadays investment treaties include ‘as a distinctive feature special dispute settlement mechanisms not normally open to investors. Access to these mechanisms is part of the protection offered under the Treaty. It is part of the treatment of foreign investors and investments and of the advantages accessible through a MFN clause.’150 Referring the Maffezini case as well,151 the tribunal established that the term and the expression used in the most-favoured-nation clause of the basic treaty ‘are sufficiently wide to include dispute settlement’.152

(p. 393) Moreover, the tribunal rejected Argentina's objection according to which the disadvantageous aspects of the dispute settlement provisions of the Argentina-Chile BIT should have been imported through the most-favoured-nation treatment clause of the basic treaty. This would have meant applying the ‘fork-in-the-road’ provision included in that BIT. The tribunal established that a most-favoured-nation treatment clause ‘relates only to more favourable treatment’ and, therefore, such a clause does not import disadvantageous provisions, like the ‘fork-in-the-road’ clause.153 This decision has given rise to criticism, as the tribunal ‘allowed the claimant effectively to “cherry pick” those benefits that could be extracted from the Argentina-Chile BIT without considering the counterbalances to those benefits set out in that treaty’.154 Besides, the tribunal denied that public policy considerations were at stake. In particular, it did not uphold that the requirement of the basic treaty that local remedies be pursued for 18 months could, under international law, imply the exhaustion of local remedies, as the respondent state had maintained.155

A very similar conclusion has been reached in another ICSID case against Argentina, the Gas Natural case, which closely resembles Maffezini, being based on the same BIT, namely, the 1991 BIT between Spain and Argentina.156 This case also concerned whether or not the most-favoured-nation BIT clause included dispute settlement and hence allowed the claimant to resort to ICSID arbitration, without pursuing host state domestic court remedies for 18 months before so doing, in conformity with the dispute settlement clause of several other Argentinian BITs, in particular with the 1991 US-Argentina BIT. The ICSID tribunal rejected all the respondent's objections and upheld jurisdiction. Like the ICSID tribunal of the Maffezini case, this ICSID tribunal was very cautious. Its reasoning was carefully based both on the specific features of the ICSID dispute settlement system, which was established to balance possible diverging interests in order to promote and protect foreign investments, and, in general, on the great importance of BITs to the same end.157 Furthermore, the tribunal denied that the requirement of the basic treaty that local remedies be pursued for 18 months could, under international law, imply the requirement of prior exhaustion of local remedies, as the respondent state had maintained. Therefore, according to the tribunal, no public policy consideration was in question.158 Argentina had instead asserted that ‘to require it to engage in an arbitration with a national of Spain under conditions to which it did not consent (p. 394) (i.e., to arbitration without prior resort to its courts) would be against the public policy of Argentina’.159

Conversely, the tribunal accepted the claimant's assertion that most Argentinian BITs ‘do not require prior resort to national courts’ and, consequently, these BITs show that there is no ‘public policy’ reason not to give effect to the most-favoured-nation provision with respect to the right to proceed directly to international arbitration.160 Although the ICSID arbitration system is not based on the stare decisis principle, the tribunal referred to the Maffezini and Siemens cases to corroborate its ‘reasoning and conclusion’.161 In addition, the tribunal also distinguished another ICSID case, Salini, in which the ICSID tribunal denied that its jurisdiction could be upheld through the most-favoured-nation clause contained in the BIT between Italy and Jordan by applying the dispute settlement clause provided in another Jordanian BIT.

At any rate, as will shortly be seen, in the Salini case the ICSID tribunal plainly outlined that the most-favoured-nation clause of the BIT between Italy and Jordan did not refer to ‘all matters governed by the agreement’162 but was of more limited scope, contrary to the most-favoured-nation clause at the centre of the Maffezini case. Accordingly, the tribunal of the Gas Natural case stressed that the issue of applying a general most-favoured-nation clause to the dispute resolution provisions of bilateral investment treaties is not free from doubt, and that different tribunals faced with different facts and negotiating background may reach different results.163

As already seen, the reasoning and conclusion reached by the ICSID tribunals in the Siemens and Gas Natural cases were much criticized. Note that in both these cases the respondent state, Argentina, was absolutely against applying the most-favoured-nation clause contained in one of its BITs in order to incorporate dispute settlement arrangements provided in another of these BITs.

Argentina even referred to public policy considerations to support and validate its objections. This is not surprising. In fact, for a very long time Argentina had been one of the states most reluctant to accept internationally organized arbitration as the common means of settling disputes between a host state and a foreign investor. The several disputes with foreign investors which arose from the financial turmoil that occurred in Argentina in 1999 has undoubtedly exacerbated such an attitude, despite the different approach adopted by this country in the last decade as it joined ICSID and started to include an ICSID arbitration clause in its BITs.

(p. 395) Recently, Argentina has, once again, clearly shown its reluctance to accept arbitration as the most appropriate means of settling investment disputes. In two cases, Suez v Argentina 164 and National Grid plc v Argentina,165 Argentina strongly objected to the claimant's request to uphold, through the most-favoured-nation clauses included in the Argentinian BITs at stake, jurisdiction of an arbitral tribunal without pursuing Argentinian domestic court remedies for 18 months before so doing, as prescribed by the same BITs.166 In both cases, the arbitral tribunals upheld jurisdiction, after mentioning relevant previous pertinent cases, particularly Maffezini.167 These tribunals also referred to Plama to underline that the refusal of the competent ICSID tribunal to uphold, through a most-favoured-nation BIT clause, arbitral jurisdiction in that case was not relevant in connection with Suez and National Grid, since such cases were based on different grounds.168 Both the tribunals, through the most-favoured-nation BIT clauses, upheld their jurisdiction in conformity with the dispute settlement clauses of other Argentinian BITs. In Suez, ICSID jurisdiction, through the most-favoured-nation clauses included in the basic treaties (the 1990 Argentina and the UK BIT and the 1991 Argentina and Spain BIT), was based on the dispute settlement clause of the 1991 Argentina and France BIT.169 In National Grid UNCITRAL jurisdiction, through the most-favoured-nation clause contained in the basic treaty (the 1990 Argentina and the UK BIT), was based on the dispute settlement clause of the 1991 Argentina and the US BIT.170

In Suez the ICSID tribunal expressly denied that the ejusdem generis principle could be applied in interpreting the BITs so as to exclude dispute settlement matters from the scope of the most-favoured-nation clause, because the category ‘dispute settlement’ was not of the same genus as the matters addressed in the clause.171 In this case the tribunal also did not accept that a most-favoured-nation clause had to be interpreted ‘strictly’.172 Furthermore, this tribunal reaffirmed the importance of arbitration to settle investment disputes.173

(p. 396) As for Argentina's reluctant approach towards arbitration and, particularly, towards establishing arbitral jurisdiction through a most-favoured-nation BIT clause, it is worth mentioning its position in the Continental Casualty v Argentina case.174 Argentina objected to ICSID jurisdiction through a similar application of the most-favoured-nation treatment clause included in the basic treaty (the 1991 Argentina and the US BIT), although the claimant had recourse to this clause for the merits of the case, rather than for possible ‘better dispute resolution provisions in another treaty’.175 Thus, the tribunal decided that this objection to its jurisdiction was irrelevant.176

On the other hand, it is also worth referring to the different attitude which Argentina took in another recent ICSID case, Camuzzi. In Camuzzi, Argentina did not object at all to the claimant's attempt to refer to the most-favoured-nation clause included in the 1990 investment treaty between Argentina and the Belgo-Luxembourg Economic Union (the basic treaty) in order to incorporate the dispute settlement clause provided by the 1991 US-Argentina BIT.177 In this case the issue was again whether the claimant could apply the most-favoured-nation clause in question to avoid the ‘eighteen months in domestic courts’ requirement prescribed by the basic treaty.178 Remarkably, the ICSID Tribunal did not ‘decide on the relevance of that clause’ in the case, since Argentina had not opposed the claimant's request.179 However, for the sake of clarity, the tribunal specified that Argentina had probably considered the ‘eighteen months in domestic courts’ requirement met, since Camuzzi had ‘submitted the dispute to [its] national courts’, which had left it unresolved.180

In addition to the above set of cases, arising out of the treaty practice of Argentina in relation to dispute settlement clauses, a series of further ICSID cases has ruled against applying a most-favoured-nation BIT clause to extend consent to arbitration provided in an umbrella clause of another BIT, with regard to ‘contract-based claims’. In these cases, reference to such a clause aimed to incorporate the respondent state's consent to ICSID arbitration provided in an umbrella clause of a BIT different from the basic treaty. ICSID tribunals based their pertinent decisions on heterogeneous reasons.

In the Salini case, the tribunal rejected the claimant's request that, through the most-favoured-nation clause of the 1999 BIT between Italy and Jordan, ICSID (p. 397) jurisdiction could be based on the dispute settlement clauses included in other Jordanian BITs, such as the 1997 US-Jordan BIT.181 To this end, the claimant had expressly mentioned and relied on the Maffezini case. The respondent state, Jordan, had denied that the most-favoured-nation clause of the basic treaty could apply to ‘procedural obligations’. To ground its objections, Jordan had referred to the Anglo-Iranian Oil Co., Rights of Nationals of the United States of America in Morocco and Ambatielos cases and also to the Maffezini case, in particular to the relevance given in the latter to ‘public policy considerations’. Furthermore, Jordan had stressed that there was no clear intention of the contracting states in this regard and that, in any case, the dispute settlement clause of the Italy-Jordan BIT was inapplicable to contractual disputes.182

The tribunal carefully dealt with the past cases considered by the disputing parties and established that they were about different matters from those at stake in the Salini case.183 In particular, as regards the Ambatielos case, the tribunal recognized that this concerned ‘the administration of justice’, but it also underlined that,

Greece invoked the most-favored-nation clause with a view to securing, …, not the application of a dispute settlement clause, but the application of substantive provisions in treaties between the United Kingdom and several other countries under which their nationals were to be treated ‘in accordance with “justice”, “right” and “equity”’. The solution adopted by the Arbitration Commission cannot therefore be directly transposed in this specific instance.184

With respect to Maffezini, the tribunal pointed out that such a decision had been much criticized, even if the ICSID tribunal had proceeded cautiously.185 In this regard, the Salini tribunal indicated that ‘the precautions taken by authors of the award may in practice prove difficult to apply, thereby adding more uncertainties to the risk of “treaty shopping”’.186 At any rate, the tribunal also stressed that ‘the circumstances of this case are different’, especially as regards evaluating ‘the common intention of the Parties’ and the text of the most-favoured-nation treaty clause to be taken into consideration.187 As already seen, the tribunal clearly highlighted that the most-favoured-nation clause of the Italy-Jordan BIT did not refer to ‘all matters governed by the agreement’,188 as, on the contrary, the most-favoured-nation clause at the centre of the Maffezini case did. Furthermore, the tribunal observed that the common intention of the parties expressed in Article 9(2) of the BIT was to exclude from ICSID jurisdiction contractual disputes between an investor and an entity of a (p. 398) state party.189 Thus, the tribunal rejected jurisdiction over the contractual disputes under the most-favoured-nation clause of the Italy-Jordan BIT.190

The issue of ascertaining whether or not jurisdiction over ‘contract-based claims’ could derive from a most-favoured-nation treaty clause was at the centre of another important ICSID case, Impregilo v Pakistan.191 Here, the claimant maintained that, through the most-favoured-nation clause of the 1997 Italy and Pakistan BIT, ICSID jurisdiction could be based on the umbrella clauses of other Pakistani BITs, such as the 1995 Switzerland and Pakistan BIT.192 As a matter of fact, under an ‘umbrella BIT clause’, a breach of a contract between a contracting state and an investor of the other contracting state amounted to a breach of the BIT in question. Hence, the standards of protection and the dispute settlement provisions contained in such a treaty could be applied to the claims arising from the breach of the contract. Pakistan objected to the claimant's assertion stressing that, ‘this would be to import into the Pakistan-Italy BIT far more than can reasonably be construed from the language of that Treaty. Even if such a submission was sustainable, the decision in SGS v. Pakistan demonstrated the limits of the “umbrella clause” in question’.193

Actually, the tribunal did not pronounce on the issue in question, as it decided that the contracts taken into consideration by the claimant were concluded ‘not with Pakistan’, but with ‘a separate and distinct entity’, the Pakistan Water and Power Development Authority (WAPDA). Therefore, it established that,

Even assuming arguendo that Pakistan through the MFN clause and the Swiss-Pakistan BIT, has guaranteed the observance of the contractual commitments into which it has entered together with Italian investors, such a guarantee would not cover the present Contracts—since they are agreements into which it has not entered.194

By so doing, the tribunal left the issue open without even mentioning other pertinent ICSID cases, such as specifically Salini, in full accordance with the lack of reference to the stare decisis principle in the ICSID Convention.

A third set of cases has come out against applying a most-favoured-nation treaty clause to establish jurisdiction by extending consent to arbitration provided in other investment treaties. This issue arose in the first arbitration case concerning the 1987 Agreement for the Promotion and Protection of Investments concluded within the framework of the Association of Southeast Asian Nations (ASEAN), namely, the Yaung Chi Oo case.195 This case was based on the subsequent (p. 399) Framework Agreement on the ASEAN Investment Area concluded in 1998, which included a broad most- favoured-nation treaty clause.196 Actually, this is the case where the issue of establishing arbitral jurisdiction, only through the functioning of a most-favoured-nation clause, emerged for the first time. In fact, the claimant had ‘subsidiarily’ relied on the most-favoured-nation clause included in the ASEAN Framework Agreement in order to incorporate consent to arbitration provided in the 1998 Philippines and Myanmar BIT.197

The tribunal rejected this contention. Apart from stressing that the two agreements referred to different appointing authorities, the tribunal indicated that, as it had already established in its Order No. 2, ‘if a party wishes to rely on the jurisdictional possibility affirmed by an ICSID Tribunal in Maffezini v Kingdom of Spain, it would normally be incumbent on it to rely on that possibility, and on the other treaty in question, at the time of instituting the arbitral proceedings’.198 Even if the tribunal noticed that this had not been done, eventually it rejected the claimant's request for another reason. The tribunal denied that there was arbitral jurisdiction on these facts under any BIT entered into by Myanmar which was in force at the relevant time.199 As a consequence, the tribunal did not accept that jurisdiction could derive from the functioning of the most-favoured-nation clause included in the ASEAN Agreement.

The Plama case more generally concerns the issue of applying a most-favoured-nation treaty clause to extend consent to arbitration provided in other investment treaties.200 The ICSID tribunal likely took the opportunity to deal with this issue in general, in order to emphasize that Maffezini was not the key case in the matter. In Plama, the tribunal rejected ICSID jurisdiction under the most-favoured-nation clause contained in the 1987 Bulgaria and Cyprus BIT which, according to the claimant, applied to ‘all aspects of treatment’ and, hence, also to the dispute settlement clauses included in other Bulgarian BITs, such as the 1997 Finland and Bulgaria BIT.201 The tribunal came to this decision after a very detailed evaluation of the text of the most-favoured-nation clause contained in the Bulgaria-Cyprus BIT, in conformity with Articles 31 and 32 of the 1969 Vienna Convention on the Law of Treaties.

In this regard, the tribunal stressed that both the disputing parties had referred to these articles reaching, however, ‘opposite conclusions’.202 It indicated that the claimant had focused on the teleological method of interpretation, by giving great (p. 400) relevance to the ‘object and purpose’ of the Bulgaria-Cyprus BIT which, undoubtedly, was to promote and protect foreign investment. In this regard, the claimant had also referred to the ICSID decision on the Maffezini case where the competent ICSID tribunal had observed that ‘dispute settlement arrangements are inextricably related to the protection of foreign investors, as they are also related to the protection of rights of traders under treaties of commerce’.203 However, the tribunal was not convinced that the claimant's view was to be preferred to that of the respondent.204 The tribunal was also not satisfied that Bulgaria's practice in the field of foreign investment endorsed the claimant's assertion about the functioning of the most-favoured-nation clause contained in the 1987 Bulgaria-Cyprus BIT.

In the light of subsequent negotiations between Bulgaria and Cyprus, the tribunal denied that these contracting states had had any intention of extending the most-favoured-nation BIT clause ‘to dispute settlement provisions in other BITs’.205 The tribunal pointed out that ‘at that time, Bulgaria was under a communist regime that favored bilateral agreement treaties with limited protections for foreign investors and with very limited dispute resolution provisions’.206 Furthermore, according to the tribunal, the fact that today arbitration is more common than ‘the traditional diplomatic protection mechanism’ does not mean that a ‘clear’ and ‘unambiguous’ consent to arbitration by the parties has become unnecessary.207

On the other hand, the tribunal established that doubts as to the parties' clear and unambiguous intention can arise if the agreement to arbitrate is to be reached by incorporation by reference.208 In this respect, the tribunal underlined that, ‘it is one thing to add to the treatment provided in one treaty more favourable treatment provided elsewhere. It is quite another thing to replace a procedure specifically negotiated by parties with an entirely different mechanism’.209 For this reason the tribunal denied that the cases to which the claimant had referred to corroborate its request were relevant.210 In particular, the tribunal strongly critized the ICSID decision on Maffezini, as it derived from an inappropriate ‘basis for analysis’211 and led to ‘a chaotic situation—actually counterproductive to harmonization’, which could not (p. 401) be considered as the intention of the contracting parties,212 and referred to possibly multiple exceptions linked to ‘public policy considerations’ without clarifying what the origin of such ‘considerations’ was.213 The tribunal was extremely convinced of this point and underscored that,

the Siemens decision illustrates the danger caused by the manner in which the Maffezini decision has approached the question: the principle is retained in the form of a ‘string citation’ of principle and the exceptions are relegated to a brief examination, prone to falling soon into oblivion.214

Although, as already pointed out, the stare decisis principle does not apply to the ICSID legal framework, the tribunal referred to Salini as a recent case in line with its conclusions.215 At any rate, the tribunal appreciated the caution adopted by the ICSID tribunal in Maffezini,216 by also recognizing that the decision was based on ‘exceptional circumstances’, which should not be treated as a statement of general principle guiding future tribunals in other cases where exceptional circumstances are not present.217 The tribunal expressly sympathized with the Maffezini tribunal as it ‘concerned a curious requirement’, that is that of 18 months in domestic courts, which, according to the ICSID tribunal of the Plama case, was ‘nonsensical from a practical point of view’.218 As already pointed out, the negative attitude of the Plama tribunal towards establishing jurisdiction through a most-favoured-nation BIT clause was followed by the ICSID tribunal competent to judge the Telenor v Hungary case. This tribunal also attributed definitive relevance to the intention clearly expressed by contracting states of a treaty.219

Concluding Remarks

From the foregoing discussion, it is clear that the most-favoured-nation treatment clause per se entails international obligations and rights not only among the contracting states of the international treaty incorporating it (the basic treaty), but also among these contracting states and other states by virtue of different international (p. 402) treaties. As a rule, a most-favoured-nation treatment clause is not only a treaty clause, but also a source of international obligations other than those included in the basic treaty.220 These are new international obligations whose contents cannot be totally foreseen and identified when the basic treaty is concluded, since such contents depend on other, sometimes subsequent, international treaties. In any case, as already pointed out, the functioning of the most-favoured-nation treatment standard as both a treaty clause and a source of international law, particularly of international legal obligations, other than international customs and treaties, presupposes that the ejusdem generis principle is satisfied. So far, ascertaining this presupposition has not given rise to controversial issues within investment cases. In reality, the ejusdem generis principle has been greatly discussed only by the ICSID tribunals of the Maffezini and Suez cases.221 Though insufficient, some clues to determine whether the ejusdem generis principle is met can be deduced from the fact that most-favoured-nation treatment clauses provided in investment treaties tend to be unconditional, reciprocal, and indeterminate and many international treaties at stake, like BITs, have a very similar framework.222

Admittedly, the ‘in like circumstances’ requirement may in the future become significant, in order to evaluate whether or not this principle is satisfied.223 In this case, the particular interpretation of a most-favoured-nation treatment clause adopted by a tribunal will be more and more crucial. Certainly, the more states differentiate most-favoured-nation treatment clauses in investment treaties, the more matters of interpretation and application become relevant. In any event, the fact that, at an international law level, new obligations, including procedural ones, can arise from a most-favoured-nation treatment clause is, and will continue to be, perfectly legitimate, as this is exactly the purpose of such a clause.

As already seen, the possibility of applying a most-favoured-nation treatment treaty clause also to procedural matters of treatment was particularly denied by the ICSID tribunal in the Plama case, with respect to extending consent to ICSID arbitration through such a clause. The latter strongly criticized the Maffezini decision, even though it extended sympathy towards that ICSID tribunal as it had to deal with ‘exceptional circumstances’, in particular with a basic treaty which included ‘nonsensical requirements’, such as the ‘eighteen months in domestic courts’ requirement. The absolutely negative approach adopted by the Plama tribunal, and more recently by the Telenor tribunal, is not in line with the concept of the most-favoured-nation treatment standard as a source of international law and with present trends in international investment law.

(p. 403) States tend to conclude various trade and investment agreements, such as preferential trade and investment agreements, free trade area agreements and trade and investment framework agreements, which aim mainly at liberalizing foreign investment flows.224 Often these new international treaties are concluded among states that had no former relationship in the fields of trade and investment, in order to boost liberalization, by at least partly opening their markets. Sometimes such treaties are concluded to replace BITs. These trends seem to achieve a completely different point from that of limiting the functioning of the most-favoured-nation treatment standard in accordance with a quite restrictive interpretation of ‘the intention of the parties’, as the Plama tribunal did without dealing with the ejusdem generis principle.225

In the light of such attempts to increase liberalization, interdependence, and consequently globalization, the destiny of this standard in international investment law is to become more and more important and probably extensive. It is worth pointing out that states which do not want to be subject to the functioning of broad most-favoured-nation treatment clauses are adopting a cautious line of conduct during negotiations of investment treaties. This emerges from some recent examples of international practice, such as the new Canadian Model BIT, the negotiations of the FTAA, some recent free trade agreements, and the several trade and investment framework agreements concluded by the USA. The 2004 Canadian Model BIT, inter alia, includes a provision to reduce the effects that its apparently broad most-favoured-nation treatment clauses may have.226 The 2003 Draft Free Trade Area of the Americas (FTAA) Agreement includes an interesting footnote (No. 13), proposed by one of the negotiating delegations, whose text is to be deemed ‘as a reflection of the Parties' shared understanding of the most-favoured-nation Article and the Maffezini case’.227 However, this footnote is not supposed to be included in the final text of the Agreement.

(p. 404) Thus, states are aware that a most-favoured-nation treatment clause can be a source of ‘undesirable’ international obligations. States that wish to avoid this result may play an active role during the negotiations of a particular investment treaty in order to incorporate therein a most-favoured-nation treatment clause which meets their needs and interests.228 On the other hand, like the 1959 Abs-Shawcross Draft Convention on Investment Abroad and the 1967 OECD Draft Convention on the Protection of Foreign Property,229 the several trade and investment framework agreements recently concluded by the USA and many modern free trade agreements230 do not include a most-favoured-nation treatment clause at all. In these cases, the common intention of the contracting states is clear and indisputable. They want completely to avoid the functioning of a most-favoured-nation treatment clause in their international investment relations.231

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Footnotes:

For a historical overview of the most-favoured-nation treatment standard and a comparison of its application in the field of trade in goods with that in international investment law, see J Kurtz, ‘The Delicate Extension of Most-Favoured-Nation Treatment to Foreign Investors: Maffezini v Kingdom of Spain’ in T Weiler (ed), International Investment Law and Arbitration (London, Cameron May, 2005) at 523ff. As regards reference to this treatment standard in international agreements concluded before the World War, see B Nolde, ‘La clause de la nation la plus favorisée et les tarifs préférentiels’, Recueil des Cours (1932-I) at 5ff.

For a quick survey of the relevant case-law to evaluate the functioning of the most-favoured-nation treatment clause in international investment law, cf M-F Houde and F Pagani, ‘Most-Favoured-Nation Treatment in International Investment Law’, in OECD International Investment Law: A Changing Landscape (Paris, OECD, 2005) at 127ff.

Maffezini v Spain , ICSID Case No. Arb/97/7 Decision on Objections to Jurisdiction, 25 January 2000, 16 ICSID Rev-FILJ 212 (2001). This decision is available on the ICSID website at <http://www.worldbank.org/icsid>. See further R Teitelbaum, ‘Who's Afraid of Maffezini? Recent Developments in the Interpretation of Most Favored Nation Clauses’, 22 J Int Arb (2005) at 225ff.

As regards the functioning of a most-favoured-nation clause as a means to ensure equality among States, cf the judgment of the International Court of Justice in The Case Concerning Rights of Nationals of the United States of America in Morocco (France v United States of America), 27 August 1952, ICJ Pleadings, Morocco Case, 1953, vol I and vol II.

See UNCTAD, Most-Favoured-Nation Treatment, Series on issues in international investment agreements (New York and Geneva, United Nations, 1999) at 7.

Cf UNCTAD, Trends in International Investment Agreements: An Overview (New York and Geneva, United Nations, 1999) at 60. See generally Art 5 of the Draft Articles on Most-Favoured-Nation Clauses prepared by the UN International Law Commission (below 13).

See E Ustor, ‘Most-Favoured-Nation Clause’, 3 EPIL 472 (1997), who points out that, under the ejusdem generis principle, not only subject-matter, but also ‘persons and things’ are to be ‘of the same category’. As regards a possible definition of the ‘basic treaty’, cf the judgment of the International Court of Justice in The Anglo-Iranian Oil Company (Jurisdiction) Case (United Kingdom v. Iran), 22 July 1952, (1952) ICJ Reports at 109. See generally Arts 9 and 10 of the Draft Articles on Most-Favoured-Nation Clauses prepared by the UN International Law Commission (below 13).

In this connection, see the ICJ judgment in the Anglo-Iranian Oil Company (Jurisdiction) case, above n 7 at 109.

See Agreement on Encouragement and Reciprocal Protection of Investments between … and the Kingdom of the Netherlands, avalilable at <http://www.unctad.org/sections/dite/iia/docs/Compendium//en/135%20volume%205.pdf>. In this regard, the 2004 German Model BIT (Arts 2 and 3) is also relevant. Some BITs provide for similar clauses. See, inter alia, US-Argentina (1991) Art II; China-Argentina (1992) Art 3(2); Hungary-Czech Republic (1993) Art 3; Bolivia-Peru (1993) Art 3; Norway-Chile (1993), Art 4(1); Netherlands-Lithuania (1994) Art 3; Switzerland-El Salvador (1994) Art 3 (2); Iran-Kazakhstan (1996) Art 4; US-Jordan (1997) Art II; Switzerland-Iran (1998) Art 4. See further <http://www.unctad.org/iia> Cf MI Khalil, ‘Treatment of Foreign Investment in Bilateral Investment Treaties’ The World Bank Group, Legal Framework for the Treatment of Foreign Investment, (Washington, The World Bank, 1992) vol I, at 13ff, specifically at 25.

10  Cf F Horchani, ‘Le droit international des investissements à l'heure de la mondialisation’, JDI, No. 2. 2004, at 388.

11  To present a complete picture, it is noteworthy mentioning that, apart from the Maffezini case (above n 3), the issue of applying the non-discriminatory treatment standards, ie most-favoured-nation and national treatment, to procedural matters had already arisen in the GATT 1947 framework with the case on s 337. See United States-Section No. 337 of the Tariff Act of 1930, 7 November 1989, 36 GATT BISD 345 (1990), in particular para 5.11. The Report by the panel is available on the WTO website (<http://www.wto.org>).

12  See, in general, G Schwarzenberger, International Law (London, Stevens, 3rd edn, 1957) vol I at 240–5; Ustor, above n 7 at 468.

13  The text of the Draft Articles is available on the UN website at <http://www.un.org/law/ilc/texts/mfn.htm>. For the work carried out by the International Law Commission in this regard, see ‘Rapport de la Commission à l'Assemblée générale sur les travaux de sa trentième session’, Annuaire de la Commission du droit international, 1978, vol II, deuxième partie.

14  See para 59 of the Rapport de la Commission à l'Assemblée générale sur les travaux de sa trentième session, ibid at 16.

15  Cf KJ Vandevelde, ‘ The Political Economy of a Bilateral Investment Treaty’, 92 AJIL 621 (1998).

16  See Ustor, above n 7 at 472.

17  See AA Fatouros, ‘Towards an International Agreement on Foreign Direct Investment?’, 10 ICSID Rev-FILJ 181 (1995) at 195–6.

18  See S Vasciannie, ‘The Fair and Equitable Treatment Standard in International Investment Law and Practice’, 70 BYIL 99 (1999) at 106.

19  In this regard, G Schwarzenberger agrees with those who describe most-favoured-nation clauses ‘as drafting (and deletion) by reference’ (above n 12 at 243).

20  Cf D Anzilotti, Cours de droit international (Paris, Recueil Sirey, 1929), who points out that ‘… juridiquement parlant, il n'existe pas une clause des la nation la plus favorisée; il existe autant de stipulations distinctes qu'il y a de traités qui la contiennent, de sorte que toute question relative à la nature et aux effets de la clause est avant tout une question d'interprétation d'une clause donnée dans un traité déterminé’ (at 438). See also R Dolzer and T Myers, ‘After Tecmed: Most-Favored-Nation Clauses in Investment Protection Agreements’, 19 ICSID Rev-FILJ 49 (2004) at 50; E Gaillard, ‘Establishing Jurisdiction through a Most-Favored-Nation Clause’, NYLJ (2005) at 8. As for differences among investment treaties cf UNCTAD, Recent Developments in International Investment Agreements, UNCTAD/WEB/ITE/IIT/2005/1, 30 August 2005; UNCTAD, International Investment Rule-Setting: Trends, Emerging Issues and Implications, TD/B/COM.2/68, 18 January 2006. See too UNCTAD, Bilateral Investment Treaties 1995–2006: Trends in Investment Rulemaking (New York and Geneva, United Nations, 2007) at 38–43; UNCTAD, Investment Provisions in Economic Integration Agreements (New York and Geneva, United Nations, 2006) at 100–5.

21  Germany-Barbados (1994) Art 3(1). See, inter alia, Canada-Poland (1990) Art III; Australia-Vietnam (1991) Art 4; France-Mongolia (1991) Art 4; France-Vietnam (1992) Art 4; Australia-Romania (1993) Art 4; Poland-UAE (1993) Art 3(1); UK-Honduras (1993) Art 3(1); Argentina-Venezuela (1993) Art 4; Israel-Estonia (1994) Art 3(1); Israel-Ukraine (1994) Art 3(1); UK-India (1994) Art 4; UK-Turkmenistan (1995) Art 3; Canada-Trinidad & Tobago (1995) Art III; Norway-Peru (1995) Art 4; Spain-Colombia (1995) Art IV(2); Israel-India (1996) Art 4(1); US-Bahrain (1999) Art 2(1); US-El Salvador (1999) Art II(1); India-Ghana (2000) Art 4(1). See <http://www.uncrad.org/iia> or ICSID, Investment Treaties (Oceana/Oxford University Press) Vols 1–9 (periodically updated).

22  See the 2004 Canadian Model BIT, Art 4 at <http://ita.law.uvic.ca/documents/Canadian2004-FIPA-model-en.pdf> , and the 2004 US Model BIT, Art 4 at <http://ita.law.uvic.ca/documents/USmodelbitnov04.pdf>.

23  See some German BITs, such as Germany-Kuwait (1994) Art 3(2); Germany-Thailand (2002) Art 3. at <http://www.unctad.org/iia>. See also the 2005 German Model BIT, Art 4(4) available at <http://www.fes-globalization.org/publications/Appendix%201%20German%20Model%20Treaty.pdf>.

24  See eg Germany-Romania (1979) Art 2. see J Karl, ‘The Promotion and Protection of German Foreign Investment Abroad’, 11 ICSID Rev-FILJ 1 (1996) at 13.

25  See, inter alia, Australia-Vietnam (1991) Art 4; Australia-Romania (1993) Art 4; UK-Honduras (1993) Art 3; China-Slovenia (1993) Art 3; Czech Republic-Hungary (1993) Art 3; Poland-UAE (1993) Art 3; Argentina-Venezuela (1993) Art 4; Bolivia-Peru (1993) Arts 3, 7; Netherlands-Lithuania (1994) Art 3; Israel-Estonia (1994) Art 3; Italy-UAE (1995) Art 3; Spain-Colombia (1995) Art IV; Norway-Peru (1995) Art 4; Israel-India (1996) Art 4; Italy-Czech Republic (1996) Art 3. See <http://www.unctad.org/iia> or ICSID, Investment Treaties above n 21.

26  See eg Canada-Latvia (1995) Art II(3); Canada-South Africa (1995) Art II(3); US-Nicaragua (1995) Art II(1); Canada-Egypt (1996) Art II(3); Canada-Panama (1996) Art II(3); Canada-Venezuela (1996) Art II(3); Canada-Thailand (1997) Art II(3); US-Azerbaijan (1997) Art II(1); US-Jordan (1997) Art II(1); US-Bahrain (1999) Art 2(1); US-El Salvador (1999) Art II(1). See <http://www.unctad.org/iia> or ICSID, Investment Treaties. See also the 2004 Canadian Model BIT, Art 4 above n 22 and the 2004 US Model BIT, Art 4 above n 22. JW Salacuse and NP Sullivan, ‘ Do BITs Really Work? An Evaluation of Bilateral Investment Treaties and their Grand Bargain’, 46 Harv ILJ 68 (2005) at 93–4.

28  See Canada-Poland (1990) Art III; US-Argentina (1991) Art II; UK-Honduras (1993), Art 3(2); Argentina-Venezuela (1993) Art 4; Germany-Swaziland (1993) Art 3(2); Germany-Barbados (1994) Art 2(2); Israel-Estonia (1994) Art 3(2); Israel-Ukraine (1994) Art 3(2); UK-India (1994) Art 4; UK-Turkmenistan (1995) Art 3; Canada-Trinidad and Tobago (1995) Art III; Israel-India (1996) Art 4(1).

29  See Japan-China (1988) Art 3; Germany-Barbados (1994) Art 3(2); Italy-Brazil (1995) Art III(5).

30  See China-Slovenia (1993) Art 3; and generally the US BITs. See <http://www.unctad.org/iia> or ICSID, Investment Treaties, above n 21.

31  Poland-UAE (1993) Art 7(2). See also Canada-Poland (1990) Art III; UK-India (1994) Art 4; Spain-Colombia (1995) Art VII(5); Norway-Peru (1995) Art 4; UK-Cuba (1995) Art 3(1); Israel-India (1996) Art 4(2); India-Ghana (2000) Art 4; and some BITs concluded by Italy, such as Italy-Vietnam (1990) Art6; Italy-Cuba (1993); Italy-Kazakhstan (1994) Art 6; and Italy-Ukraine (1995) Art 6; Italy-Russia (1996) Art 6(2); Italy-Bulgaria (1998) Art 5. See <http://www.unctad.org/iia> or ICSID, Investment Treaties, ibid.

33  US-Nicaragua (1995) Art IV(1). Many recent BITs include similar provisions. See eg Australia-Vietnam (1991) Art 8; Australia-Romania (1993) Art 6; China-Uruguay (1993) Art 5; Hungary-Czech Republic (1993) Art 4(1); Poland-UAE (1993) Art 5(1); UK-Honduras (1993) Art 4(1); Argentina-Venezuela (1993) Art 7; Israel-Estonia (1994) Art 4(1); Spain-Colombia (1995) Art VI; US-Jordan (1997) Art IV(1); US-Bahrain (1999) Art 4(1). See <http://www.unctad.org/iia> or ICSID, Investment Treaites, above n 21.

34  See eg Asian Agricultural Products Ltd v Republic of Sri Lanka , ICSID Case No. Arb/87/3, Final Award 21, June 1990, 30 ILM 577 (1991), discussed below at n 73ff.

35  Germany-Barbados (1994) Art 8 See also Bolivia-Peru (1993) Art 10 both above at n 32; UK-India (1994) Art 12; Colombia-Peru (1994) Art 11; Spain-Colombia (1995) Art VIII; Iran-Kazakhstan (1996) Art 5; Switzerland-Iran (1998) Art 7. See <http://www.unctad.org/iia> or ICSID, Investment Treaties, above n 21.

36  See Australia-Vietnam (1991) Art 4; France-Mongolia (1991) Art 4; France-Vietnam (1992) Art 4; Australia-Romania (1993) Art 4; Poland-UAE (1993) Art 4; UK-Honduras (1993) Art 7; Bolivia-Peru (1993) Art 3; Germany-Barbados (1994) Art 3(3); Israel-Estonia (1994) Art 7; Spain-Colombia (1995) Art IV(3); Israel-India (1996) Art 4(3); India-Ghana (2000) Art 4. See <http://www.unctad.org/iia> or ICSID, Investment Treaties, ibid.

37  See Australia-Vietnam (1991) Art 4; Australia-Romania (1993) Art 4; Poland-UAE (1993) Art 4; UK-Honduras (1993) Art 7; Bolivia-Peru (1993) Art 3; Germany-Barbados (1994), Art 3(4); Israel-Estonia (1994) Art 7; Spain-Colombia (1995) Art IV(3); Israel-India (1996) Art 4(3); India-Ghana (2000) Art 4. See <http://www.unctad.org/iia> or ICSID, Investment Treaties, ibid.

38  See, inter alia, US-Nicaragua (1995) Art II(2) (b); US-Azerbaijan (1997) Art II(2)(b); US-Jordan (1997) Art II(2)(b); US-Bahrain (1999) Art 2(2)(b); US-El Salvador (1999) Art II(2)(b). See <http://www.unctad.org/iia> or ICSID, Investment Treaties, ibid.

39  Art 6 of the Protocol to the BIT. <http://www.unctad.org/sections/dite/iia/docs/bits/usa_russia.pdf.

40  Art III(3)(b) <http://www.unctad.org/sections/dite/iia/docs/bits/canada_trinidad.pdf>. See also Canada-Latvia (1995) Art III(3)(b); Canada-South Africa (1995) Art III(3)(b); Canada-Egypt (1996) Art III(3)(b); Canada-Panama (1996) Art III(3)(b); Canada-Thailand (1997) Art III(3)(b) at <http://www.unctad.org/iia> or ICSID, Investment Treaties, above n 21.

41  US-Jordan (1997) Annex, Art 2 For similar exceptions see also US-Argentina (1991) Protocol, Art 4; US-Nicaragua (1995) Annex, Arts 2–3; US-Azerbaijan (1997) Annex, Art 2; US-Bahrain (1999) Annex, Art 2; US-El Salvador (1999) Annex, Art 2. See <http:www.unctad.org/iia> or ICSID, Investment Treaties, above n 21.

42  See L Eden, ‘The Emerging North American Investment Regime’, 5(3) Transnational Corporations (1996) at 77; AK Bjorklund, ‘Article 1103: Most-Favored-Nation Treatment’, in M Kinnear, AK Bjorklund, and JFG Hannaford, Investment under NAFTA: An Annotated Guide to Chapter 11 of the North American Free Trade Agreement (The Hague, Kluwer Law International, 2006).

43  See T Weiler, ‘NAFTA Investment Arbitration and the Growth of International Economic Law’, BLI (2002) No. 2 at 169–73.

44  See the Colombia-Mexico-Venezuela Free Trade Agreement (1994), Art 17-03(2); the Mexico-Nicaragua Free Trade Agreement (1997), Art 16-04(1); the Mexico-Costa Rica Free Trade Agreement (1994), Art 16-04(1); the Mexico-Bolivia Free Trade Agreement (1994) Art 15-04(1); the Central America-Dominican Republic Free Trade Agreement (1998) Art 9.05(1). See UNCTAD International Investment Agreements: A Compendium available for search at <http://www.unctadxi.org/templates/DocSearch____780.aspx> or see <http://www.sice.oas.org> where the texts of Western hemisphere agreements are available online.

45  See the Colombia-Mexico-Venezuela Free Trade Agreement (1994) Art 17-03(3) above n 44; the Central America-Dominican Republic Free Trade Agreement (1998) Art 9.06. above n 44.

46  See the Mexico-Nicaragua Free Trade Agreement (1997) Art 16-04(2), above n 44; the Mexico-Costa Rica Free Trade Agreement (1994) Art 13-04(2), above n 44, which peculiarly also includes the possible different treatment standards provided for by bilateral investment treaties among the exceptions to the functioning of its most-favoured-nation clause; the Mexico-Bolivia Free Trade Agreement (1994) Art 15-04(2), above n 44; the Central America-Dominican Republic Free Trade Agreement (1998) above n 44 Art 9-05(2).

47  See the Colombia-Mexico-Venezuela Free Trade Agreement (1994) Art 17-03, para 4. above n 44.

48  See the Colombia-Mexico-Venezuela Free Trade Agreement (1994) Art 17-03, para 2 ibid.

49  See the Canada-Chile Free Trade Agreement (1996) Art G-03; the Mexico-Chile Free Trade Agreement (1998) Art 9-04 (available at <http://www.ftaaalca.org/NGROUPS/ngin/publications/english99/CHLMEXFT.asp>); the Guatemala, Honduras, El Salvador-Mexico Free Trade Agreement (2000) Art 14-05; the Central America-Panama Free Trade Agreement (2002) Art 10-03, both available at <http://www.unctad.org/iia>; the Mexico-Uruguay Free Trade Agreement (2003) Art 13-04, available at <http://www.sice.oas.org/TPD/MEX_URY/Negotiations/Texto_s.pdf>; the US-Chile Free Trade Agreement (2003) Art 10.3; the Dominican Republic-Central America-United States Free Trade Agreement (2004) Art 10.4 at <http://www.sice.oas.org/Trade/CAFTA/CAFTADR_e/chapter6_12.asp>.

50  See the Canada-Chile Free Trade Agreement (1996) Art G-08; the Guatemala, Honduras, El Salvador-Mexico Free Trade Agreement (2000) Art 14-09; the Central America-Panama Free Trade Agreement (2002) Art 10-09; the Mexico-Uruguay Free Trade Agreement (2003) Art 13-09. See <http://www.sice.oas.org>.

51  See Art 5.1, Ch. XVII, of the 2003 Draft Agreement (FTAA.TNC/w/133/Rev.3 of 21 November 2003), available on the website <http://www.sice.oas.org>.

52  Art 14.1., Ch XVII.

53  Art 5.2., Ch XVII.

54  Art 17, Ch XVII. See also Ch XXII concerning ‘General Exceptions’.

55  See in general Art 15, Ch XVII.

56  Art 15.2, particularly 15.2(b), Ch XVII.

57  Art 16, Ch XVII.

58  See eg the Panama-Taiwan Free Trade Agreement (2003) Art 10.03 at <http://ctrc.sice.oas.org/Trade/PanRC/PANRC_e.asp>; the US-Singapore Free Trade Agreement (2003) Art 15.4(3) at <www.unctad.org/iia>; US-Morocco Free Trade Agreement (2004) Art 10.4 at <http://www.ustr.gov/Trade_Agreements/Bilateral/Morocco_FTA/Section_Index.html>.

59  See eg the Chile-Korea Free Trade Agreement (2003) Art 10.4(1) at <http://www.unctad.org/sections/dite/iia/docs/Compendium//en/289%20volume%2012.pdf>; the Mexico-Japan Free Trade Agreement (2004) Art 59 at <http://www.unctad.org/sections/dite/iia/docs/Compendium//en/japan_mexico_fta.pdf>.

60  See Art 3(2) of the Protocol of Colonia and Art 2(C)(2) of the Buenos Aires Protocol (both available at <http://www.unctadxi.org/templates/DocSearch.aspx?id=780>). Notably, the latter uses the verb ‘may’ instead of ‘shall’. In fact, it provides that ‘each Member Party may accord …’, whereas the Protocol of Colonia prescribes that ‘each Member Party shall accord …’.

61  See Art 3(3) of the Protocol of Colonia and Art 2(C)(3) of the Buenos Aires Protocol, which also excludes possible different treatment standards provided for by regional agreements from the functioning of its most-favoured-nation clause.

62  As regards the difference between the GATT most-favoured-nation clause and the GATS most-favoured-nation clause, cf D Carreau, and P Juillard, Droit International Economique (Paris, Dalloz, 2nd edn, 2005) at 294–5.

63  See AM Wimmer, ‘The Impact of the General Agreement on Trade in Services on the OECD Multilateral Agreement on Investment’, 19 World Competition (1996) at 109 ff, who believes that free-riding can arise from the GATS most-favoured-nation clause with respect to any possible investment agreement. With particular regard to the MAI negotiations, he points out that ‘the favourable application of a Multilateral Agreement on Investment can represent a measure covered by the Agreement in the sense of the MFN clause of GATS Article II:1. Consequently, WTO Member States who are currently not part of the OECD would be able, in principle, to claim the right to be treated according to the MAI standard, if the effects are not merely de minimis and a different standard of treatment can be proven’ (at 119). For a rather more positive opinion of the GATS most-favoured-nation clause, see P Sauvé, ‘Assessing the General Agreement on Trade in Services’, 29 JWT 125 (1995) at 129–31. In general, cf the Note Concerning ‘Liberalisation and Exceptions. The Interface between MAI and GATS’ by the Chairman of the OECD Negotiating Group on the MAI, DAFFE/MAI(98)11, 10 March 1998.

64  See P Van den Bossche, The Law and Policy of the World Trade Organization (Cambridge, Cambridge University Press, 2005) at 325–6.

65  Art 12(1).

66  Energy Charter Treaty available at <http://www.encharter.org/fileadmin/user_upload/document/EN.pdf>. See further T Wälde, ‘International Investment under the 1994 Energy Charter Treaty’, 29 JWT 5 (1995) at 46–7 (who believes that ‘the most-favoured principle is referred … in Article 10(3) as a soft-law obligation for pre-investment, and in Article 10(7) as a binding obligation for post-investment’); CP Andrews-Speed and T Wälde, ‘Will the Energy Charter Treaty Help International Energy Investors?’, 5(3) Transnational Corporations 31 (1996) at 39–40; JW Salacuse, ‘The Energy Charter Treaty and Bilateral Investment Treaty Regimes’, in T Wälde (ed) The Energy Charter Treaty (The Hague, Kluwer Law International, 1996) at 340–1. See also ‘The Energy Charter Treaty’ by the Legal Counsel of the IEA, 1994, at 15ff available at <http://www.iea.org/textbase/nppdf/free/1990/charter94.pdf>.

67  Both available at UNCTAD, International Investment Agreements: A Compendium, <http://www.unctadxi.org/templates/DocSearch____780.aspx>.

68  Framework Agreement on the ASEAN Investment Area 1998, available at UNCTAD, ibid. Yaung Chi Oo Trading Pte Ltd v Government of the Union of Myanmar, ASEAN Arbitral Tribunal, ASEAN ID Case No. Arb/01/1, Award 31 March 2003, 42 ILM 540 (2003) on which see text below at nn 195–9.

69  See the Consolidated Text of the MAI, 12 February 1998, DAFFE/MAI/NM(98)2, at 13. Available at UNCTAD, above n 67 <http://www.unctad.org/sections/dite/iia/docs/Compendium//en/96%20volume%204.pdf>.

70  See OECD/GD(96)157 of 6 November 1996, at 16; OECD/GD(97)38 of 17 March 1997, at 19; OECD/GD(97)114 of 13 June 1997, at 21; DAFFE/MAI/NM(97)1 of 9 September 1997, at 12; DAFFE/MAI/NM(97)2 of 1 October 1997, at 15. See also Commentary on the Consolidated Text of 12 February 1998, DAFFE/MAI/NM(98)4, at 10–12.

71  See Commentary on the Consolidated Text of 12 February 1998, DAFFE/MAI/NM(98)4, at 11; Commentary of 5 March 1998, DAFFE/MAI/NM(98)8, at 11. See also OECD/GD(97)38, cit, at 20.

72  See, eg OECD/GD(96)157 of 6 November 1996, at 17; OECD/GD(97)38, cit, at 21ff; C/MIN(97)16 of 20 May 1997, para 19. Cf Commentary on the Consolidated Text of 12 February 1998, DAFFE/MAI/NM(98)4, at 37–8.; Commentary of 5 March 1998, DAFFE/MAI/NM(98)8, at 37–9.

73  AAPL v Sri Lanka, ICSID Case No. Arb/87/3, Award of 27 June 1990, ICSID Reports, vol 4, at 246ff (this award is also available on the website: <www.investmentclaims.com>).

74  See, in particular, para 26(D). See S Manciaux, Investissements Etrangers et Arbitrage entre Etats et Ressortissants d'autres Etats (Paris, Litec, 2004) at 582–5.

75  Above n 73 at para 54.

76  CMS Gas Transmission Co v Argentina, ICSID Case No. Arb/01/8, Award of 20 April 2005. This award is available on the ICSID website (<http://www.worldbank.org/icsid>).

77  Ibid, para 343.

78  Ibid, para 377.

79  Ibid.

80  See Vasciannie, above n 18 at 132–8, 147–9.

81  See G Schwarzenberger, ‘The Most-Favoured-Nation Standard in British State Practice’, 22 BYIL 96 (1945), who considers this standard as ‘basic’ not only in the light of its ‘permanent use’, but also for the fact that ‘m.f.n. clauses serve as an insurance against incompetent draftsmanship and lack of imagination on the part of those who are responsible for the conclusion of international treaties’. In this regard, the author concludes that ‘the functions of the m.f.n. standard may be described as the elimination of discrimination, the correction of oversights and the adaptation of treaties to changing circumstances’ (at 98–100). See also G. Sacerdoti, ‘Bilateral Treaties and Multilateral Instruments on Investment Protection’, Recueil des Cours, 269 (1997) especially at 350; MK Omalu, NAFTA and the Energy Charter Treaty (The Hague, Kluwer Law International, 1999) particularly at 53–4.

82  Vasciannie stresses that ‘one effect of the growing network of bilateral investment treaties incorporating the most-favourable-nation standard has been to generalize the applicability of the fair and equitable standard among State (above n 18 at 149).

83  Pope & Talbot Inc. v Canada, Arbitral Tribunal under Chapter 11 of the NAFTA Agreement, Award on the Merits of Phase 2 of 10 April 2001, paras 105 ff. (this award is available on the website: <http://www.naftaclaims.com>). Cf Bjorklund, above n 42 at 1103(9)–(10).

84  Ibid, para 115.

85  Ibid, para 108.

86  Ibid, in particular paras 115–16.

87  Ibid, para 117.

88  Ibid, para 118.

89  Pope & Talbot, Inc v Canada, Award on Damages of 31 May 2002, para 66. This Award, like the one on the Merits, is available at: <http://naftaclaims.com/disputes_canada/disputes_canada_pope.htm>. As regards a possible connection between the functioning of the most-favoured-nation treatment clause provided for by Art 1103 and the NAFTA FTC Interpretative Note on Art 1105, see, in general, T Weiler, ‘NAFTA Article 1105 and the Free Trade Commission: Just Sour Grapes, or Something More Serious?’, Int Bus Law (2001) at 496–8.

90  ADF v The United States of America, ICSID Case No. ARB(AF)/00/1, Award of 9 January 2003, paras 75–80.

91  Ibid, paras 193–6.

92  Ibid, paras 104–7.

93  Ibid, para 196. See also paras 197–8. See too Bjorklund, above n 42 who points out that ‘the Tribunal came to this conclusion despite the fact that the function of Article 1103 was to bring in a more favourable standard under Article 1105, a provision not excluded in government procurement cases by Article 1108’, at 1103(10)–(11).

94  ICSID Award, particularly paras 44–7.

95  Lucchetti SA and Lucchetti Peru, SA v Peru, ICSID Case No. ARB/03/4, Award of 7 February 2005. This award is available on the ICSID website (<http://www.worldbank.org/icsid>). See para 23.

96  MTD Equity Sdn Bhd and MTD Chile SA v Chile, ICSID Case No. ARB/01/7, Award of 21 May 2004. This award is available on the ICSID website (<http://www.worldbank.org/icsid>).

97  Ibid, paras 100–4, 197 ff.

98  Ibid, para 204.

99  Bayindir Insaat Turizm Ticaret Ve Sanayi AŞ v Pakistan, ICSID Case No. ARB/03/29, Decision on Jurisdiction of 14 November 2005. This decision is available on the ICSID website (<http://www.worldbank.org/icsid>).

100  Ibid, paras 230–1.

101  Ibid, paras 219–21.

102  Ibid, paras 208–10.

103  Ibid, paras 223–4.

104  Telenor Mobile Communications AS v Hungary, ICSID Case No. ARB/04/15, Award of 22 June 2006. This award is available on the ICSID website (<http://www.worldbank.org/icsid>).

105  Ibid, paras 20, 41, and 52.

106  Ibid, paras 20 and 56.

107  See text below at nn 118–80.

108  ICSID Award above n 104, paras 85–8. The claimant had in particular referred to Maffezini and Siemens to support its position.

109  See text below at nn 118–80.

110  ICSID Award, above n 104, para 89.

111  Ibid, paras 90–1.

112  Ibid, para 92.

113  Ibid, para 93.

114  Ibid, para 94.

115  Ibid, para 95.

116  Ibid, paras 97, 100.

117  Ibid, para 102.

118  See above n 3.

119  It is worth noting that reference to the Maffezini case may turn out to be groundless. For example, in the Occidental v Ecuador case, the UNCITRAL tribunal established that the Maffezini case was ‘not really pertinent … as it dealt with the most-favored-nation treatment only insofar as procedural rights of the claimant there were involved, not substantive treatment as is the case here’ (Case No. UN 3467, Final Award of 1 July 2004, para 178). This award is available on the website: <www.investmentclaims.com>.

120  Also in the Loewen case a most-favoured-nation treatment clause was invoked for procedural matters. In particular, in order to prove that the requirement of maintaining ‘“continuous nationality” during investment disputes’ was not mandatory, the claimant, TLGI, referred to the most-favoured-nation treatment clause provided for by Art 1103 of the NAFTA Agreement. According to TLGI, ‘no other foreign investors were required to maintain “continuous nationality” during investment disputes’. Therefore, TLGI claimed the same treatment, as, under Art 1103, it was entitled to receive ‘the most favourable treatment that the U.S. extends to other foreign investors’. The ICSID tribunal paid no attention to this claim and upheld the USA's objection to its jurisdiction due to the lack of the claimant's continuous nationality (The Loewen Group, Inc, Raymond L Loewen v The United States of America, ICSID Case No. ARB(AF)/98/3, Award of 26 June 2003, in particular para 225. See also Raymond L Loewen v The United States of America, Petition to Vacate of 13 December 2004, footnote 2. On 31 October 2005, the USA District Court for the District of Columbia denied this petition). This judgment and the ICSID award are available on the website: <http://www.investmentclaims.com>. Acconci, ‘The Requirement of Continuous Corporate Nationality and Customary International Rules on Foreign Investments: The Loewen case’, 14 Italian Yb Int'lL (Leiden and Boston, Martinus Nijhoff, 2004) 225–36.

121  Maffezini v Spain, above n 3.

122  Ibid, para 42.

123  Ibid, para 46.

124  Ibid, paras 49–50.

125  The Ambatielos Case (Greece v United Kingdom), Award of 6 March 1956, UNRIAA, 1963, vol XII, at 107. Also the Draft Articles prepared by the UN International Law Commission includes the ‘administration of justice’ among the possible subject-matters of a most-favoured-nation clause (above n 13 at 24). Among scholars, for the same view, see Schwarzenberger, above n 12 at 250.

126  ICSID Decision, above n 3 para 53.

127  Ibid, para 54.

128  Ibid, para 56.

129  Ibid, paras 57–61.

130  Ibid, para 62.

131  Ibid. Kurtz highlights the fact that the Tribunal did not compare adjudication by the Spanish courts to ICSID arbitration. In his opinion, this is ‘a serious flaw in the Tribunal's reasoning and one which should (but most likely will not) weaken its influence amongst successive arbitral tribunals’ (above n 1 at 347).

132  Ibid. Cf L Liberti, ‘Arbitrato ICSID, clausola della nazione più favorita e problemi di attribuzione’, Rivista dell'arbitrato (2004) especially at 580–1.

133  ICSID Decision, above n 3 at para 63.

134  Ibid.

135  See C Schreuer, ‘The Coexistence of Local and International Law Remedies’, Presentation at the British Institute of International and Comparative Law Third Investment Treaty Forum Conference, 10 September 2004, TDM (2005) No. 4, at 7 at <http://www.transnational-dispute-management.com>.

136  ICSID Decision, above n 3.

137  Dolzer and Myers, above n 20 at 54.

138  Ibid. The authors think ‘both the Maffezini and Tecmed rulings reject importing of outside terms through “drafting by reference”and seem to give primacy to the parties' own behavior’ (at 60).

139  Ibid at 58.

140  Tecnicas Medioambientales Tecmed v Mexico, ICSID Case No. Arb (AF)/00/2, Award of 29 May 2003. This award is available on the ICSID website (<http://www.worldbank.org/icsid>). See para 69.

141  Ibid.

142  Ibid, paras 69, 74.

143  Dolzer and Myers, above n 20 at 58. These authors underline that ‘apparently, matters of procedure are not considered as core issues’ (ibid). They believe that the Tecmed award as a whole ‘provides limited guidance concerning the scope of application of Maffezini's conclusions versus its exceptions’ (ibid).

144  Siemens v Argentina, ICSID Case No. Arb/02/8, Decision on Jurisdiction of 3 August 2004. This decision is available on the ICSID website (<http://www.worldbank.org/icsid>).

145  Ibid, paras 82 ff.

146  Ibid, paras 80–1.

147  Ibid, paras 95–6.

148  Ibid, paras 97–9.

149  Ibid, paras 100–2.

150  Ibid, para 102.

151  Ibid, para 103.

152  Ibid, Cf: S Fietta, ‘Most Favoured Nation Treatment and Dispute Resolution under Bilateral Investment Treaties: a Turning Point?’, 8 Intl ALR 131 (2005), who doubts ‘whether the Siemens decision was entirely consistent with the ejusdem generis principle, given the fact that the subject matter of the MFN clause in that case did not clearly extend to dispute resolution issues’ (at 134).

153  ICSID Decision, above n 144 para 120.

154  Fietta, above n 152 at 135.

155  ICSID Decision, above n 144 paras 104–9.

156  Gas Natural SDG, SA v Argentina, ICSID Case No. ARB/03/10, Decision on Preliminary Questions on Jurisdiction of 17 June 2005 (this decision is available on the website: <http://www.investmentclaims.com>).

157  Ibid, para 29.

158  Ibid, para 30.

159  Ibid, para 27.

160  Ibid, para 28.

161  Ibid, paras 41–7.

162  Salini Costruttori SpA and Italstrade SpA v Jordan, ICSID Case No. ARB/03/10, Decision on Jurisdiction of 15 November 2004. This Decision is available on the ICSID website (<http://www.worldbank.org/icsid>). See para 118.

163  ICSID Decision on the Gas Natural case, above n 156, para 49.

164  Suez, Sociedad General de Aguas de Barcelona SA, and Vivendi Universal SA v Argentina, ICSID Case No. ARB/03/19, Decision on Jurisdiction, 3 August 2006. This decision is available on the ICSID website (<http://www.worldbank.org/icsid>).

165  National Grid plc v Argentina, UNCITRAL Arbitration, Decision on Jurisdiction, 20 June 2006 (this decision is available on the website: <http://www.investmentclaims.com>).

166  Both in the Suez and in the National Grid cases, the 1990 Argentina and UK BIT was at stake. The Suez case was also based on the 1991 Argentina and Spain BIT.

167  ICSID Decision on the Suez case, above n 164, para 62, and UNCITRAL Decision on the National Grid case, above n 165, paras 88–9, 92.

168  ICSID Decision on the Suez case, above n 164, paras 64–7, and UNCITRAL Decision on the National Grid case, above n 165, paras 91–2.

169  ICSID Decision on the Suez case, above n 164, para 68.

170  UNCITRAL Decision on the National Grid case, above n 165, para 44.

171  ICSID Decision on the Suez case, above n 164, para 59.

172  ICSID Decision on the Suez case, ibid, paras 60 ff. See also UNCITRAL Decision on the National Grid case, above n 165 para 85.

173  ICSID Decision on the Suez case, above n 164, particularly para 59. See also UNCITRAL Decision on the National Grid case, above n 165, para 93.

174  Continental Casualty Co v Argentina, ICSID Case No. ARB/03/9, Decision on Jurisdiction of 22 February 2006 (this Decision is available on the website: <http://www.investmentclaims.com>).

175  Ibid, para 56.

176  Ibid, para 94.

177  Camuzzi International SA v Argentina, ICSID Case No. ARB/03/2, Decision on Objections to Jurisdiction of 11 May 2005. This Decision is available on the ICSID website (<http://www.worldbank.org/icsid>).

178  Ibid, para 120.

179  Ibid, para 121.

180  Ibid.

181  See above n 162 at para 102.

182  Ibid, para 103.

183  Ibid, paras 106–12.

184  Ibid, para 112.

185  Ibid, paras 114–15.

186  Ibid, para 115.

187  Ibid, paras 117–18.

188  Ibid, para 118.

189  Ibid.

190  Ibid, para 119.

191  Impregilo SpA v Pakistan, ICSID Case No. ARB/03/3, Decision on Jurisdiction of 22 April 2005. This Decision is available on the ICSID website (<http://www.worldbank.org/icsid>).

192  Ibid, paras 192, 220–1.

193  Ibid, para 96. See also para 222.

194  Ibid, para 223.

195  Yaung Chi Oo Trading Pte Ltd v Myanmar, ASEAN ID Case No. ARB/01/1, Award of 31 March 2003, 42 ILM 540 (2003).

196  See above n 68.

197  Award, above n 195 at para 83.

198  Ibid.

199  Ibid.

200  Plama Consortium Ltd v Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction of 8 February 2005, 44 ILM 717 (2005). This Decision is available on the ICSID website (<http://www.world bank.org/icsid>).

201  Ibid, paras 183–4.

202  Ibid, paras 188 ff.

203  ICSID Decision on the Maffezini case, above n 3, para 54 and ICSID Decision on the Plama case, above n 200, para 193.

204  Plama, ibid.

205  Ibid, para 195.

206  Ibid, para 196.

207  Ibid, para 198.

208  Ibid, para 199. See also paras 200–8.

209  Ibid, para 209.

210  Ibid, paras 211–26. In particular, the claimant had referred to the Ceskoslovenska Obdchodni Banka, AS v The Slovak Republic (ICSID Case No. Arb/97/4, First Decision on Jurisdiction, 24 May 1999, 14 ICSID Rev-FILJ 251 (1999); Further Decision on Jurisdiction 1 December 2000, 15 ICSID Rev-FILJ 544 (2000) ) Rights of Nationals of America in Morocco (above n 4) Anglo-Iranian Oil Co (above n 7) Ambatielos (above n 125), and Maffezini (above n 3) cases.

211  Plama, above n 200, para 218.

212  Ibid, para 219.

213  Ibid, para 221.

214  Ibid, para 226.

215  Ibid, para 225.

216  Ibid, para 223.

217  Ibid, para 224.

218  Ibid.

219  See above n 104.

220  See G Morelli, Nozioni di Diritto Internazionale (Padoua, Cedam, 7th edn, 1967) at 39–40; F Capotorti, Corso di Diritto Internazionale (Milan, Giuffrè editore, 1995) at 175–6; idem, ‘Cours général de droit international public’, 248 Recueil des Cours (1994-IV) at 216–17.

221  See above nn 3 and 164.

222  See Ustor, above n 7 at 472.

223  See Kurtz, above n 1 especially at 555.

224  See, in general, UNCTAD, Recent Developments in International Investment Agreements, 30 August 2005, UNCTAD/WEB/ITE/IIT/2005/1, particularly at 10 ff.

225  ICSID Decision on the Plama case, above n 200, para 189. In favour of the great relevance given to ‘the intention of the parties’ by the tribunal of the Plama case, in order to evaluate the scope of a most-favoured-nation treatment clause, see Fietta, above n 152 at 136–8.

226  According to Annex III to the Canadian Model BIT, its article providing for the most-favoured-nation treatment standard (Art 4) ‘shall not apply to treatment accorded under all bilateral and multilateral international agreements in force or signed prior to the date of entry into of this Agreement’. <http://ita.law.uvic.ca/documents/Canadian2004-FIPA-model-en.pdf>. Kurtz points out that ‘the Canadian approach seems to clearly recognise the potential of MFN … to impinge on otherwise non-discriminatory regulatory measures’ (above n 1 at 553).

227  In this footnote the Maffezini decision is deemed to be based on ‘… an unusually broad most favored nation clause …’ and it is clearly specified that ‘… by contrast, the most favored nation Article of this Agreement is expressly limited in its scope to matters “with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments”. The Parties share the understanding and intent that this clause does not encompass international dispute resolution mechanisms … and therefore could not reasonably lead to a conclusion similar to that of the Maffezini case’. See <http://www.ftaa-alca.org/FTAADraft03/ChapterXVII_e.asp#note13>.

228  On the other hand, according to Kurtz, ‘… the solution to the appropriate parameters of the MFN clause will not necessarily be solved through future treaty amendment as is perhaps inevitable given the large universe of existing BITs and other investment treaties. Instead, much greater attention needs to be given to rigorous textual and teleological interpretations of individual MFN clauses’ (above n 1 at 553). Other authors believe that ‘the language of the clause’ is essential in order to evaluate its effects, particularly whether or not the clause in question covers dispute settlement (Gaillard, above n 20 at 8).

229  Cf GA van Hecke, ‘Le projet de convention de l'O.C.D.E. sur la protection des biens étrangers’, RGDIP (1964) at 641 ff.

230  See, inter alia, the 2004 Jordan-Singapore Free Trade Agreement (see <http://www.iesingapore.gov.sg/wps/wcm/connect/resources/file/ebcc2206a61d8b2/FTA_SJFTA_Final+FTA+text+15+May+2004.pdf?MOD=AJPERES>), the Free Trade Agreements concluded by Albania in 2004 respectively with Serbia and Montenegro and Romania, the Free Trade Agreements concluded by the EFTA in 2004 respectively with Lebanon and Tunisia and the 2004 Mercosur-Egypt Framework Agreement.

231  According to Teitelbaum, eliminating most-favoured-nation treatment (and national treatment) from international investment law could be a solution if these treatments were to be ‘replaced with a single, universal standard of treatment of investors’ (above n 3 at 237). Cf SM Cone III, ‘The Promotion of Free-Trade Areas Viewed in Terms of Most-Favored-Nation Treatment and “Imperial Preference”, 26 Michigan Jo Int'l Law 563 (2005); H. Labidi, ‘Où va la clause de la nation la plus favorisee en droit international des investissements?’ in F Horchani (ed), Où va le droit de l'investissement (Paris, Pedone, 2006) at 44.