Most Favoured Nation Treatment

Abstract

Abstract Most favoured nation (MFN) treatment clauses in investment treaties have been one of the most inconsistently applied standards in the realm of investment treaty arbitration. At the heart of the controversy about MFN clauses in investment law is their usage in arbitral case law to ‘import’ substantive standards and procedural rights from third-party investment treaties that ostensibly provide better investor protection. This chapter challenges the utilization of MFN clauses to import external standards into investment treaties. It revisits the non-discrimination rationale of MFN clauses and discusses the pivotal moments when the interpretation of MFN clauses took a turn for the worst within the jurisprudence. What is lacking from many arbitral awards is a consideration of whether the mere presence of the ‘imported’ external standard actually amounts to a less favourable treatment of the investor in real terms. Nor do tribunals consider whether an investor protected by the third-party treaty, who is similarly situated to the claimant investor, has actually benefited from such a standard and placed in a distinct competitive advantage vis-à-vis the claimant. This chapter critiques the departure of investment law practice from the core ingredient of MFN, the non-discrimination principle.