Abstract

This essay underscores the importance of background understandings in general international law for interpreting brief, open-ended clauses such as most favored nation (MFN) clauses. Contrary to Simon Batifort and J. Benton Heath's claim, I suggest that often interpreters of MFN clauses cannot limit themselves to the text, context, and preparatory materials of a specific MFN clause. A common international negotiating technique, including for investment treaties, is to rely on the general background understanding of what a clause typically means in international law—its default meaning. I also argue that MFN clauses have played a surprisingly limited role in the international investment regime to date. In the main, they have functioned as a stepping stone for procedural and substantive guarantees found in third-party investment treaties. This use, and the limited role of MFN clauses in investment treaty awards, stands in sharp contrast to MFN clauses in the trade regime.

Highlights

  • This essay underscores the importance of background understandings in general international law for interpreting brief, open-ended clauses such as most favored nation (MFN) clauses

  • I argue that MFN clauses have played a surprisingly limited role in the international investment regime to date

  • The quasi-simultaneous publication of two articles—one in the Journal and the other in the Journal of International Economic Law1—on whether MFN clauses in the basic investment treaty permit the invocation of substantive treaty provisions in third-party investment treaties underscores the importance of this crucial architectural feature of MFN clauses to the investment treaty regime

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Summary

Michael Waibel*

This essay underscores the importance of background understandings in general international law for interpreting brief, open-ended clauses such as most favored nation (MFN) clauses. I argue that MFN clauses have played a surprisingly limited role in the international investment regime to date In the main, they have functioned as a stepping stone for procedural and substantive guarantees found in third-party investment treaties. They have functioned as a stepping stone for procedural and substantive guarantees found in third-party investment treaties This use, and the limited role of MFN clauses in investment treaty awards, stands in sharp contrast to MFN clauses in the trade regime. This essay first examines whether an exclusive focus on the specific text of a single MFN clause is possible It emphasizes the importance of the typical meaning of an MFN clause in general international law, alongside the specific clause at issue. Batifort and Heath’s proposal could further limit the role of MFN clauses in the investment treaty regime

The Default Meaning of MFN Clauses in General International Law
AJIL UNBOUND
Findings
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