Application of MFN to the Substantive Benefits

Abstract

There is a scholarly proposition that, in principle, application of MFN treatment to the substantive benefits is uncontested. International courts and tribunals have, on several occasions, stated that MFN can apply to substantive benefits while some tribunals observed that substantive and procedural rights within IIAs are conventionally distinct. According to this, application of MFN should be confined to the substantive benefits only. However, most attempts to claim more favourable substantive benefits by MFN have failed in practice. This low level of success poses an essential question: should the seemingly accepted position supporting the extensive application of MFN to substantive benefits be re-examined? This chapter undertakes such a re-examination. It explores the following issues: whether MFN should import entirely new substantive benefits from other IIAs if the basic treaty does not contain them at all; and whether MFN should import a better-drafted substantive benefit from another treaty when the basic treaty already contains the same kind of substantive benefit in less favourable terms. To explore the above issues, this chapter reviews 21 key arbitral decisions that allowed or rejected application of MFN to the substantive benefits. The chapter argues that the conventional view that MFN has unlimited power to multilateralise substantive benefits can no longer be sustained. MFN in IIAs remains subject to some significant boundaries. The chapter also finds that although some arbitral tribunals have been sensitive to the developing host-states in applying other substantive provisions in IIAs, in deciding on MFN, no such consideration has been rendered.