The Most-Favoured-Nation Clause in Investment Treaties

By Suzy H. Nikièma, Published by IISD, February 2017

Most-favoured nation (MFN) is a both common and controversial clause in investment treaties. It has been the object of differing and unexpected interpretations by treaty-based arbitral tribunals. In particular, since Maffezini v. Spain, an original interpretation of MFN led to the possibility for investors to import more favourable provisions from a third-party bilateral investment treaty (BIT) concluded by their host state. The controversies around MFN raise fundamental questions in the context of current changes in the international investment law and arbitration regime. Part of IISD’s Best Practices Series, this study conducts a typology of investment treaties and then an analysis of the differing interpretations by the tribunals of several key issues. The issues surrounding certain interpretations of the MFN clause and the reactions of states in their recent treaties are reviewed in order to draw lessons for states. Available in English and French at http://www.iisd.org/library/iisd-best-practices-series-most-favoured-nation-clause-investment-treaties.