Application of MFN Treatment in the International Investment Dispute Settlement Procedure

ABSTRACT

Whether the MFN clauses in one international investment treaty can be applied to other investment treaties’ arbitral procedure provisions has been a controversial topic in recent years. The jurisprudence of international investment arbitral awards has proved two different answers. Even though some arbitral tribunals, which approve the application of MFN in the dispute settlement procedure, also regulate the restriction of application in the arbitration awards.

The key issue about this topic is that whether the MFN clause shall be applicable in the dispute settlement matter and if possible, what extent can MFN be applied. China has signed thousands of BITs now and most of them don’t have clear scope of the application of MFN, so what should China do to balance the protection of the foreign investor and the host country.

This dissertation will start with the basic introduction of the MFN clause and its development in the investment treaties; then focus on the review of the relevant ICSID arbitration cases concerning the extension of the MFN clause and analyze the reasons why the application of the MFN treatment is of controversy; at last, come up with the effective suggestions for China based on its practice.

CONTENTS

Click to expand Contents

CHAPTER I. Background & Introduction

1.1 The Overview of Most-Favored-Nation clause in International Investment Treaties

1.1.1 The definition of Most-Favored-Nation treatment

1.1.2 The development of Most-Favored-Nation treatment

1.1.3 The development of Most-Favored-Nation treatment in international investment treaties

1.2 The Origination of the Issue on the Application of Most-Favored-Nation Treatment

1.2.1 The introduction of international investment arbitration

1.2.2 The emergence of controversial issue on the application of MFN treatment

CHAPTER II The judicial practices of the International Court of Justice on the scope of application of MFN

2.1 Anglo-Iranian Oil Co. case (U.K. v. Iran)

2.1.1 The introduction of case

2.1.2 The Judgment of the Court

2.2 Ambatieloes case (Greece v. the United Kingdom)

2.2.1 The introduction of case

2.2.2 The Judgment of the Court

2.2.3 The Award of the Commission of Arbitration

2.3 Other scholars’ opinions over cases

CHAPTER III. ICSID arbitration cases on the scope of application of MFN

3.1 Cases approve the extended application of MFN and comments

3.1.1 Maffezini v. Spain

3.1.2 Siemens A. G. v. Argentina

3.1.3 Gas Natural v. Argentina, Suez and Vivendi v. Argentina, Suez and Interaguas v. Argentina

3.1.4 The comments and criticisms over cases

3.2 Cases disapprove the extended application of MFN and comments

3.2.1 Salini v. Jordan

3.2.2 Plama v. Bulgaria

3.2.3 Telenor v. Hungary

3.2.4 The comments and criticisms over cases

CHAPTER IV. Analysis on the related issues concerning the application of MFN clause to the international investment arbitration

4.1 Arguments on the main issues concerning the application of MFN clause to the international investment arbitration procedure

4.1.1 Rules for the interpretation of the MFN clause

4.1.2 Ejusdem Genneris principle

4.1.3 The standard of “most-favored” in the international investment arbitration

4.1.4 The particularity of the international investment arbitration provision

4.2 Analysis on the principal influential factors of the emergence of the relevant issues on the application of MFN clause

4.2.1 The ambiguity of the MFN clause in international investment treaties

4.2.2 Difficulty of the unified interpretation of the MFN clause

4.3 The recommended interpretation of the applicable scope of the MFN clause

4.3.1 The MFN clause cannot override the consent of the parties

4.3.2 The ordinary interpretation of the MFN clause

4.3.3 The claimant should prove the treatment in the third party is different and more favorable

CHAPTER V. The situation of application of MFN in China and some suggestions

5.1 Provisions of China’s BITs on applicable object of MFN clause

5.1.1 Investments or returns of investors (Investments and returns of investors)

5.1.2 Investment and associated activities

5.1.3 Admission of investment and the matters in connection with investment

5.1.4 Activities and measures after admission of investments

5.2 Provisions of China’s BITs on dispute settlement mechanisms

5.2.1 Settlement of dispute between an investor and a contracting party

5.2.2 The selectivity of arbitration

5.2.3 Applicable arbitration rules

5.2.5 The provisions of international arbitration jurisdiction are different

5.3 The influence of expanded application of MFN clause to China

5.3.1 The importance of expanded application of MFN clause to China

5.3.2 China’s attitude towards the extended application of the MFN clause

5.4 Suggestions on the application of MFN clauses in China

5.4.1 The scope of application of MFN clauses should be as clear as possible

5.4.2 The introduction of the provisions of the retroactive force of the treaty

5.4.3 Setting a reciprocal exception on the application of the MFN clause

CHAPTER VI. Conclusion

REFERENCES

CHAPTER I. Background & Introduction

1.1 The Overview of Most-Favored-Nation clause in International Investment Treaties

1.1.1 The definition of Most-Favored-Nation treatment

The globalization of the world economy is getting higher and higher, and the free circulation of goods, services, and capital is becoming more and more frequent. This requires the establishment of a global legal system to protect cross-border economic exchange and strengthen cooperation. International economic law, including international trade law, international investment law and international financial law, came into being and provided a legal backbone for the development of global economy.[1]

In so many international conventions and international agreements, MFN treatment emerges as a primary principle of these treaties, such as GATT, GATS and so on. MFN treatment plays a critical role in establishing a unified international economic relation, because it ensures that foreign investors are in a better position than third-country investors or at least not discriminatory by means of the MFN clauses included in the treaties.[2]

MFN clauses provide that the treatment accorded to the third State by granting State should be extended to the beneficiary State in case this treatment is more favorable than the treatment under the treaty between the granting State and the beneficiary State[3], Which ensures equal treatment between the beneficiary State and any third State. The rationale of MFN clauses is to “maintain at all times fundamental equality without discrimination among all of the countries connected”.[4] In different areas, MFN treatment may have different expressions.

For example, in the field of international trade in goods, the provision of MFN treatment in GATT is that “any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties”[5]. In the field of international trade in services, the provision of MFN treatment in GATS is that “[w]ith 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”[6].

1978 International Law Commission (ILC) submitted that seizes the essence of MFN that is “to establish equality of competitive opportunities between foreign investors from different countries”[7]. MFN is defined as “a treaty provision whereby a State undertakes an obligation towards another State to accord most-favored treatment in an agreed sphere of relationships.”[8] MFN treatment is such “treatment accorded by the granting State to the beneficiary State, or to persons or things in a determined relationship with that State, not less favourable than treatment extended by the granting State to a third State or to persons or things in the same relationship with that third State”[9].

Strictly speaking, the wording of MFN clauses varies widely from treaty to treaty, which results in the scope and extent of the protection provided by the clauses may be very different from one treaty compared with others.[10] However, existing differences do not affect the overall effectiveness of the terms.[11] Unless the contracting parties made clear that they intend to give an MFN clause in their investment treaty a special and particular meaning, it is widely accepted that slight difference in the wording of the clauses does not change their function[12].

1.1.2 The development of Most-Favored-Nation treatment

The MFN clause has been included in international agreements since the twelfth century.[13] Originally, MFN clauses primarily operated in the matters related to trade in order to prevent discrimination and it was accorded by the host country to foreign investors unilaterally, which is the most primitive form of MFN. The official use of MFN can be traced to the thirteenth century, beginning with a 1226 treaty in which Frederick II conceded to the city of Marseilles the privilege previously afforded to Pisa and Genoa.[14]

The use of MFN was limited to a particular city or region at first, and then it was extended to other nations as a whole[15]. And the phrase “most-favored-nation” first appeared at the end of the seventeenth century.[16] Until about the early eighteenth century, MFN clauses were worded broadly and generally applied to “all privileges, liberties, immunities and concessions…already granted to foreigners or being granted in the future.”[17] From the nineteenth century, states signed multiple bilateral friendship, commerce and navigation treaties (the predecessor of bilateral investment treaties), which included MFN treatment that aimed at lowering tariffs. However, the MFN treatment at this stage was conditional[18], requiring that benefits and privileges would be accorded to the beneficiary State provided that the beneficiary State “granted the same concessions offered by the most favored nation in return for the more favorable rights in question”[19].

The first trade treaty embraced reciprocal unconditional MFN clause that became the prevalent model of MFN in modern international trade is the Treaty of Commerce between Great Britain and France of January 23, 1860, which was called Cobden Treaty.[20] Unlike conditional MFN clause, unconditional MFN did not require the beneficiary State to make the same concession to granting State for the more favorable treatment granted to the third State.

The provision of MFN treatment in 1947 GATT was the first time that MFN clause was incorporated into the multilateral trading system around the world,[21] which made unconditional MFN developed into the cornerstone of international commercial relations.[22]

1.1.3 The development of Most-Favored-Nation treatment in international investment treaties

As we know that MFN clause has traditionally been a “pivotal tool” in trade agreements, it was then extended to and became popular in international investment agreements.[23]

The widespread acceptance of MFN treatment in investments was confirmed in 1948 by the Havana Charter, which ensured that “the desirability of avoiding discrimination as between foreign investments”.[24] Although the Havana Charter never entered into effect, MFN has become the general practice of many bilateral, regional and multilateral investment treaties, and also become the common feature and core element of BIT.[25] Nowadays, an MFN clause may be found in most BITs,[26] a BIT without an MFN is considered as “a half-empty treaty”, and these MFN clauses are reciprocal, unconditional and indeterminate in nature[27].

As far as investment matters are concerned, MFN clauses show the same basic structure and apply to all investment-related matters.[28] However, this does not mean that these clauses use the same terminology. Many investment treaties such as NAFTA entitle both foreign investors and their investments to MFN,[29] while Energy Charter Treaty only grants the MFN to the investments and so on.[30]

As we can see there are differences in the wordings of content and applicable scope of MFN clause in different BITs, and nor does it have an authority to make it fully agreed in the international community, which increases the likelihood of inconsistent referees in practice.

1.2 The Origination of the Issue on the Application of Most-Favored-Nation Treatment

1.2.1 The introduction of international investment arbitration

The existence of international investment relations between countries is bound to produce a wide range of investment disputes. As to the settlement of international investment dispute between a host country and a foreign investor, developed countries and developing countries have different positions.

For developed countries, they deny the jurisdiction of the host country and advocate to submit such investment disputes to special mechanisms and specific international arbitration courts and apply international law. However, for developing countries, in order to protect sovereignty, they insist that investment disputes should be settled within the territory of the host country.

So in order to protect international investments, improve the international investment environment, and resolve individual investment disputes on a case-by-case basis, International Bank for Reconstruction and Development organized and drafted the Convention on the Settlement of Investment Disputes between States and Nationals of Other States in 1962. And on October 14, 1966, the Convention formally entered into force.[31] The broad objective of the Convention is to “encourage a larger flow of private international investment, the provisions of the Convention maintain a careful balance between the interests of investors and those of host States”.[32]

Then International Centre for Settlement of Investment Dispute (ICSID) was established in accordance with the Convention to provide facilities for conciliation and arbitration of investment disputes that is accepted by both of developed countries and developing countries.[33] So international investment arbitration as a major means of host country-investors investment dispute settlement mechanism plays an important role in relief and enforcement of guarantees in international investment law.

1.2.2 The emergence of controversial issue on the application of MFN treatment

The precise wording of the MFN varies among treaties. Even the scope of application of MFN is controversial, but mostly is the matters related to investment, investment-related activities and income and so on, which are accepted as investors’ substantive rights.[34]

Although some BITs also provide that MFN can be applied “in all matters governed by this Agreement”,[35] they are essentially silent with respect to the whether they extend to an investor’s procedural rights,[36] which means that the MFN clause “does not mention in explicit terms whether the clause covers dispute settlement provisions or not”.[37]

So the issue is whether an investor may rely on an MFN clause to invoke the dispute resolution provisions of a third party BIT that are comparatively more favorable to the investor, which is much more contentious.[38]

On January 25, 2000, after the ICSID ruled the case of Maffezini[39], the first case that foreign investor successfully invoked the MFN to dispute settlement matters, which caused the more heated debate about the extended application of MFN clause. The issue between the MFN clause and the international investment arbitration procedure are presented through a judicial case of international investment arbitration. ICSID has ruled on this issue in a number of cases, but the award is inconsistent since the adjudication of Plama case[40] in 2005, making the academic community pays more and more attention to this issue.

CHAPTER II The judicial practices of the International Court of Justice on the scope of application of MFN

Before the Maffezini case, The International Court of Justice（ICJ）has accepted the parties’ application for the interpretation of the scope of application of certain specific MFN clauses, and the decisions made by the ICJ in these cases did not fully clarify the issue and could not be used directly to address the current international investment arbitration in the context of the application of MFN, but nevertheless, the jurisprudence of the ICJ is still of great significance. The Anglo-Iranian Oil Co. case and Ambatielos are the cases that are cited the most frequently by ICSID in the arbitration process.

2.1 Anglo-Iranian Oil Co. case (U.K. v. Iran)[41]

2.1.1 The introduction of case

In Anglo-Iranian Oil Co. case, on May 10, 1927, Iran (then known as Persia) announced the abolition of all treaties in effect at that time, and in 1930, Iran issued a Declaration accepting the compulsory jurisdiction of the Permanent Court of International Justice (P.C.I.J.) if there was a dispute related to the application of a treaty or convention accepted by Iran after the ratification of the Declaration[42]. The British and Iran had a long-standing treaty before the Declaration, which contained the MFN clause and was not abolished by Iran in 1927.

In April 1933, the Iranian Government signed an agreement with Anglo-Iranian Oil Company, Limited, a company incorporated in the United Kingdom. And from March to May in 1951, the Iran passed the laws concerning the nationalization of the oil industry throughout the country. The implementation of these laws caused the dispute between the Iranian Government and Anglo-Iranian Oil Company, Limited. The British Government supported the oil company’s claim and, in the name of exercising diplomatic protection, fielded an action against Iran in ICJ on May 26, 1951.

The U.K. tried to rely on the MFN clause in its treaties on 1857 and 1903 with Iran to invoke the 1935 Iran-Denmark, arguing that this MFN clause entitled its citizens to the same treatment as was guaranteed to citizens of Denmark. Iran argued that the ICJ (the successor of the P.C.I.J.) didn’t have jurisdiction over the dispute in that the U.K.-Iran treaty was concluded before the Convention.

However, the British Government argued that the MFN clause enabled it to invoke a number of treaties concluded by Iran with third States (like Denmark) after its acceptance of the jurisdiction of the ICJ as the basis for the exercise of jurisdiction over the dispute by the Court. Because the act of Iran constituted “a violation by Iran of certain of its obligations to the United Kingdom resulting from treaties or conventions accepted by Iran after the ratification of the Declaration”.[43]

2.1.2 The Judgment of the Court

The ICJ held that it lacked jurisdiction to hear the claim since the UK-Iran treaty was concluded before the Declaration and therefore could not provide the basis for jurisdiction. The Court held that the British Government was not entitled to invoke the Denmark-Iran treaty to establish the jurisdiction of the Court.

The Court explained that if United Kingdom would like to enjoy the more favorable treatment accorded by Iran to other countries by the MFN clause, “the United Kingdom must be in a position to invoke the latter treaty”.[44] The treaties contained MFN clause were basic treaties that the United Kingdom must rely on to invoke the third party treaty. The third party treaty did not have any legal effect between Iran and the United Kingdom without the basic treaties.[45] However, the basic treaties were entered into force before the Iran Declaration, so they were excluded by the terms of the Declaration, which means the disputes related to the application of the basic treaties did not fall within the jurisdiction of the Court.

Then the United Kingdom argued that If Denmark can bring the disputes concerning the 1934 Iran-Denmark treaty before the Court but the United Kingdom cannot, then the United Kingdom was not in the most-favored-nation status. The Court held that MFN clause in UK-Iran treaties had “no relation whatever to jurisdictional matters between the two Governments… The Denmark can bring before the Court any dispute as to the application of its Treaty with Iran, it is because that Treaty is subsequent to the ratification of the Iranian Declaration. This can not give rise to any question relating to most-favoured-nation treatment”.[46]

2.2 Ambatieloes case (Greece v. the United Kingdom)[47]

2.2.1 The introduction of case

In Ambatieloes case, on 17 July 1919, the Greek ship owner MR. Ambatielos concluded a contract with the British Government for the purchase of a number of ships.[48] Because the ships were delivered later than the date parties agreed, due to the large decline in freight at that time, Ambatielos did not expect the profits and cannot afford all purchase costs, so there was the dispute between Ambatielos and the British Government. Ambatielos sued the British Government before a British court, but his claim was dismissed by the trail court and the Court of Appeal. In 1951, the Hellenic Government brought the case before ICJ.[49]

2.2.2 The Judgment of the Court

So Hellenic Government, relying on the MFN clause contained in the Article X of the commerce and navigation treaty in 1886 between Greece and UK, invoked provisions like “justice and right” or “justice and equity” in treaties between the UK and third parties[50] to claim that “Ambatielos had suffered a denial of justice before the English courts under the more favorable treatment standards in the third party treaties”.[51]

The British Government pointed out that the MFN clause in the 1886 Anglo-Greek commercial treaty, which dealt with matters of commerce and navigation[52], cannot be invoked to claim the benefits of provisions in other treaties concerning judicial proceedings. And also, even if the fact alleged by the Hellenic Government that the conduct of the courts and the British Government during these proceedings amounted to a denial of justice was true, that an allegation of denial of justice must be based on general principles of international law and cannot be premised on Article X of the Treaty of 1886 dealing with commerce and navigation.[53]

However, the Hellenic Government argued that the contract Ambetialos signed with British Government is a commercial contract, so the litigation arising from it was related to the “all matters relating to commerce and navigation”[54]. Then the MFN clause within the 1886 commercial treaty is applicable. The ICJ held that “it had no jurisdiction to decide on the substantive matters like the merits of the Ambatielos claim. It had jurisdiction to decide the United Kingdom is under an obligation to submit to arbitration”.[55]

We can see that ICJ did not directly address the question of whether the MFN clause can be applied to the provisions of the judicial proceedings. However, some judges did not agree on the Judgment of the Court, they thought that “ the ejusdem generis principle precluded an MFN clause in a commercial treaty from applying to judicial matters”[56]. The MFN clause of the 1886 commercial treaty accorded MFN treatment only to the matters relating commerce and navigation, the MFN clause in Article X cannot be extended to the administration of justice that were not provided within the article, and we cannot expect the Court to give the extensive interpretation of this article.[57]

2.2.3 The Award of the Commission of Arbitration

After the Ambatielos case was sued before the Commission of Arbitration, the tribunal finally dismissed Ambatielos’s request for the rights granted to other countries by the United Kingdom were not, in fact, greater than those accorded Greece.[58]

At first, the tribunal pointed out that the applicable scope of MFN treatment was limited, and can only “attract matters belonging to the same category of the subject as that to which the clause itself relates”.[59] Then the tribunal held that the expression of scope of MFN clause in 1886 commercial treaty “has not, in itself, a strictly defined meaning … in practice, the meaning given to it is fairly flexible”[60].

The tribunal expressed its conclusion that the administration of justice was within the scope of the MFN because it held that administration of justice did not belong to the category of “commerce and navigation” when it was isolated. However, if it was linked to the protection of the traders it was not true. The protection of legitimate rights and interests of traders was clearly one of the important matters in commerce and navigation treaties, and administration of justice was concerned with the protection of these rights. Thus, in the case where the MFN clause defined its applicable scope as “all matters relating to commerce and navigation”, the administration of justice cannot necessarily be excluded from the application of the MFN clause.[61]

Finally, the tribunal concluded that the scope of MFN clause “can only be determined in accordance with the intention of the Contracting Parties as deduced from a reasonable interpretation of the Treaty”,[62] regarding the wording of Article X, “it being the Contracting Parties’ intention that the trade and navigation of each country shall be placed, in all respects, by the other on the footing of the most favoured nation”,[63] so the tribunal held that the parties intended for in the inclusion of jurisdictional matters in the scope of the MFN clause.

2.3 Other scholars’ opinions over cases

In summarizing the judgment of the ICJ in Anglo-Iranian Oil Co. case, some scholars think there are several points that are noteworthy. Firstly, the parties can only obtain the jurisdiction of ICJ by invoking the MFN clause under the circumstance that the dispute over the basic treaty should fall within the jurisdiction of ICJ, only the MFN clause and the host country’s consent to jurisdiction over the dispute with the third party cannot establish consent.[64]

Secondly, ICJ’s decision was not clear about the application of MFN clause. Some scholars wondered that “[i]s it that consent to the jurisdiction of the I.C.J. is not ‘treatment’ within the meaning of the MFN clause?”[65] The Court held that there was no need to consider “the meaning and the scope of the most-favored-nation clause”,[66] because the Court confined its jurisdiction to the date the effective of the Declaration.

However, the writer thinks that the Court, in this case, make a restrictive explanation of the MFN clause, namely that MFN treatment is not applicable to the procedural matters such as the jurisdiction of ICJ.[67]

In the meantime, the President McNair approved the Court’s judgment and provided a clearer explanation. McNair thought if it already decided that the Court had jurisdiction, there was no doubt that the United Kingdom could invoke the MFN clause to enjoy the benefit from the third party treaties, “[b]ut that is not the question now before the Court. The question is whether the United Kingdom can effectively base the jurisdiction of the Court on the Irano-Danish Treaty of 1934 as a treaty ‘postérieur à la ratification de cette déclaration’ -which is quite another matter”,[68] which means that McNair expressly acknowledged that “the United Kingdom would have been able to rely on the MFN clause on the merits had it been able to surmount the jurisdictional hurdle presented by the Iranian declaration”[69]. It was because the United Kingdom cannot obtain the jurisdiction of ICJ by invoking the MFN clause, there was no MFN clause the United Kingdom can rely on.

So President McNair’s opinion was that the Contracting party could only claim more favorable substantive treatment in a third party treaty on the basis of the MFN clause and procedural matters such as the jurisdiction of the ICJ were not covered by the MFN clause.

If the opinion of the tribunal in Ambatielos case is placed in the context of the International investment law, the writer believes that the decision should support the idea that the broadest MFN clause should be applicable to the jurisdictional protection of foreign investors and their investments within third party treaties unless there is a clear opposite expression of a BIT.[70] This conclusion of the arbitral tribunal is clearly consistent with the decision of the ICSID like Maffezini and Siemens cases, which will be discussed below.

Ambatielos case is the first case that one party in the international investment dispute requires an invocation of the MFN clause on the issue of an international dispute settlement procedure.[71] Although the tribunal eventually concludes it as a “matter of substantive law”,[72] the request of the parties still indicates the exploration to the extended application of MFN treatment.

CHAPTER III. ICSID arbitration cases on the scope of application of MFN

In recent years, MFN clauses have been controversial in an increasing number of investment arbitrations such as ICSID. However, until now, ICSID has not yet formed a consistent approach to deal with this issue. The existing cases are divided into two factions, one expands the interpretation of the MFN treatment and approves that MFN treatment should be within the procedural terms; the other restricts the interpretation of the MFN treatment, and approves that MFN treatment should be limited to substantive terms, cannot be applied to dispute settlement procedures.[73] The writer will analyze in detail about relevant cases of ICSID in the following part, hoping that can summarize the way on the interpretation of MFN from ICSID and explore the future possible development trend.

3.1 Cases approve the extended application of MFN and comments

3.1.1 Maffezini v. Spain[74]

In Maffezini case, there was an investment dispute between Argentine investor Maffezini and the Spanish Government. Then Maffezini brought the case before ICSID. The Spanish Government argued that ICSID did not have jurisdiction over dispute because according to article 10 of Argentine-Spain BIT, there were 18 months domestic litigation waiting period before an investor could initiate ICSID arbitration. However, Maffezini claimed that based on the MFN clause of the Argentina-Spain BIT, he was entitled to invoke more favorable provisions of dispute settlement in the treaties between Spain and third party like Chile, which allowed Chilean investors in Spain to go directly to ICSID arbitration.[75]

The MFN clause of Argentine-Spain BIT provided that the MFN clause was applicable to “all matters subject to this Agreement”. In response, Spain contended that based on the ejusdem generis principle, the MFN clause in the Argentine-Spain BIT only referred to “substantive matters or material aspects of the treatment granted to investors and not to procedural or jurisdictional questions”.[76] Then Spain asserted that the purpose of MFN clause was to avoid discrimination, and such discrimination was only related to the material economic treatment, not procedural matters.

As to the Spain’s argument, based on the award of Ambatielos case that the MFN treatment could be extended to the matters concerning the “administration of justice”, which is in accordance with the ejusdem generis principle, the Tribunal held that the dispute settlement arrangements in today’s international investment area were inextricably linked to the protection of foreign investors[77], and international investment arbitration and other dispute resolution methods played a fundamental role in maintaining the rights conferred by the relevant investment treaties and were closely linked to the substantive aspects of the investment treaties accorded.[78]

So the Tribunal determined that “if a third-party treaty contains provisions for the settlement of disputes that are more favorable to the protection of the investor’s rights and interests than those in the basic treaty, such provisions may be extended to the beneficiary of the most favored nation clause as they are full compatible with the edjusdem generis principle”.[79]

Considering that non-controlled application of the MFN clause to dispute settlement procedures might result in the “disruptive treaty-shopping that would play havoc with the policy objectives of underlying specific treaty provisions”,[80] the Tribunal noted that there should be some important limitations arising from the public policy considerations.

In this context, the Tribunal provided some examples of “public policy considerations” that could not be by-passed by invoking MFN clause, namely: (1) the rule of exhaustion of local remedies; (2) the fork in the road clause; (3) the arrangement of a particular forum such as the ICSID; (4) the use of a highly institutionalized system of arbitration that incorporates precise rules of procedure like NAFTA.[81]

On the basis of the above considerations, the Tribunal concluded that the MFN clause in the Argentine-Spain BIT contained the dispute settlement procedure, and there was no “fundamental question of public policy considered in the context of the treaty”, so Maffezini had the right to invoke more favorable dispute settlement provision in the third party treaty based on the MFN clause in the Argentine-Spain BIT.[82]

3.1.2 Siemens A. G. v. Argentina[83]

Similar to the Maffezini case, the Siemens case also dealt with a bilateral investment agreement (Argentine-German BIT), containing the provisions of the eighteen-months waiting period before investor-State arbitration. The Claimant German investor Siemens hoped to invoke the dispute settlement provisions of the third party treaty (Argentine-Chilean BIT) based on the MFN clause of the basic treaty to avoid the preconditions for domestic litigation, and directly bring the case before ICSID. Finally, the Tribunal supported the Siemens’s claim.

The Argentine Government argued that wordings of the MFN clause in the Argentine-German BIT were different from the Argentine-Spain BIT of Maffezini case, the former provided for a narrower scope of MFN treatment, so the award of the Maffezini case was not applicable to this case. The Tribunal considered that although MFN clause in the Argentine-Spain treaty was applied to “all matters subject to this Agreement”, and the MFN clause in the Argentine-German only can be applied to “activities related to investments”,[84] however, “the term ‘treatment’ and the phrase “activities related to the investments” were sufficiently wide to include settlement of disputes”.[85]

To reach this conclusion, the Tribunal cited the article 31(1) of the Vienna Convention. This article provided that a treaty should be “interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose”. Therefore, the Tribunal should be guided by the purpose of the Treaty as expressed in its title and preamble. According to the preamble, the Tribunal concluded that the intention of parties was “to create favorable conditions for investments and to stimulate private initiative”.[86]

The Tribunal examined the MFN clause of the Argentine-German BIT, and found that the wording of the “treatment” and activities” were too generally broad and the neither of them had been restricted nor defined by the parties, which means that the parties did not make any special agreement on the scope of application of the MFN clauses. Even though there were some exceptions of MFN treatment provided in the treaty, it did not contain dispute resolution.[87]

Then the Tribunal found that “the Treaty itself, together with so many other treaties of investment protection, has 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 an MFN clause”.[88] Thus, the MFN clause in the Argentine-German BIT could be applied to more effective dispute resolution provisions in the third party treaty, which was consistent with the purpose of the Treaty to protect investment, nor does it violate the text of the clause itself.

There is a far-reaching aspect of the Siemens decision that we should notice. During the procedure, Argentina argued that if the Tribunal allowed that Claimant to invoke the more beneficial part of the dispute settlement provisions of the Argentine-Chile BIT through the MFN clause, the Claimant should also bear the less favorable conditions of the provisions contained in the Argentine-Chile BIT, such as “fork in the road”. If not, German investors ultimately enjoyed more preferential treatment than Chile investors, which was inconsistent with the purpose of MFN clause to ensure equal competition among foreign investors from different countries.[89]

However, the Tribunal rejected Argentina’s argument because it held that MFN clause “related only to more favorable treatment…Even if the MFN clause was of a general nature, its application would be related only to the benefits that the treaty of reference might grant and to the extent that benefits were perceived to be such”,[90] which means the Tribunal thus allowed the investor to “cherry-pick” more favorable provisions from third party BITs without being bound to any less favorable conditions contained in those treaties.[91]

3.1.3 Gas Natural v. Argentina, Suez and Vivendi v. Argentina, Suez and Interaguas v. Argentina

Gas Natural case, Vivendi case, and Interaguas case totally confirmed the decisions of ICSID in Maffezini case and Siemens case, namely the Tribunal concluded that the broad and ambiguous wording of MFN clause could be extended to the dispute settlement. However, there were new developments of decisions in these three cases that we should pay attention.

In Gas Natural case[92], the dispute was the same as Maffezini case that a Spanish investor in Argentina invoking the MFN clause of the Spain-Argentina BIT and a third-party BIT, so it was not surprised that the decision was the same. The noteworthy of this case was that the Tribunal held that the international investor-State arbitration provisions in BITs constituted a “substantive incentive and protection for foreign investors”.[93]

The Tribunal thought that independent investor-State arbitration provisions were the most important part of ICSID Convention and BITs. Because such provisions were “universally regarded–by opponents as well as by proponents–as essential to a regime of protection of foreign direct investment”.[94]

So the Tribunal thought that the problem for interpreting the application of MFN to dispute settlement should be resolved in favor of investor protection and established a presumption for the interpretation of MFN clause in BITs that the MFN clause was applicable to dispute settlement unless there was a expressed different resolution between parties to the investment treaties.[95]

Both of Vivendi case[96] and Interaguas case[97] confirmed that MFN treatment also could be applied to avoid less favorable pre-arbitration requirements. The noteworthy of these cases is that the Tribunal made conclusion based on an ordinary process of treaty interpretation on MFN clause’s own terminologies in each case.

The Tribunal emphasized that it was guided by article 31 of the Vienna Convention on the Law of Treaties that treaty languages should be interpreted in accordance with its ordinary meaning and the object and purpose of the treaty.[98] The Tribunal found that “no rule and no reason for interpreting the MFN treatment clause any differently from any other clause in the two BITs”, so the Tribunal could not interpret an MFN clause nor strictly or narrowly.[99]

Then the Tribunal emphasized that the treatment of MFN clause included not only substantive investment protection, but also access to investor-State arbitration, which was necessary for equal treatment of investors from different countries.[100]

In addition, the Wintershall case[101], Camuzzi case[102], Hochtief case[103], Impregilo case[104] and Teinver case[105] also completely followed the decision of the Maffezini case.

3.1.4 The comments and criticisms over cases

As we can see that the Tribunals of cases above interpreted “silence” within MFN clauses of the basic treaties as an opportunity to extend MFN protection to procedural rights.[106] Such extended interpretation of the MFN clause has aroused criticism in international law scholarship.

Some scholars believe that the decision of Maffezini case has made it impossible to distinguish between substantive rights and rights relief under the investment agreement, so that the MFN clause cannot be applied only to substantial part without procedural part and in fact, from investor’s point of view, only the existences of these dispute resolution procedures within the international investment arbitration that investor’s substantive rights can exist. So on the basis of this view, the more favorable dispute settlement provisions are equal to more favorable substantive rights.[107]

However, some scholars raise concerns that the Tribunal interpreted MFN clause only from the investor’s perspective and ignored the consent of state parties, which is the fundamental principle underpinning the settlement of the dispute in international law.[108] The purpose of the investment treaties is nothing more than the protection and promotion of investment, and too much emphasis on the interpretation based on the purpose of treaty is partial to investor and is detrimental to the interest of host country.[109]

Some scholars criticize the Tribunal in Siemens case for the lack of rigor in the application of MFN clause that had a significantly smaller scope into the procedural matters, and the Tribunal seems to hold the view that, in understanding the MFN clause, when state parties do not specify the scope of application of the MFN clause, it is acceptable to presume that MFN treatment is applicable to procedural matters. This view is not only contrary to the traditional view but also has no legitimate reasons to support.[110]

More scholars are questioning the limits of application of MFN clause. In the case of Maffezini and Siemens, the Tribunal established the exceptions of MFN clause for limiting applying MFN clause to the procedural matters. While their common rationale is based on public policy considerations, whether some specific exceptions listed in the decisions truly embody public policy and how to decide which exception should be clarified into public policy? In the face of many questions, the Tribunal’s conclusions are too arbitrary.[111] The abstraction of public policy makes it difficult to decide the exceptions of application of the MFN clause to procedural matters, and both Maffezini case and Siemens case lacked clarity in defining the scope of the exceptions to its ruling.[112]

In addition, the Tribunal of Siemens case supported investor only invoking the favorable part of the dispute resolution provision in a third party treaty, and some scholars made sharp criticisms that the dispute resolution mechanism should be a package that should be invoked as a whole and cannot be dismembered.[113] It would be detrimental to maintain stability and foreseeability for the legal environment if it would allow the beneficiary country to invoke only favorable part of dispute settlement provision within a third party treaty based on the MFN clause to create a dispute settlement mechanism that granting country had not agreed at all[114]. Besides, it may result in disruptive treaty shopping and harm not only the interest of host country but also the equal protection of foreign investors[115].

3.2 Cases disapprove the extended application of MFN and comments

3.2.1 Salini v. Jordan[116]

Salini case was the first case to reject the application of MFN clauses to dispute settlement mechanisms. In Salini case, two Italian companies Salini and Italstrade signed the construction contract with Jordan Valley Authority for constructing a dam in Karameh, Jordan. Two Italian claimants finished construction but Jordan rejected to pay the final payment to claimants. Then Salini and Italstrade brought the contractual claims directly before ICSID in August 2002.[117]

Salini and Italstrade’s application for ICSID arbitration was based on the Jordan-Italy BIT. Article 9 of Jordan-Italy BIT provided for ICSID arbitration of disputes concerning treaty violations, but article 9 (2) also provided that “[i]n case the investor and an entity of the Contracting Parties have stipulated an investment Agreement, the procedure is foreseen in such investment agreement shall apply”.[118] The construction contract required disputes to be settled in Jordanian courts unless the parties agreed to refer the dispute arbitration.[119] So two Italian claimants should bring the contractual claims before Jordanian court in accordance with the article 9(2) of Jordan-Italy BIT.

However, in order to avoid the dispute settlement provision within the contract, Salini and Italstrade argued that according to the decision concluded by Maffezini case, they were entitled to invoke more favorable dispute settlement provisions in the Jordan-USA BIT and Jordan-United Kingdom BIT based on the MFN clause within the Jordan-Italy BIT because USA and UK investors were “entitled to refer to ICSID any dispute arising from their construction contracts”.[120] So the Claimants contended that the MFN clause entitled them to bring the contractual claims directly to ICSID.

Jordan argued that the MFN clause in the Jordan-Italy BIT was not applicable to procedural matters and such clause cannot override the clear intention of the parties to give priority to the dispute settlement mechanism in the investment contract.[121] Besides, the decision of Maffezini case was not binding and the Tribunal should not follow.[122]

The Tribunal rejected the Claimants’ argument and concluded that it lacked jurisdiction over contractual disputes.[123] Before making the decision, the Tribunal reviewed the Maffezini case and concerned about the impact of the Maffezini decision that “the precautions (public policy considerations) taken by the authors of the award may in practice prove difficult to apply”, and might bring “more uncertainties to the risk of ‘treaty shopping’”.[124] Then the Tribunal observed and analyzed the various MFN clauses in BITs

Finally, the Tribunal highlighted the following three points as its justification:

1. The MFN clause of the Jordan-Italy[125] in this case was clearly narrower than the MFN clause in Maffezini case; therefore the Tribunal cannot apply the interpretation of the MFN clause in Maffezini case;[126]
2. The MFN clause of the Jordan-Italy BIT did not include any provision “extending its scope of application to dispute settlement” and it did not envisage “all rights or all matters covered by the agreement”. Besides, there was no evidence proved that the contracting parties of the Jordan-Italy BIT intended to apply the MFN clauses to dispute settlement. On the contrary, article 9 (2) of the Jordan-Italy clearly expressed the parties’ intention was to “exclude from ICSID jurisdiction contractual disputes between investors and an entity of a State Party”, thereby enabling the dispute resolution provided in the investment contract to be applied.[127]
3. The claimants Salini and Italstrade could not prove that application of the MFN clause to dispute settlement matters was not serious public policy of Jordan.[128]

Some scholars thought that Salini case was inconsistent with the Maffezini case because the Tribunal interpreted dispute settlement provisions based on the intention of state parties rather than from the perspective of the investor.[129] Other scholars thought that the decision of Salini case was reasonable not because the Tribunal’s presumption that MFN clause could not be extended to procedural matters, but because of “the fundamental rule of international law that the jurisdiction of an international tribunal is based on consent”.[130]

3.2.2 Plama v. Bulgaria[131]

The Salini tribunal just emphasized the differences between the Salini case and Maffezini case in order to avoid the application of the decision of Maffizini case but did not directly conclude whether the decision of Maffezini case was justified or not. However, a few months later, the Tribunal in Plama case not only limited the scope of application of the MFN clause but also made a sweeping critique to the decision of Maffezini case.

In 1998, a Cypriot investor purchased a Bulgarian company Nova Plama, which owned an oil refinery in Bulgaria. After that, Plama claimed that Bulgaria deliberately disturbed the operation of its oil refinery, “refused or unreasonably delayed the adoption of adequate corrective measures”, which caused the material damage to its investment. So in December 2002, Plama referred the dispute to ICSID arbitration.[132]

Plama asserted ICSID jurisdiction on the basis of Bulgaria-Cyprus BIT. However, article 4 of Bulgaria-Cyprus BIT explicitly provided that contracting parties only intended to limit dispute to an international Ad hoc Arbitration Court concerning “the amount of the compensation” on expropriation.[133] To avoid such limitation, Plama argued that the MFN clause of Bulgaria-Cyprus BIT entitled it to invoke the more favorable dispute resolution provisions in the third parties treaties concluded by Bulgaria.[134]

Plama contended that MFN clause in the Bulgaria-Cyprus BIT should apply to “all respects of ‘treatment’”, and such treatment not only involved the substantive rights of other BITs, but also the dispute settlement provisions. So Plama required applying the dispute settlement provisions of Bulgaria-Finland BIT, which clearly provided the dispute resolution under ICSID.[135]

Ultimately, the Tribunal concluded that the MFN clause of Bulgaria-Cyprus BIT could not be interpreted as “providing consent to submit a dispute to ICSID arbitration”.[136]

At first, the Tribunal analyzed and criticized the decision of Maffezini case. The Tribunal pointed out that the statement concluded by the Maffezini tribunal that “dispute settlement arrangements are inextricably related to the protection of foreign investors” was legally insufficient to conclude that contracting parties of the BIT intended to extend the MFN clause to dispute settlement matters.[137]

Through analyzing the treaty negotiating process between Bulgaria and Cyprus, the Tribunal noticed that after Bulgaria’s communist regime changed, the contracting parties tried to negotiate the revision of their BIT especially the dispute settlement provisions. However, the negotiation failed, which indicated that the contracting parties intended to limit the narrow dispute settlement provisions within the BIT and had no intention to extend such dispute settlement mechanism through MFN clause.[138]

Then the Tribunal mentioned the critical reason for such decision. The Tribunal concluded that even though the MFN clauses were applied frequently and arbitration was accepted as an effective way to resolve investor-state investment disputes, this phenomenon could not change the “basic prerequisite for arbitration: an agreement of the parties to arbitrate”.[139] And it was a well-established principle that such an agreement should be “clear and unambiguous”.[140] So by incorporating dispute settlement provision in third party treaty based on the MFN clause to refer to ICSID arbitration might bring doubt to the parties’ clear and unambiguous intention.[141]

At last, the Tribunal noticed that in some treaties, like NAFTA and FTAA, the dispute settlement provisions in other BITs were explicitly excluded from the MFN clause in basic treaties. However, the Tribunal emphasized that when there was no specific exclusion in the MFN clause, “one cannot reason a contrario that the dispute resolution provisions must be deemed to be incorporated”. On the contrary, the intention to incorporate dispute settlement provisions must be “clearly and unambiguously” expressed in the MFN clause.[142] However, the wording of the MFN clause in Bulgaria-Cyprus could not satisfy such standard.

3.2.3 Telenor v. Hungary[143]

In Telenor case, the Norway-Hungary BIT in question also limited ICSID jurisdiction to the disputes concerning the expropriation.[144] The Tribunal concluded that the MFN clause in the Norway-Hungary BIT could not be applied to extend ICSID jurisdiction to dispute matters that the contracting parties had not agreed at all in the BIT because such extension would subvert the common intention of the parties.[145]

To reach such conclusion, the Tribunal held that it “wholeheartedly endorses the analysis and statement of principle” concluded by the Plama Tribunal and listed four reasons for limiting applying MFN clause as a basis for jurisdiction for lack of clear language to show the parties’ intention.[146]

At first, according to the treaty interpretation method provided in article 31 of the 1969 Vienna Convention on Treaties, unless there was clearly contrary language or context, the ordinary meaning of MFN treatment was limited to investor’s substantive rights. And there was no reason for construing MFN clause as importing procedural rights.[147]

Secondly, as the Plama Tribunal pointed out that, the wide interpretation of MFN clause might allowed foreign investors to “pick” among the various BITs concluded by host state and field its dispute at ICSID by choosing the dispute settlement provision of other BITs wide enough to cover a dispute that beyond the provision of the basic treaty, which would bring an unpredictable risk to the host state.[148]

Thirdly, the wide interpretation of MFN clause would lead to “uncertainty” and “instability” to dispute settlement provisions in the basic treaty. Because at the moment such provisions were effective and applicable, at the next moment, it might be substituted by the dispute resolution provisions of the third party treaty.[149]

Fourthly, the Tribunal focused on the importance of interpreting the MFN clause on the basis of intention of contracting parties – not from the perspective of the investor. Then the Tribunal explained that even though the independent international arbitration was important to investors, the Tribunal’s task was to interpret the BIT and “apply ordinary canons of interpretation”, not to substitute dispute resolution mechanism explicitly provided by contracting parties by considering the “general policy considerations” like investor protection.[150] Finally, the Tribunal emphasized that MFN clause “should not operate to displace the clear choice of a narrow dispute resolution provision by state parties to a BIT”.[151]

3.2.4 The comments and criticisms over cases

As noted above, although the decision of Salini case is inconsistent with the Maffezini case, the Salini case did not reject or criticize the Maffezini Tribunal’s argument. On the contrary, to some degree, the Salini Tribunal held that the decision of Maffezini case “was justifiable because of its broad wording of the MFN clause”.[152] However, some scholars still think that the Salini case symbolized that ICSID has taken a decisive step in refusing to apply the expansive interpretation that adopted in Maffezini case, and “back to the application of principles of international law to the facts of each individual case”.[153]

The writer thinks Plama case is a typical case of restrictive interpretation of the MFN clause. Some scholars think that strictly speaking, the Plama Tribunal “could have reached the same result within the framework of Maffezini”,[154] because it could invoke the public policy exceptions identified in the Maffezini case to limit the expansion of the MFN clause. However, the Plama Tribunal deliberately started with a contrary hypothesis. Both Maffezini and Siemens Tribunals interpreted silence or ambiguity in the MFN clause as an opportunity to extend MFN treatment to dispute settlement, but the Plama Tribunal held that when MFN clause was unclear on its applicable scope, no one could presume that the term contained the dispute resolution matters.

The Plama tribunal, after examining the exceptions of the Maffezini case, pointed out that it “was puzzled as to what the origin of these ‘public policy considerations’ is”.[155] Besides, these public policy considerations themselves “take away much of the breadth of the preceding observations made by the tribunal in Maffezini”.[156]

Then the Plama tribunal introduced a new approach for interpreting MFN clauses in opposition to the decision in Maffezini case.[157] The Tribunal concluded that “the principle with exceptions as stated by the tribunal in the Maffezini case should instead be a different principle with one, single exception: an MFN provision in a basic treaty does not incorporate by reference dispute settlement provisions in whole or in part set forth in another treaty, unless the MFN provision in the basis treaty leaves no doubt that the Contracting Parties intended to incorporate them”[158]. However, some scholars wonder that in addition to quoting the UK BITs, which explicitly include the dispute settlement matters in the context of the MFN clauses, there is no guiding rule concluded by the Plama Tribunal to determine the circumstances under which the intention of contracting parties can be regarded as clear and unambiguous, leaving a question to be answered.[159]

Even worse, some scholars worry that the Salini case and Plama case did not contradict the Maffezini case, and in fact, they were dealing with the different problems. In the case of Maffezini, the parties to the dispute had chosen ICSID arbitration, but there was a dispute concerning whether or not a domestic suit must be passed before the submission of ICSID arbitration.[160] In cases of Salini and Plama, both parties had agreed in advance any other dispute resolution, and the claimant attempted to replace the dispute settlement mechanisms of the basic treaty of investment contract with ICSID arbitration by invoking the MFN clause, which could not be supported even in the Maffezini case.[161] Besides, the MFN clauses in these two cases were clearly narrower than the MFN clause in the Maffezini case, and the restrictive interpretation of these two cases did not address such thorny that whether the broad MFN clause can be applied to dispute settlement matters.[162]

CHAPTER IV. Analysis on the related issues concerning the application of MFN clause to the international investment arbitration

4.1 Arguments on the main issues concerning the application of MFN clause to the international investment arbitration procedure

The application of the MFN clause to international investment arbitration procedure extends the scope of the MFN treatment to the procedural matters and raises the debate as to whether the MFN clause can be applied to the dispute settlement mechanism. As we can see above, when discussing this issue, the arguments related to this issue are mainly focused on the following aspects.

4.1.1 Rules for the interpretation of the MFN clause

“The MFN clause does not operate automatically to ‘incorporate’ provisions of a third treaty so that all that remains for a tribunal to do is to interpret the amended text of the basic treaty”.[163] The reasons for supporting or opposing the expansion of the MFN clause in the above cases contain the explanation of treaty matters that are not specified or are not defined within the treaty.

As one scholar said, “every law necessarily belongs to a legal system” and the international investment law essentially included within the framework of the international legal system.[164] So the BITs just like any other treaties of general international law, “are subject to the rules of treaty interpretation along with the application of Article 31 and 32 of the Vienna Convention on the Law of Treaties 1969”.[165] Judicial decisions and State practices have recognized the customary international law nature of treaty interpretation rules provided in these two articles, which provide a balanced interpretative method, namely equitable consideration and recognition of the reasonable interests of investor and host country within the invest treaty.[166]

As we can see that ICJ and ICSID, in the course of the cases listed above, unanimously followed the treaty interpretative method provided in article 31(1) of the Vienna Convention on the Law of Treaties, namely “[a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose”.[167] And ILC explains that this rule “emphasizes the primacy of the text as the basis for the interpretation of a treaty, while at the same time giving a certain place to extrinsic evidence of the intentions of the parties and to the objects and purposes of the treaty as means of interpretation”.[168]

While it is also to decide the applicable scope of the MFN treatment by means of an interpretation of the MFN clause, in Berschader case, the MFN clause in the basic treaty also involves “all matters covered by the Treaty”, which is similar to Maffezini case, however, the Tribunal reaches a diametrically contrary decision.[169]

Since there is a unified method of interpretation, why in similar cases the interpretation of the scope of the MFN clauses has different results? In fact, article 31 of the Vienna Convention on the Law of Treaties contains four principles of treaty interpretation, namely, the principle of good faith, the principle of textual analysis, the principle of contextual interpretation and the principle of effect analysis.[170]

For relationships among these four interpretative principles, the general view is that there is no applicable order among them;[171] on the contrary, it is just the logical enumeration of the interpretative method in a natural way.[172] And they should be applied simultaneously and harmoniously based on the specific circumstance of the each case, because “the process of interpretation is a unity and all elements of interpretation shall be taken into account as a single interpretative task”.[173] As a result, the four interpretative principles are widely accepted, but they will inevitably lead to conflicting circumstances when they are applied to a specific case.

The most controversial method of interpretation is the effect analysis, which means that the MFN clause should be interpreted in light of its treaty’s object and purpose.

Some scholars think, “since most of the substantive provisions of the BIT concern that promotion and protection of foreign investment, it could be argued that any ambiguity should be interpreted in a way that would favour the rights granted to foreign investors”.[174] There is no doubt that the purpose of the investment treaty is to protect and promote investments. However, too much emphasis on such purpose could “lead tribunals to resolve all doubtful questions in favour of investors on the theory that better protection for investors always be more in keeping with the ‘purpose’ of the treaty”,[175] which will be against the interests of host countries.

The dispute settlement mechanism should be regarded as a neutral mechanism to resolve the dispute between investors and host countries, not to be used to be in favour of any party. So, it is not appropriate to treat the dispute settlement provision as an instrument merely to protect the interests of investors.[176]

In summary, the interaction of the different interpretative principles gives the tribunal a certain degree of discretion, which further leads to the debate on the interpretation of the application of MFN clause. However, some scholars point out that the purpose of interpretation is to “discover the shared expectations that the parties to the relevant communication succeeded in creating in each other”.[177]

No matter what kind of interpretative method that the tribunal will choose, it cannot neglect the common intentions of both parties and substitute with its own assumptions; otherwise, it is the distortion on the interpretation. So, an interpretation should consider BITs as a whole, the nature and purpose of the MFN clause and the presumable intent of the parties.[178]

4.1.2 Ejusdem Genneris principle

The ejusdem generis principle is one of the most important interpretative principles to decide the scope of the MFN clause and “recognized and affirmed by the jurisprudence of international tribunals and national courts and by diplomatic practice”.[179] By nature of this principle, an MFN clause “can only attract matters belonging to the same category of the subject as that to which the clause itself relates”.[180]

ILC adopted this principle and provided it in the article 9 and article 10 of Draft Articles on Most-Favoured-Nation Clauses[181] and thoroughly analyzed the legal basis of this principle in the commentaries of these two articles. The Commission holds the view that the process of application of the MFN clause is in fact through the provisions of the basic treaty to invoke and attract the provisions of third party treaties, and if there is no “substantive identity” between the terms of the two treaties, then the result will tend to impose the obligations of the granting state that it cannot contemplate,[182] which is unfair to the granting state and also violates the spirit of equality by nature of the MFN treatment.

Through analyzing the article 9 and article 10 of Draft Articles on Most-Favoured-Nation Clauses, we can find that ILC limits the applicability of the MFN clause to two grounds, namely, its “subject matter (ratione materiae)” and its “personal applicability (ratione personae)”.[183] For subject matter, it means that the rights beneficiary state claims must be within the specified or implied scope of the MFN clause in the basic treaty. Besides, the more favorable treatment that the beneficiary state wants to invoke in the third party treaty also should be contained within the scope of the MFN clause in the basic treaty.[184]

For personal applicability, there are two conditions should be satisfied as well. At first, the persons or things related to the MFN treatment must be included in the specified or implied scope of MFN clause in the basic treaty. Second, the persons or things as noted above must belong to the same category with the persons or things that have a determined relationship with the third state and enjoy more favorable treatment granted by granting state, besides, both of them should have the same relationships with their respective states.[185]

“Although the meaning of the ejusdem generis principle is clear, its application is not always simple”,[186] both ICJ cases and ICSID cases above are dealing with the same question, namely whether the expansion of the MFN clause to the dispute settlement provision within the third party treaty is in accordance with the ejusdem generis principle? And the decisions are inconsistent. There is a controversial argument whether procedural matters like dispute resolution belong to the implied matters of the MFN clause when the scope of the clause is unspecified and still no conclusion.

4.1.3 The standard of “most-favored” in the international investment arbitration

The emergence of the issue on extended application of the MFN clause is due to the fact that the investor argues that investment arbitration procedure in third party treaty is more favorable than the dispute settlement mechanism concluded in the basic treaty, therefore, the investor advocates adopting the more favorable international investment arbitration mechanism to protect its investment interests. But how to determine how favored is the most favored is also the controversial issue that the tribunal confronts.

Asian Agricultural Products (AAPL) case[187] is the case that comes up with the criteria for determining the “favorable”. On January 28, 1987, the security forces of Sri Lanka destroyed a farm within its territory, owned by a British company AAPL. Sri Lanka argued that the destruction of the farm was the incidental damage of its military operation, and there was a provision concerning the exemptions from the war clause and civil disturbance, so Sri Lanka government did not bear the responsibility for the loss that AAPL suffered. Then AAPL applied the MFN clause contained in the Sri Lanka/U.K. BIT to invoke the treaty between Sri Lanka and Switzerland, which did not provide for a war clause or civil disturbance exemption from the protection and security standard.[188]

The most important meaning of AAPL case is that it raised the question of the criteria for “more favorable” which still did not have the answer, namely when the claimant invoke the MFN clause, whether it should prove the provisions within the third party treaty are more favorable objectively or only from the claimant’s perspective.

The Tribunal rejected AAPL’s argument on the application of the MFN clause for it was not proven that the Sri Lanka/Switzerland Treaty contained rules more favorable than those provided for under the Sri Lanka/U.K.[189] However, the Tribunal ultimately supported the claimant’s argument because the Tribunal concluded that Sri Lanka failed to take important precautionary measures, which have minimized the risks of killings and destruction, to get all suspected persons out of the farm premises peacefully before launching the operation, so Sri Lanka violated its due diligence obligation.[190]

Besides, the Tribunal emphasized that the claimant was under the obligation to prove that the treaty it invoked was, in fact, more favorable than the similar provision in the treaty entered into between the host country and its own country. Moreover, the Tribunal emphasized the more favorable treatment must be considered under the ordinary objective circumstances. To define the more favorable treatment under the ordinary objective circumstances and determine which kind of BIT is more favorable from the perspective of the third person is the definition of the more favorable treatment of the Tribunal.[191]

AAPL invokes the dispute settlement clause in the third party treaty through the MFN clause within the basic treaty on the basis of the view that international investment arbitration is more favorable than suing the defendant in the domestic court, because some scholars think that the treaty includes the wide range of options for arbitration is more favorable than the treaty excludes the options.[192]

In the above ICSID cases, the application of the MFN clause is divided into two categories. On is through the MFN clause to bypass the prerequisite of investment arbitration (an 18 month waiting period) and submit the dispute to ICSID directly, like Maffezini case and Siemens case. The other one is through the application of the MFN clause to import into the basic treaty an ICSID jurisdiction that is completely absent from the treaty’s text, like Salini case and Plama case.[193]

Specifically, the comparison for the “most favored” of dispute settlement procedure also includes two categories in accordance with the application of the MFN clause. The on is the comparison between the investment dispute settlement mechanism (local remedy of the host country) provided in the basic treaty and international investment arbitration. The other one is the comparison between the investment arbitration procedures provided in the basic treaty and the international investment arbitration procedures in the third party treaty invoked by the MFN clause.

For the first category of comparison of the “most favored”, the investors and their states of nationality believed that their interests and rights are better protected by international investment arbitration than by submission of disputes to domestic courts since they felt that the investment arbitration mechanism is more neutral and objective because of the third party involved. However, host states preferred to bring disputes before the domestic court to protect its sovereignty.[194] In cases like Maffezini, the Tribunal simply concluded that access to the Spanish courts in the 18 months period was less favorable treatment than direct arbitral proceedings without explaining the specific reasons. This view reflects “an epistemological belief in the superiority of investment arbitration”[195].

Some scholars worry that the Tribunal in Maffezini case lacked the meaningful analysis on whether arbitral proceedings is, in fact, more favorable than the proceedings of the domestic Spanish courts, and such neglect “is emblematic of a troubling tendency in many arbitral awards to undertake lengthy analyses of the facts without a meaningful and contextual dialogue of the legal issues underlying these broad standards”.[196]

For the second category of the comparison between the investment arbitration procedures provided in the basic treaty and the international investment arbitration in the third party treaty invoked by the MFN clause, if the BIT between investor’s country and host country provides that the investment dispute should be referred to UNCITRAL, while the third party treaty establishes the jurisdiction of ICSID, the dispute has not already begun, how can the investor know in advance and for sure that by resorting first to domestic courts for a certain period of time its interests will be damaged? It is difficult to decide which procedure is more favorable, which is based only on theory.[197] The fundamental reason is that there is no comparability among these institutions.[198]

4.1.4 The particularity of the international investment arbitration provision

The one holding the objection to the extended application of the MFN clause think that the particularity of the international investment arbitration provision as a dispute settlement provision itself also rejects the application of the MFN clause. Among the international juridical practice, dispute resolution mechanism is specifically negotiated by the contracting parties and cannot be incorporated by the MFN clause.[199]

ICSID is established in 1956 and is dedicated to resolving the dispute between host country and investor. In the field of international investment, submission of international investment dispute to ICSID arbitration has become the first choice of foreign investor. On the basis of article 25 (1) of ICSID Convention, the jurisdiction of ICSID “shall extend to any legal dispute arising directly out of an investment, between a Contracting State and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre”.[200]

From such statement, we can see that when a dispute is submitted to ICSID, there must be a written agreement between the parties that they agree to submit the specific dispute to the Centre arbitration, and the existence of such agreement is the cornerstone of the Center’s jurisdiction over the particular dispute.[201]

However, ICSID’s understanding of consent of the parties has changed in 1997 Lanco International Inc. case[202]. The Tribunal holds that “consent for the purpose of Article 25(1) is understood to be given by the State party to the dispute in the bilateral investment treaty from the moment the State extends a generic invitation to all the investors who are nationals of the other Contracting State to submit the settlement of their possible disputes to ICSID jurisdiction”[203]. Since then, ICSID has agreed that the consent of the parties may be given in a clause included in BITs, providing for the submission to the Centre of future disputes with foreign investors arising out of BITs. However, we still can see that even though the request for the format of the consent of the parties is wider, it is not required that the agreement between the parties to submit the particular dispute to the Centre arbitration must be in writing, but the consent of the parties is still the material element of the jurisdiction of the Centre.

So in one investment arbitration case, the right of the arbitrator to the interpretation of the terms of the investment treaty and dealing with the dispute comes from the authorization of the disputing parties, and such authorization derives from the consent of both parties to the dispute, so the arbitrator can only arbitrate the case within the scope of the authorization.[204]

Because of such prerequisite of ICSID’s jurisdiction, the application of the MFN clause to the international investment arbitration should answer one question, namely when investors try to extend the consent of the host country in the third party treaty on the investment arbitration to the basic treaty through the MFN clause, whether the host country in the basic treaty agree with such arbitration procedure.

The writer thinks there is no uniform conclusion for this question, and it should be addressed based on the specific circumstances. If the host country agrees to the jurisdiction of ICSID for the investment disputes arising out of the basic treaty, and there is also the host country’s consent of investment arbitration in the third party treaty for the similar disputes, then investors can extend host country’s consent in third party treaty to the basic treaty through the MFN clause, like Maffezini case and Siemens case. In the two cases where the host country had agreed with the ICSID’s jurisdiction and only set up the domestic judicial prerequisite of the arbitration, so the tribunals concluded that the parties could submit the disputes to ICSID directly and immediately without resorting to domestic court by invoking the MFN clause in the basic treaty.[205]

If the host country only accepts the investment arbitration in the third party treaty and does not give such consent in the basic treaty, in light of the particularity of the investment dispute settlement provisions, such consent cannot be extended from the third party treaty to the basic treaty by the MFN clause, creating the obligations to the host country that it cannot foresee when it was signing the basic treaty. Like Salini case and Plama case, in these two cases, the parties negotiated specific dispute settlement provisions, which did not contain the jurisdiction of ICSID, in the basic treaty or their construction contract, so the tribunals concluded that the claimants could not “replace a procedure specifically negotiated by parties with an entirely different mechanism”.[206]

4.2 Analysis on the principal influential factors of the emergence of the relevant issues on the application of MFN clause

4.2.1 The ambiguity of the MFN clause in international investment treaties

The application of the MFN clause raises the impassioned debate on a series of related issues and the most fundamental cause of which is the wording of the MFN clause itself.

While the MFN clause has become “a core element” in today’s international investment legislation, granting MFN treatment is not a mandatory obligation of the State based on the customary international law.[207] In the case of the nature of the terms of the MFN clause, the majority of the academic community argues that the MFN clause is not the rule of customary international law because it lacks legal conviction.[208] The prevailing view is that the MFN treatment obligation is derived from the creation of the treaty and that the State has the MFN treatment obligation only in the case of the treaty provision. If BITs do not contain the MFN clauses, the different treatments of investors of different nationalities are reasonable.[209] As a result, the MFN treatment in the field of international investment is an obligation negotiated especially by Contracting Parties in BITs.

Because “the MFN policy adopted by any nation will depend on the characteristic of its economy and the type of trade policy deemed necessary to protect and foster the development of that economy”,[210] the wordings of the MFN clauses may be different among BITs. It is such different wordings of the MFN clauses in BITs that lead to the argument on the interpretation and application of the MFN treatment. Some scholars have roughly divided the MFN clauses in the current BITs into the following four categories[211]:

1.    The MFN clause explicitly provides that its scope can be extended to dispute settlement mechanism, like U.K. Model BIT; [212]
2.    The MFN clause itself does not specifically indicate that its scope incudes a dispute settlement mechanism, but uses broad terminologies such as “all matters”, “all rights” or “treatment” to describe its object of application, like the MFN clauses in Maffezini case, Plama case, Salini case and Siemens case and so on;
3.    The MFN clause itself does not specifically indicate that its scope incudes a dispute settlement mechanism, but lists and limits its applicable object and scope, like NAFTA; [213] and
4.    The MFN clause itself expressly excludes the application of dispute settlement provisions, like FTAA.[214]

There is no dispute as to the applicable scope of the MFN clauses of the first and fourth categories, because the wording of the treaty is clear, which means expressed intention of the parties is clear and should be considered effective.[215] However, as to the second and third categories, the expression of the MFN clause is unclear. So in the course of the specific case, the arbitral tribunal may find a corresponding reason to expand or narrow its scope of application, which will tend to be the focus of controversy.

The most difficult and controversial dispute arises from the MFN clause of the second category. Even The MFN treatment is the agreed obligation, the contracting parties can negotiate clearly whether the MFN treatment applies to procedural matters to indicate expressly their intention, and such method can avoid the uncertainty of the interpretation of the MFN clause. However, the reality is that the vast majority of BITs do not provide expressly whether MFN clause covers dispute settlement provisions, leading to the frequent occurrence of such disputes.[216]

Besides, even using the same terminologies in different MFN clauses, the interpretations of such clauses are also inconsistent, such as the meaning of the “treatment”. Because it lacks the clear definition of the term “treatment” in conventional practice, the different tribunals give their own definition of such terminology. The Suez Tribunal thought that the meaning of treatment “includes the rights and privileges granted and the obligations and burdens imposed by a Contracting State on investments made by investors covered by the treaty”,[217] and the tribunal concluded that the term “treatment” did not exclude the procedural matters from the scope of the MFN clause based on such definition.

However, the Plama Tribunal did not adopt such definition, it held that “[i]t is not clear whether the ordinary meaning of the term “treatment” in the MFN provision of the BIT includes or excludes dispute settlement provisions contained in other BITs to which Bulgaria is a Contracting Party”.[218]

So, when there is a broad wording of the MFN clause that neither explicitly exclude nor include the dispute settlement arrangements, may a foreign investor incorporate dispute settlement mechanism within the third party treaty based on the MFN clause? One commentator answered that “[i]n those situations, the intention of the contracting parties can reasonably be interpreted to include the whole range of the rights accorded to the investors of a third country, including the right to the neutral and effective settlement of their investment disputes through arbitration”.[219]

However, the incompatible decisions concluded by ICSID indicate that the answer to this question is uncertain. Because of the lack of explicit wording and the unanimous interpretation of the MFN clause, such dispute concerning the scope of application of the MFN will still exist.

4.2.2 Difficulty of the unified interpretation of the MFN clause

As noted above, because each MFN clause in investment treaties is negotiated specifically by contracting parties, the MFN principle has never been contained in a broad, multilateral convention that provides the consistent wording and application of MFN clauses in the field of international investment.[220] MFN clauses are included in different investment treaties, resulting in the interpretation of the MFN clauses.

However, even each investment arbitral tribunal follows the rule provided in article 31 of Vienna Convention on the Law of Treaties, there is no unified dispute settlement mechanism like Dispute Settlement Body (DSB) in WTO.[221] A unified dispute resolution body is conductive to the uniform application of the law. In the field of international investment, although ICSID arbitration has become the main way for settlement of investment disputes in many BITs, the jurisdiction of ICSID is based on the consent of parties, which does not have the same mandatory as the DSB.[222]

In addition, many BITs may choose other arbitration institutions or self-appointed dispute resolution agencies (such as NAFTA).[223] Dispersion of dispute settlement mechanisms is not conducive to maintaining the consistency of the law.

Even ICSID, an important forum for resolving disputes between investors and host countries, also has made inconsistent decisions on whether the MFN clause can be applied to procedural matters in multiple cases. So, lack of unified dispute resolution body increases the difficulty of the unified interpretation of the MFN clause.

4.3 The recommended interpretation of the applicable scope of the MFN clause

Even the decisions of ICSID arbitration concerning the application of the MFN clauses are inconsistent and there is no unified interpretation of the applicable scope the MFN clause. However, we can still find some reasonable or desirable interpretative methods to a certain degree from these cases, which may be guidance for the interpretation of the MFN clause in the future.

4.3.1 The MFN clause cannot override the consent of the parties

Consent of the parties is the cornerstone of the jurisdiction of the ICSID, and this conclusion has already become the internationally recognized basic rule.[224] From the point of view of the Tribunal, whether the host country has unequivocally agreed its jurisdiction is an essential prerequisite for the Tribunal to hear the case.[225]

Such unequivocal consent should be clear to the forum as well as party, which means agreeing to UNCITRAL arbitration cannot be equated with agreeing to ICSID arbitration, also, consent to ICSID arbitration of disputes with Spanish nationals cannot be equated with the consent to arbitration with Chile nationals.

So, the writer thinks that in the case where the host country has entered into an arbitration mechanism with the investor’s country or investor itself, the latter cannot substitute such mechanism into another completely different arbitration mechanism through the MFN clause, since the latter clearly lacks the consent of host country.

In fact, as noted above, in Maffenize case and Siemens case, the investors have agreed in advance with host country about the jurisdiction of ICSID, and they invoke the MFN clauses not to completely replace such arbitration mechanism in the basic treaty, but rather to avoid the domestic prerequisite of ICSID arbitration. As a result, the above two cases concerning the extended application of the MFN clause does not use the MFN clause to substitute the consent of the parties to the investment arbitration.

4.3.2 The ordinary interpretation of the MFN clause

When there is the clear consent of the parties to investment arbitration, the next issue for the Tribunal to consider is whether the investor can alter other aspects of the arbitration mechanism through the MFN clause (e.g., the waiting period in the case of Maffezini) to enjoy a more favorable treatment of the third party treaty in the same subject-matter. At this time, for the Tribunal, there is, therefore, no substitute for a case-by-case basis interpretation of the specific BIT provisions in question.[226]

The purpose of the interpretation of the treaty is to determine that the meaning of the treaty is in conformity with the intention of the parties as expressed in the agreement and that the arbitrator’s duty is to interpret the treaty, not to modify them.[227]

Because the interpretative methods, which the arbitrators use to reach the arbitration conclusion in the investment arbitration practice, may be the important reason for the controversy of the application of the MFN clause.[228] Thus, the interpretation of the treaty should be a comprehensive consideration of the terms of the treaty, the context of the treaty, the consultation history in the negotiating process and other factors, and such principles of interpretation should be balanced.[229]

4.3.3 The claimant should prove the treatment in the third party is different and more favorable

The distribution of the above-mentioned burden of proof to the claimant (often foreign investor) has become a basic principle of international law.[230] And writer believes that it is also an effective measure to prevent the unlimited expansion of the MFN clause.

When it comes to the question whether the MFN clause applies to dispute settlement procedure, the claimant is under the obligation to first demonstrate that there is a discrepancy between the treatment of the basic treaty and the third party treaty in the aspect of dispute settlement.

Secondly, the claimant should prove that if the claimant were not allowed to invoke dispute settlement provision in the third party treaty through the MFN clause, the claimant would, in fact, suffer less favorable treatment. As in the Asian Agricultural case, the Tribunal rejected claimant’s argument at first time because it concluded that the claimant had “not proven that the Sri Lanka/Switzerland Treaty contains rules more favorable than those provided for under the Sri Lanka/U.K. Treaty”.[231]

Anyway, the MFN clause cannot be applied in a way that may violate basic fundamental principles of international law, impose results that could not the intention of both parties, or otherwise disrupt the predictability and stability of the international investment law system.

CHAPTER V. The situation of application of MFN in China and some suggestions

5.1 Provisions of China’s BITs on applicable object of MFN clause

In 1982, China signed the first bilateral investment treaty (BIT) with Sweden. Until now, China has signed thousands of BITs with other countries, and all of these BITs provide the MFN clause. However, the applicable scopes of MFN treatment in these BITs are different but all limited. In general, there are four categories in BITs concluded by China.[232]

5.1.1 Investments or returns of investors (Investments and returns of investors)

In China’s first BIT signed with Sweden, it only uses one term “investments” to limit the applicable scope of MFN.[233] However, this approach only appeared in the early China’s BITs.

The other example is the agreement between China and the government of the Sultanate of Oman, “Each Contracting Party shall in its territory accord investments and returns of investors of the other Contracting Party treatment not less favourable than that which it accords to investments and returns of investors of any third State.”[234]

5.1.2 Investment and associated activities

For example, Article 48(2) of BIT between the China and Pakistan provides the MFN treatment shall accord to “investments and activities associated with such investments by the investors”[235]. The BIT between China and Finland enumerates so-called “investments and associated activities”, namely “establishment, acquisition, management, maintenance, use, enjoyment, expansion, sale”.[236] It also uses the term “other disposal of investments” to include other activities which are related to investments.

5.1.3 Admission of investment and the matters in connection with investment

The provisions on the admission of investment are, in fact, an applicable license for the pre-entry stage of foreign investment.

For example, the agreement between China, Japan and Korea provides the MFN treatment is applicable to “investors with respect to investment activities and the matters relating to the admission of investment”.[237]

5.1.4 Activities and measures after admission of investments

The MFN clause in the BIT between China and the Kingdom of Saudi Arabia is related to the activities and measures after the admission of investments. It provides that MFN treatment shall accord to “the management, use, enjoyment or disposal of investment or with the means to assure their rights to such investments like transfers and indemnifications or with any other activity.”[238]

Although the activities enumerate above are associated with the investments, there still are essential differences between them and “investment and associated activities” enumerated in China and Finland’s BIT. Some matters cited in China/Finland BIT are missing from BIT between China and the Kingdom of Saudi Arabia, such as “establishment of investments”, which means the applicable scope of MFN in China and the Kingdom of Saudi Arabia’s BIT is restricted to the management and disposal of investment after foreign investment accepted by the host country. So before foreign investment entering into another country, MFN cannot be applied.

In sum, these are four different kinds of the applicable scope of MFN treatment in China’s BITs. As we can see from above, all of them are associated with substantial matters. No matter how MFN clause is worded in any BITs concluded by China, none of them include the procedural matters, which means, none of BITs China signed explicitly provide that MFN can be applied to procedural matters.

5.2 Provisions of China’s BITs on dispute settlement mechanisms

5.2.1 Settlement of dispute between an investor and a contracting party

Each BIT has different provisions about how to settle the dispute between an investor and a contracting party. Normally, it has several kinds of settlement as follows:

1. NO need to negotiate, investors can submit the investment dispute to international arbitration directly;[239]

2. The parties should negotiate or consultant first, if negotiation or consultation cannot solve dispute, then parties can submit dispute to the international arbitration without exhausting the local remedies;[240]

3. Before foreign investors submitting the dispute to the international arbitration, they can choose local remedies of host country first;[241] or

4. Investors can choose one or both of the means of administrative relief, judicial relief of host country and international arbitration.[242]

5.2.2 The selectivity of arbitration

Even though many BITs choose arbitration to be the one kind of methods to resolve disputes, the requirements of arbitration still are different. For example, BIT between China and Switzerland provides that the investor may submit the dispute to international arbitration based on its intention.[243] However, there are some BITs have mandatory provisions that parties must/shall submit the disputes to arbitration.[244] Another example is the BIT between China and Romania provides that either party to the dispute “shall be entitled to submit the dispute to ICSID”.[245]

5.2.3 Applicable arbitration rules

Different BITs China signed provide different arbitration rules for dispute settlement. For example, according to BIT between China and Argentine: “the tribunal shall determine its own procedure.”[246] While free trade agreement between China and New Zealand chooses the rule of  UNCITRAL.[247] But BIT between China and Bahrain provides that tribunal can take as guidance the arbitration rules of ICSID.[248]

5.2.5 The provisions of international arbitration jurisdiction are different

In the early’s BITs, only the dispute related to the amount of compensation of expropriation and nationalisation can be submitted to an arbitral tribunal,[249] this situation mainly happened before China has ratified ICSID Convention in 1993. At that time, China was mainly a capital-importing country, so it was very prudent to the international investment and international arbitration. In early’s BITs, China normally chose domestic court of the host country to resolve the investment dispute because this kind of method can protect China’s sovereignty.[250] However, some BITs like BIT between China and Switzerland provides that investor can submit a dispute on the matter of compensation of deprivation to international arbitration;[251] or any dispute concerning other matters except the amount of compensation of expropriation and nationalization may be submitted to an arbitration by mutual agreement like BIT between China and Japan.Later, some BITs provide that any dispute concerning the investment shall be submitted to arbitration.[252]

As we can see from above, BITs China sighed have the huge difference on the provisions of dispute settlement procedure matters. And China has changed its attitude towards international investment arbitration from “limited-consent” into “full-consent”.

5.3 The influence of expanded application of MFN clause to China

5.3.1 The importance of expanded application of MFN clause to China

Since China signed the first bilateral investment treaty with Sweden, until 2014, China has signed 104 BITs.[253] However, BITs concluded by China lack the expressed provisions concerning the application of MFN clause to the dispute settlement procedure, and also the provisions about dispute settlement mechanism in these BITs are different.

If there is investment dispute between foreign investor and host country, foreign investor may ask to apply the MFN clause and choose the dispute settlement mechanism in the third party treaty that is considered to be the most favorable among the BITs, which is a great risk for China who accepts the jurisdiction of ICSID since most of ICSID’s cases related to the application of the MFN clause support the expanded application of MFN treatment.[254]

Now international investment disputes that China as defendant seldom happen,[255] however, China still should be vigilant about the negative impact of the expanded use of MFN and consider seriously the meaning of the procedural provisions on the jurisdiction of the case in order to avoid repeating the situations that Argentina suffered.[256]

The Shum case is the first case concerning the application of the MFN clause China’s investment treaties. The Tribunal admits that each MFN clause itself is an independent unit and therefore requires a personalized interpretation in order to determine the scope of its application.[257]

The Ekran case is the first time that China participates in investment arbitration case as the identity of the respondent.[258] At present, according to the official website of ICSID, the case has been concluded by the reconciliation between the disputing parties and did not publish any relevant content.[259]

5.3.2 China’s attitude towards the extended application of the MFN clause

Although there is no specific provision about the applicable scope of the MFN clause in China, we still can guess from some BITs China signed that China has relative conservative attitude towards MFN clause such as article 139 of BIT between China and New Zealand[260].

Now some international economic scholars in China has studied this problem and given their ideas. Because the expanded application of the MFN clause can enlarge the consent of host country to international investment arbitration like ICSID, which will increase the risk that host country will be sued before international investment arbitration and also greatly increase the burden of human, material and financial resources in host country, so most of the scholars in China argue that the MFN treatment should be clearly excluded from dispute settlement. Like scholar XU Chongli says that “The provisions of dispute settlement mechanism in China’s BITs are totally different, if China recognizes that MFN clauses are applicable to these procedural matters, it will allow foreign investors to obtain, respectively, the most favorable provisions from various treaties, which will impose the unbearable burden on China”.[261]

And also he thinks that “Some BITs concluded in China recently have the problem that the decentralization of China is too fast and the abstention is too much, so China should provide explicitly in BITs that MFN cannot be used in dispute settlement procedure.”[262]

Other scholars also agree with this opinion, such as Shi Hua says that “in order to avoid taking our country into disadvantage …defining that MFN clause cannot be applied in the dispute settlement”.[263] Xu Min thinks that “China should make explicit restrictions and exclusions on the application of MFN provisions to procedural treatment in BITs or revised in the future”.[264]

5.4 Suggestions on the application of MFN clauses in China

There is no explicit provision about whether the MFN clause can be applied to dispute settlement procedure in the most of the BITs concluded by China. Once the investment disputes happen between host countries and foreign investors, only the court or arbitration tribunal can judge when it comes to the extended application of MFN. As we can see from above, the tribunals conclude two totally different opinions when there is no definite provision about whether MFN clause can be expanded applied, leading to the instability in the interpretation of the treaty to a great extent.

More notably, the current international investment dispute arbitration community seems to have formed a cognitive community, they believe in the liberalization of investment, protect the value orientation of investors, and ignore the existence of the legitimate rights and interests of the host country.[265] In the face of all the above situation that is not conducive to China, the writer thinks China should take the following preventive measures.

5.4.1 The scope of application of MFN clauses should be as clear as possible

In order to avoid the wrong explanation of the extended application of MFN, which will cause harm to the interest of host country, the first thing China should do is clearly and explicitly expresses its attitude towards the application of MFN in its BITs that the MFN clause should be excluded from dispute settlement matters.

There are seldom provisions about MFN’s applicability to dispute settlement issue in practice but still, exists a few exceptions. 2003 FTAA explicitly excludes the MFN’s applicability of dispute settlement. So we can see that America plans to use the interpretation of authority to fix the controversial referees in the past cases, which will enhance the uniformity of the referee when there is similar dispute before the court, and also enhance the parties’ predictability of the result of the referee.[266]

5.4.2 The introduction of the provisions of the retroactive force of the treaty

Among the BITs China signs with other countries, the preferential treatment that China accords to the other party are hugely different – even on the basis of the principle of international law of equitable and mutual benefit. China’s BITs have more favorable treatment provisions for some countries, especially developing countries and least developed countries.

The exception of MFN treatment such as customs union, free trade zone, economic union can exclude some countries from enjoying these more favorable treatment[267], but there may still exist some circumstances that cannot be excluded from application by the exception of MFN. If these circumstances exist and because of the expanded application of MFN bring about the application of these circumstances, it will cause the huge damage and inequity to China’s interest and violate the true intent of China when it signs the BITs.

In the meantime, even there are clear provisions about whether MFN can be applied to dispute settlement procedure in the treaty when China signs BIT in the future, the BITs China has already signed still exist ambiguous provisions about the applicable scope of MFN, so how to avoid the abuse of the MFN clause in order to protect China and other foreign investors’ interests, it may be a acceptable choice to provide the principle of non-retroactivity of the MFN clause in BITs.[268]

For example, 2004 Canadian FIPA model, ANNEX III, Exceptions from Most-Favoured-Nation Treatment, article 1 provides that “[a]rticle 4 shall not apply to treatment accorded under all bilateral or multilateral international agreements in force or signed prior to the date of entry into of this Agreement”.[269] Through such a provision, it can build a wall that foreign investors cannot invoke the MFN clause to apply more favorable provisions including dispute settlement matters in the BITs China signed before.[270] If the BITs China signed before cannot be modified, the contracting parties can add the principle of non-retroactivity of MFN to the treaty through the memorandum or supplementary agreement.[271]

5.4.3 Setting a reciprocal exception on the application of the MFN clause

In the conclusion of a BIT, China may also set a reciprocal exception on the application of the MFN clause to the dispute settlement procedure, that is, in principle, China does not support the MFN clause applicable to dispute resolution unless the other party allows Chinese investors to invoke a third party treaty that has more favorable dispute settlement provision through the MFN clause.

This approach has at least three benefits: one can reduce the difficulty of negotiation on the complete exclusion of the application of dispute settlement procedure from the MFN clause; second, through reciprocity, Chinese investors may still have the opportunity to invoke third party treaties through the MFN clause for the benefit of the dispute settlement arrangements, which is conducive to the protection of the interests of Chinese investors; Third, even if China allows foreign investors through the MFN clause to invoke a more favorable dispute resolution clause of third party treaty, Chinese investors in the future also can enjoy the same treatment through the principle of reciprocity, which will help to minimize the possible adverse consequences of the expansion of the MFN clause in China.[272]

CHAPTER VI. Conclusion

The different provisions of the applicable scope of the MFN clause and the lack of the provisions on the application of the MFN clause to the procedural matters lead to the disagreement on the extended application of the MFN clause in theory, which is controversial. And in practice, the tribunals reach the completely opposite conclusions that bring deeply the confusion on such issue.

For a variety of reasons, this series of events has led to a debate on a series of questions about the rules of interpretation of MFN provisions, the standards of “most favored” in international investment arbitration procedures and the particularity of international investment arbitration clauses. However, although in practice the arbitral tribunals have the support and opposition these two attitudes toward the extended application of the MFN treatment, such divergence is not so intense. Most cases support the widening application of the MFN clauses. And the extended application of the MFN treatment would make the application of the procedural provision uncertain and thus affect the distribution of the substantive rights between the parties.

Therefore, we should exercise caution on the issue of the expanded application of the MFN clause. Expressly stipulating the applicable scope of the MFN treatment in investment treaty is the most direct and effective way to solve this problem. Secondly, when there is difficulty in direct negotiation on the provision of the scope of the application of the MFN treatment, providing that the MFN clause is of non-retroactivity, setting reciprocal exception and other methods are acceptable.

In short, the extension of the MFN treatment concerns the common interests of host countries and foreign investors, and China should take a reasonable and feasible approach in the context of a full analysis of the current international situation.

REFERENCES

I. Books & Journals

Stephan W. Schill, Multilateralizing Investment Treaties Through Most-Favored-Nation Clauses, Berkeley J. Int’I L. 2009

Georg. Schwarzenberger, International Law as Applied by International Courts and Tribunals, 1957

Endre Ustor, Most-Favored-Nation Clause, 3 Encyclopedia of Public International Law, 468 (Rudolf Bernhardt & Peter Macalister Smith ed., North-Holland 1997

UNCTAD, Most-Favored-Nation Treatment, in Series in International Investment Agreements, 1999

Stephen Fietta, Most-favoured nation treatment and dispute resolution under bilateral investment treaties: a turning point? Int. A.L.R. 2005

Marie-France Houde & Fabrizio Pagani, Most-Favoured-Nation Treatment in International Investment Law, OECD, Working Papers on International Investment, 2004

Alejandro Faya Rodriguez, The Most-Favored-Nation Clause in International Investment Agreements:A tool for Treaty Shopping? 25 J. Int’l Arb. 2008

Yannick Radi, The application of the most-favoured-nation clause to the dispute settlement provisions of bilateral investment treatirs: domesticating the “Trojan horse”, E.J.I.L. 2007

Stanley Kuhl Hornbeck, The Most-Favored-Nation Clause in Commercial Treaties: Its Function in Theory and Practice and Its Relation to Tariff Policies, Bulletin of the University of Wisconsin, 6 E.P.S.S. 1910

UNCTAD Series on Issues in International Investment Agreements, Most-Favored-Nation-Treatment, Section II A, UNCTAD/ITE/IIT/10 vol. III, 1999

Stanley Hombeck, The Most-Favored-Nation Clause, Am. J. Int’l L., 1909

Warren F. Schwartz & Alan O. Sykes, The Economics of the Most Favored Nation Clause, Economic Dimensions in International Law: Comparative and Empirical Perspective, Cambrige Univ. Press. 1997

David Thomson, France: Empire and Republic, 1850-1940: Historical Documents, Macmillan & Co Ltd, 149, 1968

OECD, Relationship Between International Investment Agreements, OECD Directorate For Financial and Enterprise Affairs; Working Papers On International Investment, May 1, 2004

Rudolf Dolzer & Margrete Stevens, Bilateral Investment Treaties, Martinus Nuhoff Publishers, 1995

Pia Acconci, The Most Favoured Nation Treatment and the International Law on Foreign Investment, The Oxford Handbook of International Investment Law, Oxford Univ. Press. 2008

ICSID, Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 1965

Elizabeth Whitsitt, Application of Most-Favoured-Nation Clauses to the Dispute Settlement Provisions of Bilateral Investment Treaties: An Assessment of the Jurisprudence, J. Energy & Nat. Resources L. 2009

Jarrod Wong, The Application of Most-Favored-Nation Clauses to Dispute Resolution Provisions in Bilateral Investment Treaties, 3 Asian J. WTO & Int’l Health L. & Pol’y. 2008

Domenico Di Pietro, The use of presedents in ICSID arbitration. Regularity or certainty?, Int. A. L. R., 2007

Dr. Edvard Hambro, The Ambatielos Arbitral Award, Archiv des Volkerrechts, Mohr Siebeck GmbH & Co. KG. 1957

Scott Vesel, Clearing a Path Through a Tangled Jurisprudence: Most-Favored-Nation Clauses and Dispute Settlement Provisions in Bilateral Investment Treaties, 32 YALE J. INT’L L. 2007

Sergei Gorbylev, The use of ICJ case law in investment treaty arbitration, Arbitration, 2013

ZHANG Zhenhua, The New Development of MFN in the International Investment Agreement & China’s Countermeasures, 24(116) Journal of Hunan Financial and Economic College, 2008

ZHENG YUN, MFN and Dispute Settlement Procedures in the Context of International Investment Liberalization, Economic Herald, 2012

LI HONG, Current Issues of International Law, China Legal Publishing House, 2005

MA Chengyuan, Studies in International Law, edited by YU Mincai, Citic Publishing House, 2003

HUANG MENG, From the Perspective of the Development to Analyze the Application of the MFN Clause to Investment Dispute Settlement, Theory Research, 2010

Paul Michael Blyschak, State Consent, Investor Interests and the Future of Investment Arbitration: Reanalyzing the Jurisdiction of Investor-State Tribunals in Hard Cases, 9 Asper Rev. Int’l Bus. & Trade L. 2009

James Craeford SC, Ten Investment Arbitration Awards That Shook the World: Introduction and Overview, 4 No. 1 Disp. Resol. Int’l. 2010

Ole Kristian Fauchald, The Legal Reasoning of ICSID Tribunals – An Empirical Analysis, 19 No. 2 EJIL. 2008

Stephan W. Schill, Multilateralizing Investment Treaties Through Most-Favored-Nation Clauses, Berkeley J. Int’I L. 2009

Gabriel Egli, Don’t Get BIT, Addressing ICSID’s Inconsistent Application of Most-Favored-Nation Clauses to Dispute Settlement Provisions, 34 Pepp. L. Rev. 2007

John W. Boscariol & Orlando E. Silva, The Widening of MFN Obligation and Its Import On Investor Protection, Int. T.L.R. 2005

R. Dolzer & T. Myers, After Tecmed: Most-Facored-Nation Clauses in Investment Protection Agreements, ICSID Review, 19 Foreign Investment Law Journal, 2004

Gordon Smith, Chinese bilateral investment treaties: restrictions on international arbitration, Arbitration, 2010

Stephen Fietta, Most-favoured nation treatment and dispute resolution under bilateral investment treaties: a turning point? Int. A.L.R. 2005

Dana H. Freyer & David Herlihy, Most-Favored-Nation Treatment and Dispute Settlement in Investment Arbitration: Just How “Favored” is “Most-Favored”? ICSID Review, 2005

Barry Appleton, MFN and International Investment Treaty Arbitration: Have We Lost Sight of the Forest Through the Trees? 1 Appleton’s Int’l Investment L. & Arb. News. 2005

Zachary Douglas, The MFN Clause in Investment Arbitration: Treaty Interpretation Off the Rails, 2 J Int Disp Settlement, 2011

Joseph Raz, The Concept of a Legal System: An Introduction to the Theory of Legal System, Oxford Uni. Press, 1980

PR Thulasidhass, Most-Favoured-Nation Treatment in International Investment Law: Ascertaining the Limits through Interpretative Prinpicles, Amsterdam Law Rorum, 2015

Reports of the Commission to the General Assembly, 2 Y.B. Int’l L. Comm’n, 218, U.N. Doc. A/6309/Rev.1/1966

International Public Law, edited by Wang Huhua, Peking Uni. Press & S.P.P.H., 2008

Oppenheim’s International Law, edited by R. Jennings and A. Watts, vol 1, Harlow, 1992

Anthony Aust, Modern Treaty Law and Practice, Cambridge University Press, 2007

Rudolf Dolzer & Margrete Stevens, Bilateral Investment Treaties, Kluwer Law International, 1995

Myres McDougal, Harold Lasswell & James C Miller, The Interpretation of International Agreements and World Public Order: Principle of Content and Procedure, Martinus Nijhoff Publishers, 1994

Nassib G. Ziade, Some Recent Decisions in ICSID Cases, ICISD Review-Foreign Investment Law Journal

David M. Bigge, Can Investor Use MFN To Dodge Transparency, New York University School of Law, 2011

Jurgen Kurtz, The Most Favoured Nation Standard and Foreign Investment: An Uneasy Fit? The Journal of World Investment & Trade, 2004

ZHU Mingxin, The MFN Clause Applies to the Appearance and Substance of the Investment Dispute Settlement Procedure – Based on the Perspective of Treaty Interpretation, ZUEL Law Journal, 2015

Roberts Anthea, Power and Persuasion in Investment Treaty Interpretation: the Dual Role of States, 104(2) American Journal of International Law, 2010

Martins Paparinskis, MFN Clauses and International Dispute Settlement: Moving Beyond Maffezini and Plama? 26 ICSID Review – Foreign Investment Law, 2011

Richard Snyder, The Most-Favored-Nation Clause: An Analysis with Particular Reference to Recent Treaty Practice and Tariffs, 1948

Julie Maupin, MFN – based Jurisdiction on Investor – State Arbitration: Is There any Hope for a Consistent Approach?, 14(1) Journal of International Economic Law, 2011

Emmabuel Gaillard, Establishing Jurisdiction Through a Most-Favored-Nation Clause, N.Y.L.J., 2005

LIANG Kaiyin, On Conflicts And Choice of Disputes Solving Systems Between ICSID and WTO, Law Science Magazine, 2009

International of Peace Treaties with Bulgaria, Hungary and Romania, Advisory Opinion (second phrase), 1950

Tomoko Ishikawa, Interpreting the Most-Favoured-Nation Clause in Investment Treaty Arbitration: Interpretation as a Process of Creating an Obligation?, edited by Charles Sampford, Spencer Zifcak & Derya Aydin Okur, Rethinking International Law and Justice, Ashgate Publishing Limited, 2014

Petr Polasek, China’s Investment Treaties and MFN: Recent Development, edited by Ian A. Laird and Todd J. Weiler, 4 Investment Treaty Arbitration and International Law, JurisNet, LLC, 2012

LIU Ying & FENG Jun, The Extension of the Application of the Most-Favored-Nation Clause in the International Investment Dispute – From the Substantive Issues to Procedural Issues, Law Review, 2013

WANG Nan, On the Application of Most-Favored-Nation Clause to International Investment Dispute Settlement, 28 Hebei Law Science, 2010

Norah Gallagher, China’s BITs and Arbitration Practice: Progress and Problems, edited by Wenhua Shan, China and International Investment Law: Twenty Years of ICSID Membership, Brill Nijhoff, 2014

LIANG Danni, A Study on the Application of the Most-Favored-Nation Clause in the International Investment Treaty – Analysis on “Ekran Berhand v. People’s Republic of China”, ZUEL Law Journal, 2012

LIANG Danni, A Study on the Application of the Most-Favored-Nation Clause in the International Investment Treaty – Analysis on “Ekran Berhand v. People’s Republic of China”, ZUEL Law Journal, 98-103 (2012

XU Chongli, From substance to procedure – The Dispute over the Applicable Scope of Most-Favored-Nation Treatment, Research on Law and Business, 2007

HI Hua, On the Application of Most-Favored Nation Clause in Investment Dispute Settlement, vol. 35, Journal of Shanxi University (Philosophy & Social Science), 2012

XU Min, On the Development of ICSID Investment Arbitration on the Most-Favored-Nation Treatment Clause in Bilateral Investment Agreements, Exploring Economic Problems, 2009

Jurgen Kurtz, The Delicate Extension of MFN Treatment to Foreign Investors: Maffezini v. Kingdom of Spain, International Investment Law and Arbitration, edited by Todd Weiler, Cameron May Ltd, 2005

CHEN An, Four Great Safe guards in Bilateral Investment Agreements shouldn’t be Rashly Dismantled during Sino-foreign Negotiation-Comments on of Critical Provisions concerning Dispute Settlement in the U.S. and Canada’s Model BITs text, Journal of International Economic Law, 2006

Huang Shixi, Application of MFN Treatment and New Development of Jurisdiction in the International Investment Arbitration, Legal Science, 2013

II. Legal documents

The General Agreement on Tariffs and Trade (1986)

General Agreement on Trade in Services (1995)

Draft Articles on Most-Favoured-Nation Clauses (1978)

The North American Free Trade Agreement (1992)

Vienna Convention on the Law of Treaties (1969)

Convention on the Settlement of Investment Disputes Between States and Nationals of other States (1966)

China-Denmark Bilateral Investment Treaty (1985)

United Nations Conference on Trade and Employment, Final Act and Related Documents (1948)

Germany-Bangladesh Bilateral Investment Treaty (1981)

The Energy Charter Treaty (1994)

Argentine-Spain Bilateral Investment Treaty(1992)

Draft Articles on most-favoured-nation clauses with commentaries (1978)

U.K. Model Bilateral Investment Treaty (2008)

Canada Model Bilateral Investment Treaty (2004)

Free Trade Area of the Americas (Draft Agreement) (2003)

China-Sweden Bilateral Investment Treaty (1982)

China-Oman Bilateral Investment Treaty (1995)

China-Pakistan Bilateral Investment Treaty (1990)

China-Japan, Korea Bilateral Investment Treaty (2014)

China-Saudi Arabia Bilateral Investment Treaty (1997)

China-Kazakhstan Bilateral Investment Treaty (1994)

China-Spain Bilateral Investment Treaty (2008)

China-Korea Bilateral Investment Treaty (2007)

China-United Arab Emirates Bilateral Investment Treaty (1994)

China-Switzerland Bilateral Investment Treaty (2010)

China-Romania Bilateral Investment Treaty (1995)

China-Argentine Bilateral Investment Treaty (1994)

China-Bahrain Bilateral Investment Treaty (2000)

Finland-China Bilateral Investment Treaty (2006)

China-Australia Bilateral Investment Treaty (1988)

Chin-Portugal Bilateral Investment Treaty (2008)

China-New Zealand Free Trade Agreement (1989)

China-Cambodia Bilateral Investment Treaty (2000)

China-Vietnam Bilateral Investment Treaty (1993)

III. Cases

Rights of Nationals of the United States of America in Morocco (Fr. v. U.S.), ICJ, 1952

Emilio Agustín Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7, Decision on Jurisdiction, 25, January 2000

Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/04, Decision on Jurisdiction, 8 February 2005

Anglo-Iranian Oil Co. (U.K. v. Iran), I.C.J, July 22, 1952

Ambatielos Case (Greece v. U.K.), I.C.J, May 19, 1953

Siemens A. G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Decision on Jurisdiction, August 3, 2004

Gas Natural SDG, S.A. v. The Argentine Republic, ICSID Case No. ARB/03/10, Decision of the Tribunal on Preliminary Question of Jurisdiction, June 17, 2005

Suez S.A. & Vivendi Universal S.A. v. The Argentine Republic, ICSID Case No. ARB/03/19, Decision on Jurisdiction, August 3, 2006

Suez S.A. & InterAguas S.A. v. The Argentine Republic, ICSID Case No. ARB/03/17, Decision on Jurisdiction, May 16, 2006

Wintershall Aktiengesellschaft v. The Argentine Republic, ICSID Case No. ARB/04/14, Award, December 8, 2008

Camuzzi International S. A. v. The Argentine Republic, ICSID Case No. ARB/03/7, Decision on Jurisdiction, June 10, 2005

Hochtief AG v. The Argentine Republic, ICSID Case No. ARB/07/31, Decision on Jurisdiction, October 24, 2011

Impregilo S. p. A. v. The Argentine Republic, ICSID Case No. ARB/07/17, Award, June 21, 2011

Teinver S. A., Transportes de Cercanias S. A. & Autobuses Urbanos del Sur S. A. v. The Argentine Republic, ICSID Case No. ARB/09/1, Decision on Jurisdiction, December 21, 2012

Salini Construttori S.p.A. v. The Hashemite Kingdom of Jordan, ICSID Case No. ARB/02/13, Decision on Jurisdiction, Nov. 15, 2004.

Telenor Mobile Communications A.S. v. The Republic of Hungary, ICSID Case No. ARB/04/15, Award, Sept. 13, 2006

Bureau Veritas, Inspection, Valuation, Assessment & Control, Blvac B.V. v. The Republic of Paraguay, ICSID Case, No. ARB/07/9, Decision on Jurisdiction, May 29, 2009

Berschader v. The Russian Federation, Case No. 080/2004, Award, April 2006

Asian Agricultural Products Ltd. v. Republic of Sri Lanka, ICSID Case No. ARB/87/3, Final Award, June 27, 1990

Lanco International Lnc. v. The Argentine Republic, ICSID Case No. ARB/97/6, Preliminary Decision: Jurisdiction of the Arbitral Trbunal, December 8, 1998

Tza Yap Shum v. The Republic of Peru, ICSID Case No. ARB/07/6, Decision on Jurisdiction and Competence, 19 June 2009

IV. Websites

http://tfs.mofcom.gov.cn/article/Nocategory/201111/20111107819474.shtml

https://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm

https://icsid.worldbank.org/en/Pages/cases/casedetail.aspx?CaseNo=ARB/11/15

---

[1] Stephan W. Schill, Multilateralizing Investment Treaties Through Most-Favored-Nation Clauses, Berkeley J. Int’I L. 497 (2009)

[2] 1 Georg. Schwarzenberger, International Law as Applied by International Courts and Tribunals, 241 (1957)

[3] Endre Ustor, Most-Favored-Nation Clause, 3 Encyclopedia of Public International Law, 468 (Rudolf Bernhardt & Peter Macalister Smith ed., North-Holland 1997)

[4] See Rights of Nationals of the United States of America in Morocco (Fr. v. U.S.), ICJ, 1952, 192

[5] See article 1(1) of <The General Agreement on Tariffs and Trade>, Geneva, 1986

[6] See article 2(1) of <General Agreement on Trade in Services>, 1995

[7] UNCTAD, Most-Favored-Nation Treatment, in Series in International Investment Agreements, 8 (1999)

[8] See article 4 of <Draft Articles on Most-Favoured-Nation Clauses>, United Nations, 1978

[9] Id., article 5

[10] Stephen Fietta, Most-favoured-nation treatment and dispute resolution under bilateral investment treaties: a turning point? Int. A.L.R. 131-138 (2005)

[11] Marie-France Houde & Fabrizio Pagani, Most-Favoured-Nation Treatment in International Investment Law, OECD, Working Papers on International Investment, 3-8 (2004)

[12] Alejandro Faya Rodriguez, The Most-Favored-Nation Clause in International Investment Agreements:A tool for Treaty Shopping? 25 J. Int’l Arb. 89-102 (2008), available at http://works.bepress.com/alejandro_faya_rodriguez/2/

[13] Yannick Radi, The application of the most-favoured-nation clause to the dispute settlement provisions of bilateral investment treaties: domesticating the “Trojan horse”, E.J.I.L. 758 (2007)

[14] Stanley Kuhl Hornbeck, The Most-Favored-Nation Clause in Commercial Treaties: Its Function in Theory and Practice and Its Relation to Tariff Policies, Bulletin of the University of Wisconsin, 6 E.P.S.S. 399 (1910)

[15] For example, in a 1417 Treaty of Mercantile Intercourse between England and Flanders, which granted English ships the right to use Flemish harbors “in the same way as French, Dutch, Swalanders and Scots.” UNCTAD Series on Issues in International Investment Agreements, Most-Favored-Nation-Treatment, Section II A, UNCTAD/ITE/IIT/10 vol. III, 1999

[16] Stanley Hornbeck, The Most-Favored-Nation Clause, Am. J. Int’l L., 400 (1909)

[17] Schill, supra note 1, at 509

[18] Conditional MFN clauses were introduced and subsequently became dominant in international treaty practice since the United States and France signed the Treaty of Amity and Commerce in 1778

[19] Warren F. Schwartz & Alan O. Sykes, The Economics of the Most Favored Nation Clause, Economic Dimensions in International Law: Comparative and Empirical Perspective, Cambridge Univ. Press. 59-61 (1997)

[20] See article XIX of Cobden Treaty: Each of the two High Contracting Powers engages to confer on the other any favour, privilege, or reduction in the tariff or duties of importation on the articles mentioned in the present Treaty, which the said Power may concede to any other third Power, David Thomson, France: Empire and Republic, 1850-1940: Historical Documents, Macmillan & Co Ltd, 149, 1968

[21] Article 1 of GATT: any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties. The most important meaning of this article is that MFN it stipulates is unconditional, which means once a country becomes the member of GATT, no matter what it behaviors, it is entitled to enjoy the MFN treatment accorded by other Member States.

[22] Hombeck, supra note 19, at 395

[23] Rodriguez, supra note 13, at 89

[24] See article 12, paragraph 2 (a)(ii) of , April, 1948

[25] OECD, Relationship Between International Investment Agreements, OECD Directorate For Financial and Enterprise Affairs; Working Papers On International Investment, May 1, 2004

[26] Rudolf Dolzer & Margrete Stevens, Bilateral Investment Treaties, Martinus Nuhoff Publishers, 65 (1995)

[27] Pia Acconci, The Most Favoured Nation Treatment and the International Law on Foreign Investment, The Oxford Handbook of International Investment Law, Oxford Univ. Press. 2008

[28] UNCTAD, supra note 8, at 5

[29] See article 1103 of NAFTA, available at https://www.nafta-sec-alena.org/Home/Legal-Texts/North-American-Free-Trade-Agreement?mvid=1&secid=539c50ef-51c1-489b-808b-9e20c9872d25#A1103

[30] See article 10, paragraph of <The Energy Charter Treaty, Trade Amendment, and Related Documents>, Energy Charter Secretariat, 1994

[31] https://icsid.worldbank.org/en/pages/default.aspx

[32] ICSID, Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals of the Other States, para. 13 (1965), available at https://icsid.worldbank.org/en/Documents/icsiddocs/ICSID%20Convention%20English.pdf

[33] See article 1 of <Convention on the Settlement of Investment Disputes Between States and Nationals of other States>, 1966, available at https://icsid.worldbank.org/en/Documents/icsiddocs/ICSID%20Convention%20English.pdf

[34] Elizabeth Whitsitt, Application of Most-Favoured-Nation Clauses to the Dispute Settlement Provisions of Bilateral Investment Treaties: An Assessment of the Jurisprudence, J. Energy & Nat. Resources L. 529 (2009)

[35] For instance, article 4(2) of <Agreement Between the Argentine Republic and the Kingdom of Spain on the Reciprocal Promotion and Protection of Investments>, 1992

[36] Whitsitt, supra note 43, at 530

[37] Radi, supra note 15, at 760

[38] Jarrod Wong, The Application of Most-Favored-Nation Clauses to Dispute Resolution Provisions in Bilateral Investment Treaties, 3 Asian J. WTO & Int’l Health L. & Pol’y. 171-192 (2008)

[39] Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Decision Jurisdiction, 25, January 2000

[40] Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/04, Decision on Jurisdiction, 8 February 2005

[41] Anglo-Iranian Oil Co. (U.K. v. Iran), I.C.J, July 22, 1952

[42] Id., at 105.

[43] Anglo-Iranian Oil Co. (U.K. v. Iran), I.C.J, July 22, 1952, at 107.

[44] Id., at 108.

[45] Domenico Di Pietro, The use of precedents in ICSID arbitration. Regularity or certainty?, Int. A. L. R., 98 (2007)

[46] Anglo-Iranian Oil Co. (U.K. v. Iran), I.C.J, July 22, 1952, at 109.

[47] Ambatielos Case (Greece v. U.K.), I.C.J, May 19, 1953

[48] Dr. Edvard Hambro, The Ambatielos Arbitral Award, Archiv des Volkerrechts, Mohr Siebeck GmbH & Co. KG. 152-173 (1957) available at https://www.jstor.org/stable/40797174?seq=1#page_scan_tab_contents

[49] Ambatielos Case, supra note 59, at 32

[50] The Hellenic Government invoked Article 16 of the Treaty of peace and Commerce between the United Kingdom and Denmark, Article 8 of the Treaty of Peace and Commerce with Sweden, Article 10 of the Treaty of Commerce with Bolivia

[51] Wong, supra note 47, at 180

[52] The MFN clause in the commercial treaty stipulated that “in all matters relating to commerce and navigation, any privilege, favour, or immunity under which either Contracting Party has actually granted or may hereafter grant to the subjects or citizens of any other State shall be extended immediately and unconditionally to the subjects or citizens of the other Contracting Party…”

[53] Ambatielos Case, supra note 58, at 21

[54] Id., at 21.

[55] Id., at 23.

[56] Scott Vesel, Clearing a Path Through a Tangled Jurisprudence: Most-Favored-Nation Clauses and Dispute Settlement Provisions in Bilateral Investment Treaties, 32 YALE J. INT’L L. 153 (2007)

[57] Ambatielos Case, supra note 58, at 34

[58] Sergei Gorbylev, The use of ICJ case law in investment treaty arbitration, Arbitration, 351(2013)

[59] Ambatielos (Greece v. U.K.), Award of 6 March 1956, 12 R. Int’l Arb. Awards (Comm.Arb.), 107

[60] Id.

[61] Ambatielos (Greece v. U.K.), Award of 6 March 1956, 12 R. Int’l Arb. Awards (Comm.Arb.), 110

[62] Id.

[63] Id.

[64] ZHANG Zhenhua, The New Development of MFN in the International Investment Agreement & China’s Countermeasures, 24(116) Journal of Hunan Financial and Economic College, 124-126 (2008)

[65] Vesel, supra note 68, 148

[66] Anglo-Iranian Oil Co. (U.K. v. Iran), I.C.J, July 22, 1952, 109

[67] ZHENG YUN, MFN and Dispute Settlement Procedures in the Context of International Investment Liberalization, Economic Herald, 62 (2012)

[68] Anglo-Iranian Oil Co. (U.K. v. Iran), Individual Opinion of President McNair, I.C.J, July 22, 1952, 13

[69] Vesel, supra note 55, at 149

[70] LI HONG, Current Issues of International Law, China Legal Publishing House, 470 (2005)

[71] MA Chengyuan, Studies in International Law, edited by YU Mincai, Citic Publishing House, 172 (2003)

[72] Vesel, supra note 55, at 153

[73] HUANG MENG, From the Perspective of the Development to Analyze the Application of the MFN Clause to Investment Dispute Settlement, Theory Research, 26 (2010)

[74] Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Decision Jurisdiction, 25, January 2000

[75] Paul Michael Blyschak, State Consent, Investor Interests and the Future of Investment Arbitration: Reanalyzing the Jurisdiction of Investor-State Tribunals in Hard Cases, 9 Asper Rev. Int’l Bus. & Trade L. 99, 125 (2009)

[76] Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Decision Jurisdiction, 25, January, 15 (2000)

[77] Id., at 18.

[78] James Craeford SC, Ten Investment Arbitration Awards That Shook the World: Introduction and Overview, 4 No. 1 Disp. Resol. Int’l 71, 75 (2010)

[79] Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Decision Jurisdiction, 25, January, 21(57) (2000)

[80] Id., at 24. para. 63

[81] Alejandro Faya Rodriguez, The Most-Favored-Nation Clause in International Investment Agreements:A tool for Treaty Shopping? 25 J. Int’l Arb. 93 (2008)

[82]Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Decision Jurisdiction, 25, January, 2000

[83] Siemens A. G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Decision on Jurisdiction, August 3, 2004

[84] The MFN clause in Article 3 of the Argentine-German BIT provides: “3(1) None of the Contracting parties shall accord in its territory to the investments of nationals or companies of the other Contracting party or to the investments in which they hold shares, a less favorable treatment than the treatment granted to the investments of its own nationals or companies or to the investments of nationals or companies of third states. 3(2) None of the Contracting parties shall accord in its territory to nationals or companies of the other Contracting party a less favorable treatment of activities related to investments than granted to its own nationals or companies or to the nationals and companies of third states”.

[85] Siemens case, supra note 96, at 41. para 103

[86] The preamble provided that the parties had agreed to the provisions of the Treaty for the purpose of creating favorable conditions for the investments of nationals or companies of one of the two States in the territory of the other State. Both parties recognized that the promotion and protection of these investments by a treaty might stimulate private economic initiative and increase the well-being of the peoples of both countries.

[87] Ole Kristian Fauchald, The Legal Reasoning of ICSID Tribunals – An Empirical Analysis, 19 No. 2 EJIL 301, (2008)

[88] Siemens A. G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Decision on Jurisdiction, August 3, 40(102), (2004)

[89] Siemens A. G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Decision on Jurisdiction, August 3, 2004, at 48-49. paras 119-121

[90] Id., at 49. para 120

[91] Stephan W. Schill, Multilateralizing Investment Treaties Through Most-Favored-Nation Clauses, Berkeley J. Int’I L. 533 (2009)

[92] Gas Natural SDG, S.A. v. The Argentine Republic, ICSID Case No. ARB/03/10, Decision of the Tribunal on Preliminary Question of Jurisdiction, June 17, 2005, paras 26-31, 41-49 (W. Bank 2005)

[93] Id., at 20. para 31

[94] Id.

[95] Id., at 29. para 49

[96] Suez S.A. & Vivendi Universal S.A. v. The Argentine Republic, ICSID Case No. ARB/03/19, Decision on Jurisdiction, August 3, 2006, paras. 52-68 (W. Bank 2006)

[97] Suez S.A. & InterAguas S.A. v. The Argentine Republic, ICSID Case No. ARB/03/17, Decision on Jurisdiction, May 16, 2006, paras. 52-66 (W. Bank 2006)

[98] Suez & Vivendi, para. 54; Suez & InterAguas, para. 54

[99] Suez & Vivendi, para. 61; Suez & InterAguas, para. 59

[100] Suez & Vivendi, para. 55; Suez & InterAguas, para. 55

[101] Wintershall Aktiengesellschaft v. The Argentine Republic, ICSID Case No. ARB/04/14, Award, December 8, 2008

[102] Camuzzi International S. A. v. The Argentine Republic, ICSID Case No. ARB/03/7, Decision on Jurisdiction, June 10, 2005

[103] Hochtief AG v. The Argentine Republic, ICSID Case No. ARB/07/31, Decision on Jurisdiction, October 24, 2011

[104] Impregilo S. p. A. v. The Argentine Republic, ICSID Case No. ARB/07/17, Award, June 21, 2011

[105] Teinver S. A., Transportes de Cercanias S. A. & Autobuses Urbanos del Sur S. A. v. The Argentine Republic, ICSID Case No. ARB/09/1, Decision on Jurisdiction, December 21, 2012

[106] Whitsitt, supra note 43, at 538

[107] Scott Vesel, Clearing a Path Through a Tangled Jurisprudence: Most-Favored-Nation Clauses and Dispute Settlement Provisions in Bilateral Investment Treaties, 32 YALE J. INT’L L. 125 (2007)

[108] Whitsitt, supra note 43, at 536

[109] Gabriel Egli, Don’t Get BIT, Addressing ICSID’s Inconsistent Application of Most-Favored-Nation Clauses to Dispute Settlement Provisions, 34 Pepp. L. Rev. 1045 (2007)

[110] John W. Boscariol & Orlando E. Silva, The Widening of MFN Obligation and Its Import On Investor Protection, Int. T.L.R., 11(2), 61-67 (2005)

[111] Boscariol & Silva, supra note 116, at 61-67

[112] R. Dolzer & T. Myers, After Tecmed: Most-Favored-Nation Clauses in Investment Protection Agreements, ICSID Review, 19 Foreign Investment Law Journal, 54 (2004)

[113] Scott Vesel, Clearing a Path Through a Tangled Jurisprudence: Most-Favored-Nation Clauses and Dispute Settlement Provisions in Bilateral Investment Treaties, 32 YALE J. INT’L L. 128 (2007)

[114] Id.

[115] Whitsitt, supra note 43, at 537

[116] Salini Construttori S.p.A. v. The Hashemite Kingdom of Jordan, ICSID Case No. ARB/02/13, Decision on Jurisdiction, Nov. 15, 2004.

[117] Id.

[118] Salini Construttori S.p.A. v. The Hashemite Kingdom of Jordan, ICSID Case No. ARB/02/13, Decision on Jurisdiction, Nov. 15, 170(66) (2004)

[119] Id.,at 172. para 71

[120] Salini Construttori S.p.A. v. The Hashemite Kingdom of Jordan, ICSID Case No. ARB/02/13, Decision on Jurisdiction, Nov. 15, 181(102) (2004)

[121] Id., at 181-182. para 103

[122] Id.

[123] Id., at 186. para 119

[124] Salini Construttori S.p.A. v. The Hashemite Kingdom of Jordan, ICSID Case No. ARB/02/13, Decision on Jurisdiction, Nov. 15, 185(155) (2004)

[125] The MFN clause of the Jordan-Italy provided that “[b]oth Contracting Parties, within the bounds of their own territory, shall grant investments effected by, and the income accruing to, investors of the Contracting Party no less favourable treatment than that accorded to investments effected by, and income accruing to, its own nationals or investors of Third States”.

[126] Salini case, supra note 135

[127] Id., at 185-86. para 118

[128] Id.

[129] Elizabeth Whitsitt, Application of Most-Favoured-Nation Clauses to the Dispute Settlement Provisions of Bilateral Investment Treaties: An Assessment of the Jurisprudence, J. Energy & Nat. Resources L. 542 (2009)

[130] Vesel, supra note 55, at 172

[131] Plama Consortium Ltd. v. Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction, Feb. 8, 2005

[132] Id., at 269. para 21

[133] Id., at 272-73. para 26

[134] Article 3(1) of Bulgaria-Cyprus BIT provided that “Each Contracting Party shall apply to the investments in its territory by investors of the other Contracting Party a treatment which is not less favorable than that accorded to investments by investors of third states”.

[135]Plama Consortium Ltd. v. Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction, Feb. 8, 2005, at 286, 292, paras 79, 99

[136] Id., at 333. para 227

[137] Id., at 323. para 193

[138] Id., at 324. para 195

[139] Id., at 324. para 198

[140] Gordon Smith, Chinese bilateral investment treaties: restrictions on international arbitration, Arbitration, 65 (2010)

[141]Plama Consortium Ltd. v. Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction, Feb. 8, 325(199) (2005)

[142] Id., at 326-27. paras 203, 204

[143] Telenor Mobile Communications A.S. v. The Republic of Hungary, ICSID Case No. ARB/04/15, Award, Sept. 13, 2006

[144] Id., at 11. para 25

[145] Id., at 46-54. paras 85-100

[146] Telenor Mobile Communications A.S. v. The Republic of Hungary, ICSID Case No. ARB/04/15, Award, Sept. 13, 50(91) (2006)

[147] Id., at 50. para 92

[148] Telenor Mobile Communications A.S. v. The Republic of Hungary, ICSID Case No. ARB/04/15, Award, Sept. 13, 2006, at 51. para 93

[149] Id., at 51. para 94

[150] Id., at 51. para 95

[151] Whitsitt, supra note 43, at 545

[152] Egli, supra note 115, at 1075

[153] Stephen Fietta, Most-favoured–nation treatment and dispute resolution under bilateral investment treaties: a turning point? Int. A.L.R. 136 (2005)

[154] Dana H. Freyer & David Herlihy, Most-Favored-Nation Treatment and Dispute Settlement in Investment Arbitration: Just How “Favored” is “Most-Favored”? ICSID Review, 77(2005)

[155] Id., at 332. para 221

[156] Id.

[157] Barry Appleton, MFN and International Investment Treaty Arbitration: Have We Lost Sight of the Forest Through the Trees? 1 Appleton’s Int’l Investment L. & Arb. News. (2005)

[158] Plama case, supra note 139, at 332, para 223

[159] Freyer & Herlihy, supra note 162, at 78

[160] Maffezini, supra note 78

[161] Salini case, supra note 123, at 139

[162] Gabriel Egli, Don’t Get BIT, Addressing ICSID’s Inconsistent Application of Most-Favored-Nation Clauses to Dispute Settlement Provisions, 34 Pepp. L. Rev. 1045 (2007)

[163] Zachary Douglas, The MFN Clause in Investment Arbitration: Treaty Interpretation Off the Rails, 2 J Int Disp Settlement, 105 (2011)

[164] Joseph Raz, The Concept of a Legal System: An Introduction to the Theory of Legal System, Oxford Uni. Press, 1 (1980)

[165] PR Thulasidhass, Most-Favoured-Nation Treatment in International Investment Law: Ascertaining the Limits through Interpretative Principles, Amsterdam Law Rorum, 14 (2015)

[166] Bureau Veritas, Inspection, Valuation, Assessment & Control, Blvac B.V. v. The Republic of Paraguay, ICSID Case, No. ARB/07/9, Decision on Jurisdiction, May 29, 2009

[167] http://legal.un.org/ilc/texts/instruments/english/conventions/1_1_1969.pdf

[168] Reports of the Commission to the General Assembly, 2 Y.B. Int’l L. Comm’n, 218, U.N. Doc. A/6309/Rev.1/1966, available at http://legal.un.org/docs/?path=../ilc/documentation/english/reports/a_cn4_191.pdf&lang=EFSRC

[169] Berschader v. The Russian Federation, Case No. 080/2004, Award, April 2006

[170] International Public Law, edited by Wang Huhua, Peking Uni. Press & S.P.P.H., 376 (2008)

[171] Oppenheim’s International Law, edited by R. Jennings and A. Watts, vol 1, Harlow, 1267(1992)

[172] Anthony Aust, Modern Treaty Law and Practice, Cambridge University Press, 234 (2007)

[173] Thulasidhass, supra note 176, at 24

[174] Rudolf Dolzer & Margrete Stevens, Bilateral Investment Treaties, Kluwer Law International, 17 (1995)

[175] PR Thulasidhass, Most-Favoured-Nation Treatment in International Investment Law: Ascertaining the Limits through Interpretative Principles, Amsterdam Law Rorum, 15 (2015)

[176] Id., at 16-17

[177] Myres McDougal, Harold Lasswell & James C Miller, The Interpretation of International Agreements and World Public Order: Principle of Content and Procedure, Martinus Nijhoff Publishers, 16-17 (1994)

[178] Id.

[179] Draft Articles on most-favoured-nation clauses with commentaries, International Law Commission, 27 (1978)

[180] Ambatielos Case, supra note 71

[181] Article 9 “Scope of rights under a most-favoured-nation clause: 1. Under a most-favoured-nation clause the beneficiary State acquires, for itself or for the benefit of persons or things in a determined relationship with it, only those rights, which fall within the limits of the subject-matter of the clause. 2. The beneficiary State acquires the rights under paragraph 1 only in respect of persons or things which are specified in the clause or implied from its subject-matter.”

Article 10 “Acquisition of rights under most-favoured-nation clause: 1. Under a most-favoured-nation clause the beneficiary State acquires the right to most-favoured-nation treatment only if the granting State extends to a third State treatment within the limits of the subject-matter of the clause. 2. The beneficiary State acquires rights under paragraph 1 in respect of persons or things in determined relationship with it only if they: a. belong to the same category of persons or things as those in a determined relationship with a third State which benefit from the treatment extended to them by the granting State and b. have the same relationship with the beneficiary state as the persons and things referred to in subparagraph (a) have with that third State.”

[182] Commentaries,supra note 187, at 30

[183] Thulasidhass, supra note 175, at 18

[184]

[185]

[186] commentaries, supra note 187, at 27

[187] Asian Agricultural Products Ltd. v. Republic of Sri Lanka, ICSID Case No. ARB/87/3, Final Award, June 27, 1990

[188] Id., at 535. para 26(D)

[189] Id., at 548. para 54

[190] Nassib G. Ziade, Some Recent Decisions in ICSID Cases, ICISD Review-Foreign Investment Law Journal, 520, available at http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C140/DC675.pdf

[191] Id.

[192] David M. Bigge, Can Investor Use MFN To Dodge Transparency, New York University School of Law, 8 (2011)

[193] Dana H. Freyer & David Herlihy, Most-Favored-Nation Treatment and Dispute Settlement in Investment Arbitration: Just How “Favored” is “Most-Favored”? ICSID Review, 76(2005)

[194] Elizabeth, supra note 43, at 535

[195] Jurgen Kurtz, The Most Favoured Nation Standard and Foreign Investment: An Uneasy Fit? The Journal of World Investment & Trade, 880 (2004)

[196] Id., at 886

[197] Alejandro Faya Rodriguez, The Most-Favored-Nation Clause in International Investment Agreements:A tool for Treaty Shopping? 25 J. Int’l Arb. 100 (2008), available at http://works.bepress.com/alejandro_faya_rodriguez/2/

[198] ZHU Mingxin, The MFN Clause Applies to the Appearance and Substance of the Investment Dispute Settlement Procedure – Based on the Perspective of Treaty Interpretation, ZUEL Law Journal, 181 (2015)

[199] Telenor case, supra note, at 51, para. 95

[200] https://icsid.worldbank.org/en/Documents/icsiddocs/ICSID%20Convention%20English.pdf

[201] ICSID, Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, paras. 23-24 (1965)

[202] Lanco International Lnc. v. The Argentine Republic, ICSID Case No. ARB/97/6, Preliminary Decision: Jurisdiction of the Arbitral Tribunal, December 8, 1998

[203] Id., at 471, para. 43

[204] Roberts Anthea, Power and Persuasion in Investment Treaty Interpretation: the Dual Role of States, 104(2) American Journal of International Law, 179-225 (2010)

[205] Maffezini case, supra note 78; Siemens case, supra note 88

[206] Plama case, supra note 139, at 328, para. 209

[207] UNCTAD, Most-Favored-Nation Treatment, in Series in International Investment Agreements, 1 (1999)

[208] Martins Paparinskis, MFN Clauses and International Dispute Settlement: Moving Beyond Maffezini and Plama? 26 ICSID Review – Foreign Investment Law, 18-19 (2011)

[209] Oppenheim’s International Law, edited by R. Jennings and A. Watts, vol 1, Harlow, 1326 (1992)

[210] Richard Snyder, The Most-Favored-Nation Clause: An Analysis with Particular Reference to Recent Treaty Practice and Tariffs, 242 (1948)

[211] Julie Maupin, MFN – based Jurisdiction on Investor – State Arbitration: Is There any Hope for a Consistent Approach?, 14(1) Journal of International Economic Law, 163-168 (2011)

[212] Article 3 “National Treatment and Most-favoured-nation Provisions” of U.K. Model BIT provides that MFN treatment “shall apply to the provisions of Articles 1 to 12 of this Agreement”, and article 8 of this agreement is the provision concerning the “Settlement of Disputes between an Investor and a Host State”, available at http://investmentpolicyhub.unctad.org/Download/TreatyFile/2847

[213] Article 1103 of NAFTA provides the scope of the MFN treatment is related to “establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments”, available at https://www.nafta-sec-alena.org/Home/Texts-of-the-Agreement/North-American-Free-Trade-Agreement/mvid/1/secid/539c50ef-51c1-489b-808b-9e20c9872d25#A1103

[214] Footnote 13 of FTAA expressly provides that MFN clause “does not encompass international dispute resolution mechanism…and therefore could not reasonably lead to a conclusion similar to that of the Maffezini case”, available at http://www.ftaa-alca.org/ftaadraft03/ChapterXVII_e.asp#note13

[215] Dana H. Freyer & David Herlihy, Most-Favored-Nation Treatment and Dispute Settlement in Investment Arbitration: Just How “Favored” is “Most-Favored”? ICSID Review, 60(2005)

[216] Yannick Radi, The application of the most-favoured-nation clause to the dispute settlement provisions of bilateral investment treaties: domesticating the “Trojan horse”, E.J.I.L. 758 (2007)

[217] Suez case, supra note 106, at 29, para. 55

[218] Plama case, supra note 139, at 322, para. 189

[219] Emmabuel Gaillard, Establishing Jurisdiction Through a Most-Favored-Nation Clause, N.Y.L.J., 3 (2005)

[220] Scott Vesel, Clearing a Path Through a Tangled Jurisprudence: Most-Favored-Nation Clauses and Dispute Settlement Provisions in Bilateral Investment Treaties, 32 YALE J. INT’L L. 137 (2007)

[221] WTO, available at https://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm

[222] LIANG Kaiyin, On Conflicts And Choice of Disputes Solving Systems Between ICSID and WTO, Law Science Magazine, 90-93 (2009)

[223] Article 1120(1) of NAFTA provides that a disputing investor may submit claim to arbitration under the UNICITRAL Rules, available at https://www.nafta-sec-alena.org/Home/Texts-of-the-Agreement/North-American-Free-Trade-Agreement/mvid/1/secid/539c50ef-51c1-489b-808b-9e20c9872d25#A1120

[224] ICSID, Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, para 23

[225] Id., para. 25.

[226] Scott Vesel, Clearing a Path Through a Tangled Jurisprudence: Most-Favored-Nation Clauses and Dispute Settlement Provisions in Bilateral Investment Treaties, 32 YALE J. INT’L L. 187 (2007)

[227] International of Peace Treaties with Bulgaria, Hungary and Romania, Advisory Opinion (second phrase), 229 (1950)

[228] Tomoko Ishikawa, Interpreting the Most-Favoured-Nation Clause in Investment Treaty Arbitration: Interpretation as a Process of Creating an Obligation?, edited by Charles Sampford, Spencer Zifcak & Derya Aydin Okur, Rethinking International Law and Justice, Ashgate Publishing Limited, 144 (2014)

[229] Dana H. Freyer & David Herlihy, Most-Favored-Nation Treatment and Dispute Settlement in Investment Arbitration: Just How “Favored” is “Most-Favored”? ICSID Review, 82(2005)

[230] ZHU Mingxin, supra note 221

[231] Asian Agricultural case, supra note 199, at 548, para. 54

[232] Petr Polasek, China’s Investment Treaties and MFN: Recent Development, edited by Ian A. Laird and Todd J. Weiler, 4 Investment Treaty Arbitration and International Law, JurisNet, LLC, 111-114 (2012)

[233] See article 2(2) of >: Investments by investors of either Contracting State in the territory of the other Contracting State shall not be subjected a treatment less favorable than that accorded to investments by investors of third States. available at http://tfs.mofcom.gov.cn/aarticle/h/au/201001/20100106724195.html%3Cbr/%3E

[234] Article 3(2) of , available at http://tfs.mofcom.gov.cn/aarticle/h/at/201002/20100206778900.html

[235] See < Agreement between the Government of the People’s Republic of China and the Government of the Islamic Republic of Pakistan on the Reciprocal Encouragement and Protection of Investments>, available at http://tfs.mofcom.gov.cn/aarticle/h/at/201002/20100206778604.html

[236] Article 3(3) of , available at http://tfs.mofcom.gov.cn/aarticle/h/au/201001/20100106725240.html

[237] Article 4(1) of , available at http://tfs.mofcom.gov.cn/article/h/at/201405/20140500584828.shtml

[238] Article 3(3) of < Agreement between the Government of the People’s Republic of China and the Kingdom of Saudi Arabia on the Reciprocal Promotion and Protection of Investments>, available at http://tfs.mofcom.gov.cn/aarticle/h/at/201002/20100206778906.html

[239] See article 9(1) of < Agreement Between The Government of the People’s Republic of China and the Government of the Republic of Kazakhstan for the Promotion and Reciprocal Protection of Investments>, available at http://en.pkulaw.cn/display.aspx?id=7284&lib=tax&SearchKeyword=&SearchCKeyword=

[240] See article 9(2) of < Agreement Between The Government of the People’s Republic of China and the Government of the Kingdom of Spain on the Promotion and Reciprocal Protection of Investments>, available at http://tfs.mofcom.gov.cn/aarticle/h/au/201002/20100206775471.html

[241] See article 9(2)(3) of < Agreement on the Encouragement and Reciprocal Protection of Investments Between The Government of the People’s Republic of China and the Government of the Republic of Korea>, available at http://tfs.mofcom.gov.cn/aarticle/h/at/201002/20100206778660.html

[242] See article 9(2) of < Agreement Between The Government of the People’s Republic of China and the Government of the United Arab Emirates for the Promotion and Protection of Investments>, available at http://tfs.mofcom.gov.cn/aarticle/h/at/201002/20100206778885.html

[243] See article 12(1) of < Agreement Between The Government of the People’s Republic of China and the Government of the Confederation of Switzerland on the Reciprocal Promotion and Protection of Investments>, available at http://tfs.mofcom.gov.cn/aarticle/h/au/201002/20100206774475.html

[244] See article 8(2) of < Agreement Between The Government of the People’s Republic of China and the Government of the Brunei Darussalam on the Encouragement and Reciprocal Protection of Investments>, available at http://investmentpolicyhub.unctad.org/Download/TreatyFile/514

[245] See article 9(2) of < Agreement Between The Government of the People’s Republic of China and the Government of Romania Concerning the Encouragement and Reciprocal Protection of Investments>, available at http://tfs.mofcom.gov.cn/aarticle/h/au/201002/20100206775800.html

[246] See article 8(5) of < Agreement Between The Government of the People’s Republic of China and the Government of the Argentine Republic on the Promotion and Reciprocal Protection of Investments>, available at http://tfs.mofcom.gov.cn/aarticle/h/bk/201002/20100206785097.html

[247] See article 153(1) of  , available at http://images.mofcom.gov.cn/gjs/accessory/200804/1208158780064.pdf

[248] See article 9(5) of < Agreement Between The Government of the People’s Republic of China and the Government of the State of Bahrain Concerning the Encouragement and Reciprocal Protection of Investment>, available at http://tfs.mofcom.gov.cn/aarticle/h/at/201002/20100206778930.html

[249] See article 12(2) of < Agreement Between The Government of the People’s Republic of China and the Government of Australia on the Reciprocal Encouragement and Protection of Investments>, available at http://tfs.mofcom.gov.cn/aarticle/h/av/201002/20100206778946.html

[250] LIU Ying & FENG Jun, The Extension of the Application of the Most-Favored-Nation Clause in the International Investment Dispute – From the Substantive Issues to Procedural Issues, Law Review, 45-51(2013)

[251] See article 12(1) of < Agreement Between The Government of the People’s Republic of China and the Government of Confederation of Switzerland on the Reciprocal Promotion and Protection of Investments>, available at http://tfs.mofcom.gov.cn/aarticle/h/au/201002/20100206774475.html

[252] See article 9(1) of , available at http://tfs.mofcom.gov.cn/aarticle/h/au/201002/20100206775363.html

[253] http://tfs.mofcom.gov.cn/article/Nocategory/201111/20111107819474.shtml

[254] WANG Nan, On the Application of Most-Favored-Nation Clause to International Investment Dispute Settlement, 28 Hebei Law Science, 120-125 (2010)

[255] Norah Gallagher, China’s BITs and Arbitration Practice: Progress and Problems, edited by Wenhua Shan, China and International Investment Law: Twenty Years of ICSID Membership, Brill Nijhoff, 208-212 (2014)

[256] LIANG Danni, A Study on the Application of the Most-Favored-Nation Clause in the International Investment Treaty – Analysis on “Ekran Berhand v. People’s Republic of China”, ZUEL Law Journal, 98-103 (2012)

[257] See Tza Yap Shum v. The Republic of Peru, ICSID Case No. ARB/07/6, Decision on Jurisdiction and Competence, 19 June 2009.

[258] LIANG Danni, A Study on the Application of the Most-Favored-Nation Clause in the International Investment Treaty – Analysis on “Ekran Berhand v. People’s Republic of China”, ZUEL Law Journal, 98-103 (2012)

[259] https://icsid.worldbank.org/en/Pages/cases/casedetail.aspx?CaseNo=ARB/11/15

[260] See article 139(2) of : For greater certainty, the obligation in this Article does not encompass a requirement to extend to investors of the other Party dispute resolution procedures other than those set out in this Chapter. available at http://images.mofcom.gov.cn/gjs/accessory/200804/1208158780064.pdf

[261] XU Chongli, From substance to procedure – The Dispute over the Applicable Scope of Most-Favored-Nation Treatment, Research on Law and Business, 41-50 (2007)

[262] Id.

[263] SHI Hua, On the Application of Most-Favored-Nation Clause in Investment Dispute Settlement, vol. 35, Journal of Shanxi University (Philosophy & Social Science), 86-91 (2012)

[264] XU Min, On the Development of ICSID Investment Arbitration on the Most-Favored-Nation Treatment Clause in Bilateral Investment Agreements, Exploring Economic Problems, 89-93 (2009)

[265] Jurgen Kurtz, The Delicate Extension of MFN Treatment to Foreign Investors: Maffezini v. Kingdom of Spain, International Investment Law and Arbitration, edited by Todd Weiler, Cameron May Ltd, 534-535 (2005)

[266] CHEN An, Four Great Safeguards in Bilateral Investment Agreements shouldn’t be Rashly Dismantled during Sino-foreign Negotiation-Comments on of Critical Provisions concerning Dispute Settlement in the U.S. and Canada’s Model BITs text, Journal of International Economic Law, 3-37 (2006)

[267] See article 3(3) of , available at http://tfs.mofcom.gov.cn/aarticle/h/at/201002/20100206778910.html

See article 3(3) of : The treatment and protection as mentioned in Paragraph 1 and 2 of this Article shall not include any preferential treatment accorded by the other Contracting State to investments of investors of a third State based on customs union, free trade zone, economic union, agreement relating to avoidance of double taxation or for facilitating frontier trade, available at http://tfs.mofcom.gov.cn/aarticle/h/at/201002/20100206778724.html

[268] Huang Shixi, Application of MFN Treatment and New Development of Jurisdiction in the International Investment Arbitration, Legal Science, 177-185 (2013)

[269] http://www.italaw.com/documents/Canadian2004-FIPA-model-en.pdf

[270] XU Chongli, From substance to procedure – The Dispute over the Applicable Scope of Most-Favored-Nation Treatment, Research on Law and Business, 41-50 (2007)

[271] ZHU Mingxin, The MFN Clause Applies to the Appearance and Substance of the Investment Dispute Settlement Procedure – Based on the Perspective of Treaty Interpretation, ZUEL Law Journal, 183 (2015)

[272] XU Chongli, supra note 272