The most favored nation clause: A consistent way forward

MFN clauses are key instruments in trade and investment law present in most bilateral and multilateral agreements. They are a treaty-based standard not rooted in customary international law, so their interpretation should be made case-by-case.   

This dissertation addresses the origins and scope thereof focusing primarily on the interpretative hindrances that arbitration scholars and practitioners face when tasked with their application. Arbitral precedents show that differing outcomes largely depend on the specific formulation of the MFN clause invoked, which adventures that inconsistent rulings are here to stay.   

In the absence of other elements as agreed by States, MFN clauses may be reasonably construed to cover substantive rights. However, they cannot extend to procedural and jurisdictional benefits unless expressly stated since investor-State arbitration is based upon the principle of State’s consent.   

It follows that the application of MFN clauses to substantive benefits is worth revising, and that procedural and jurisdictional applications should be made with caution. Looking ahead, MFN clauses may expand their horizons to new applications not raised by States and investors in arbitral practice. 

To tackle the past and the future, this dissertation concludes that the consistent way forward must be found in the establishment of guiding legal principles and boundaries, among which the textual interpretation should prevail, and the enhancement of States’ drafting and interpretative techniques. 

See complete chapter at: Queen Mary Law Journal, Volume 3 (15 June, 2022).