Application of MFN to the Substantive Benefits

Sharmin, Tanjina

doi:10.1007/978-981-15-3730-1_4

Tanjina Sharmin³

Part of the book series: International Law and the Global South ((ILGS))

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Abstract

There is a scholarly proposition that, in principle, application of MFN treatment to the substantive benefits is uncontested. International courts and tribunals have, on several occasions, stated that MFN can apply to substantive benefits while some tribunals observed that substantive and procedural rights within IIAs are conventionally distinct. According to this, application of MFN should be confined to the substantive benefits only. However, most attempts to claim more favourable substantive benefits by MFN have failed in practice. This low level of success poses an essential question: should the seemingly accepted position supporting the extensive application of MFN to substantive benefits be re-examined? This chapter undertakes such a re-examination. It explores the following issues: whether MFN should import entirely new substantive benefits from other IIAs if the basic treaty does not contain them at all; and whether MFN should import a better-drafted substantive benefit from another treaty when the basic treaty already contains the same kind of substantive benefit in less favourable terms. To explore the above issues, this chapter reviews 21 key arbitral decisions that allowed or rejected application of MFN to the substantive benefits. The chapter argues that the conventional view that MFN has unlimited power to multilateralise substantive benefits can no longer be sustained. MFN in IIAs remains subject to some significant boundaries. The chapter also finds that although some arbitral tribunals have been sensitive to the developing host-states in applying other substantive provisions in IIAs, in deciding on MFN, no such consideration has been rendered.

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Notes

1.
Stephan W. Schill, ‘Multilateralizing Investment Treaties Through Most-Favored-Nation Clauses’ (2009) 27 Berkeley Journal of International Law 518–519; David D. Caron and Esme Shirlow, ‘Most-Favoured-Nation Treatment: Substantive Protection’ in Building International Investment Law: The First 50 Years of ICSID 399, 408–13 (Meg Kinnear, Geraldine R. Fischer, Jara Minguez Almeida, Luisa Fernanda Torres & Mairee Uran Bidegain eds, 2015).
2.
Emilio Agustin Maffezini v the Kingdom of Spain (Maffezini), ICSID Case No. ARB/97/7, Decision of the Tribunal on Objections to Jurisdiction, dated 25 January 2000. In the pre-Maffezini phase, the principle was affirmed in the Ambatielos Claim (Greece, United Kingdom of Great Britain and Northern Ireland) (Judgment) [1953] Reports of International Arbitral Awards 1956, 82. The decision supported application of MFN to the issues relating to legal remedy. However, the decision treated ‘legal remedy’ as a matter of substance not of mere procedure. For the overview of the cases, see Chap. 3. In the post-Maffezini phase, the same principle was upheld in some cases. For example, Salini Construttori SpA and Italstrade SpA v the Hashemite Kingdom of Jordan (Salini v Jordan), ICSID Case No. ARB/02/13, Award, dated 31 January 2006.
3.
For example, see, Vladimir Berschader and Moise Berschader v The Russian Federation (Berschader v Russia), Arbitration Institute of the Stockholm Chamber of Commerce, Case No 080/2004, Award, dated 21 April 2006, para 179.
4.
Plama Consortium Limited v Republic of Bulgaria (Plama v Bulgaria), ICSID Case No. ARB/03/24, Decision on Jurisdiction, dated 8 February 2005, paras 223–229.
5.
Caron and Shirlow, above n 1. The authors identified 50 investor-state cases in which claims were made for the application of MFN to substantive standards. They found that the claim mostly failed or remained undecided; also see, Simon Batifort and J. Benton Heath, The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization,’ (2017) 111:4 The American Journal of International Law, 873–913. Batifort and Heath identified 12 cases in which MFN succeeded to import substantive standards from other IIAs; also see, some commentaries on the work of Batifort and Heath. For example, Stephan W. Schill, ‘Notes and Comments: MFN Clauses as Bilateral Commitments to Multilateralism: A Reply to Simon Batifort and J. Benton Heath,’ (2017) 111:4 The American Journal of International Law 914; Martins Paparinskis, ‘MFN Clauses and Substantive Treatment: A Law of Treaties Perspective of the Conventional Wisdom,’ (2018) 112 AJIL Unbound 49; Facundo Perez-Aznar, ‘The Fictions and Realities of MFN Clauses in International Investment Agreements,’ (2018) 112 AJIL Unbound 55. Although Schill and Paparinskis did not refute the proposition that the success rate of MFN to substantive benefits is lower than its failure, these authors have argued for the conventional presumption supporting an expansive application of MFN to substantive benefits.
6.
Ibid., Caron and Shirlow.
7.
Batifort and Heath, above n 5.
8.
Most IIAs frequently include some substantive benefits to be accorded to investors. For example, fair and equitable treatment standard, national treatment, MFN treatment, protection against unlawful expropriation, full protection and security, umbrella clauses and compensation for loss arising from war or emergency. IIA parties are free to include in or exclude any substantive benefit mentioned above in the treaty. Again, the substantive benefits can be drafted in a liberal or restrained manner depending on the economic policy of the IIA parties. Since most IIAs are bilateral investment treaties, there exist significant differences amongst them in terms of the substantive benefits included in the IIAs. For example, it is possible that an IIA drafts the fair and equitable treatment standard broadly while drafting the same benefit in a restrictively in another IIA. If states wish, they may not include fair and equitable treatment standard in an IIA at all. Therefore, it is possible that MFN is invoked to extend the scope of a substantive benefit which is included in the basic treaty but not drafted in the most possible extensive language. On the other hand, there could be instances where MFN is invoked to claim a substantive benefit not included in the basic treaty but included in another IIA signed by the host-state. In this situation, attempts can be made to invoke MFN to import a substantive benefit which is otherwise completely omitted from the basic IIA.
9.
Rumana Islam, ‘The Fair and Equitable Treatment (FET) Standard in International Investment Arbitration, Developing Countries in Context,’ (Springer, 2018).
10.
Ibid., Chap. 5.
11.
See Chap. 1 for an overview on the existing jurisprudence.
12.
Berschader v Russia, above n 3, para 179.
13.
Ibid.
14.
Section 4.2 of this chapter discuss 10 publicly available arbitral decisions which allowed the application of MFN to substantive benefits. The cases are as follows: MTD Equity Sdn Bhd. & MTD Chile S.A. v Republic of Chile (MTD v Chile), ICSID Case No. ARB/01/7, Award, dated 25 May 2004; EDF International S.A. v Saur International S.A. and Leon Participaciones Argentinas S.A. v Argentina Republic (EDF v Argentina), ICSID Case No. ARB/03/23, Award, dated 11 June 2012; White Industries Australia Limited v The Republic of India (White Industries v India), UNCITRAL, Final Award, dated 20 November 2011; Bayindir Insaat Turizm Ticaret ve Sanayi A.S. v Islaimc Republic of Pakistan (Bayindir v Pakistan), ICSID Case No. ARB/03/29, Award, dated 27 August 2009; Hesham Talaat M. Al-Warraq v The Republic of Indonesia (Al-Warraq v Indonesia), UNCITRAL, Final Award (15 December 2014); Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan (Rumeli Telekom and Telsim Mobil v Kazakhstan), ICSID Case No. ARB/05/16, Award, dated 29 July 2008; Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v. The Government of Mongolia (Sergei Paushok V Mongolia), UNCITRAL, Award on Jurisdiction and Liability, dated 28 April 2011; Mr. Franck Charles Arif v Republic of Moldova (Franck Charles Arif v Moldova), ICSID Case No. ARB/11/23, Award, dated 8 April 2013; and OAO Tatneft v. Ukraine, UNCITRAL, Award on Merits, dated 29 July 2014; Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. The Argentine Republic (Teinver v Argentina), ICSID Case No. ARB/09/1, Award, dated 21 July 2017. As mentioned in above n 5, Batifort and Heath identified total of 12 cases in which MFN succeeded to import more favourable substantive benefits. Their list includes all 10 cases listed above. However, Batifort and Heath mentioned 2 more cases which are not studied in this section, namely L.E.S.I. S.p.A. and ASTALDI S.p.A. v. République Algérienne Démocratique et Populaire, ICSID Case No. ARB/05/3, Award, dated 12 November 2008, (this decision is written in French, no authentic English translation is available to this researcher); and ATA Construction, Industrial and Trading Company v The Hashemite Kingdom of Jordan (ATA Construction v Jordan), (ICSID Case No. ARB/08/2, Award dated 18 May 2010). This author has found that in ATA Construction v Jordan, the MFN-based claim remained undecided. Accordingly, this researcher finds that application of MFN to substantive benefits succeeded in approximately 11 cases. It must be noted that this chapter studies only those cases in which an award or decision has been rendered by the arbitral tribunals. This chapter does not study cases which are pending for a decision. It must also be noted that in Teinver v Argentina, application of MFN to procedural prerequisites to arbitration was rejected in the Decision of the Tribunal on Jurisdiction, dated 21 December 2012. The Decision on Jurisdiction will be studied in Chap. 6.
15.
Section 4.2 discusses 11 cases in which MFN failed. The cases are as follows: ADF Group Inc. v United States of America (ADF v USA), (ICSID Case No. ARB (AF)/00/1, Award, 9 January 2003); Metal-Tech Ltd v Republic of Uzbekistan, (ICSID Case No. ARB/10/3, Award, 4 October 2013); Chemtura Corporation v Government of Canada (Chemtura v Canada); UNCITRAL, Award of the tribunal, dated 2 August 2010; Mesa Power Group LLC v Government of Canada (Mesa Power v Canada); UNCITRAL, PCA Case No. 2012–17, Award of the tribunal, dated 24 March 2016; Apotex Holdings Inc. and Apotex Inc. United States of America (Apotex v USA); ICSID Case No. ARB(AF)/12/1, Award, dated 25 August 2014; Ickale Insaat Limited Sirketi v Turkmenistan (Ickale v Turkmenistan); ICSID Case No. ARB/10/24, Award, dated 8 March 2016; UABE Energija Lithuania v Latvia (UABE Energija v Latvia); ICSID Case No. ARB/12/33, Award, dated 22 December 2017; CMS Gas Transmission Company v The Argentine Republic (CMS v Argentina); (ICSID Case No. ARB/01/8, Award, 12 May 2005); GEA Group Aktiengesellschaft v Ukraine (GEA v Ukraine), ICSID Case No. ARB/08/16, Award, dated 31 March 2011; Cargill Incorporated v The United Mexican States (Cargill v Mexico); (ICSID Case No. ARB (AF)/05/2, Award, 18 September 2009); Windstream Energy LLC v Canada (Windstream Energy v Canada), Permanent Court of Arbitration, In the Matter of an Arbitration under Chapter Eleven of the North American Free Trade Agreement and the 2010 UNCITRAL Arbitration Rules, Award, 27 September 2016. It must be noted that the cases studied in Sect. 4.2 do not constitute any exhaustive list of cases in which MFN failed or remained undecided. This author has found that 4 types of MFN-based claims have failed or remained undecided in the context of substantive benefits. First, claims to extend the scope of substantive benefits already included in the basic treaty, albeit, in less favourable terms, than that in other IIAs. Second, claims to import additional substantive benefits which were not included in the basic treaty at all in any form. Third, claims to apply MFN to eliminate some allegedly unfavourable substantive benefits included in the basic treaty. Fourth, claims to apply MFN to restrain the host-state from providing more favourable treatment to any other investor. The cases discussed in Sect. 4.2 of this chapter are selected to illustrate the above-mentioned 4 types of MFN-based claims which failed or remained undecided in the context of substantive benefits.
16.
MTD V Chile, above n 14.
17.
Ibid., paras 41–51.
18.
MTD V Chile, above n 14, paras 52–58.
19.
Ibid., para 80.
20.
MTD V Chile, above n 14, para 80.
21.
Agreement between the Government of Malaysia and the Government of the Republic of Chile on Promotion and Investment Protection (Chile-Malaysia BIT), signed on 11 November 1992, (entry into force on 04 August 1995); MTD V Chile, above n 14, paras 1, 100–104.
22.
Agreement between the Government of the Republic of Chile and the Government of the Kingdom of Denmark Concerning the Promotion and Reciprocal Protection of Investments (Chile-Denmark BIT), signed on 28 May 1993, (entry into force on 3 November 1995).
23.
Ibid.
24.
Chile-Denmark BIT, above n 22.
25.
Agreement between the Government of the Republic of Chile and the Government of the Republic of Croatia on the Reciprocal Promotion and Protection of Investments (Chile-Croatia BIT), signed on 28 November 1994, (entry into force on 15 June 1996).
26.
Ibid., Art 3(3).
27.
Chile-Croatia BIT, above n 25, Art 4(1).
28.
MTD v Chile, above n 14, para 206.
29.
Ibid., paras 103–104.
30.
MTD v Chile, above n 14, 103–104.
31.
Chile-Malaysia BIT, above n 21, Article 3(1).
32.
MTD v Chile, above n 14, para 104.
33.
Ibid., Decision on Annulment, dated 21 March 2007.
34.
Ibid., para 64. The Committee held that,

The most-favoured-nation clause in Article 3(1) is not limited to attracting more favourable levels of treatment accorded to investments from third States only where they can be considered to fall within the scope of the fair and equitable treatment standard. Article 3(1) attracts any more favourable treatment extended to third State investments and does so unconditionally.

However, the Annulment Committee refused to annul the Award given by the MTD tribunal because it could not find anything sufficiently fatal.
35.
MTD v Chile, Decision on Annulment, above n 33.
36.
OAO Tatneft v. Ukraine, above n 14.
37.
Agreement between the Government of the Russian Federation and the Cabinet of Ministers of the Ukraine on the Encouragement and Mutual Protection of Investments (Russia-Ukraine BIT), signed on 27 November 1998, (entry into force on 27 January 2000).
38.
OAO Tatneft v. Ukraine, above n 14, paras 1–5.
39.
Ibid.
40.
Russia-Ukraine BIT, above n 37, Article 3(1).
41.
Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Ukraine for the Promotion and Reciprocal Protection of Investments (UK-Ukraine BIT), signed on 10, February 1993, (entry into force on 10 February 1993), Article 2(2) contained an FET provision along with an obligation to provide full protection and security.
42.
The Energy Charter Treaty, signed on 17 December 1994, (entry into force on 16 April 1998), Article 10(12).
43.
OAO Tatneft v. Ukraine, above n 14, para 365, also see para 426.
44.
Rumeli Telekom and Telsim Mobil v Kazakhstan, above n 14.
45.
Franck Charles Arif v Moldova, above n 14.
46.
Franck Charles Arif v Moldova, above n 14.
47.
Rumeli Telekom and Telsim Mobil v Kazakhstan, above n 14.
48.
Ibid., paras 1–9.
49.
Rumeli Telekom and Telsim Mobil v Kazakhstan, above n 14, paras 1–9.
50.
Agreement between the Republic of Turkey and the Republic of Kazakhstan Concerning the Reciprocal Promotion and Protection of Investments (Turkey-Kazakhstan BIT), signed on 1 May 1992, (entry into force on 10 August 1995).
51.
Turkey-Kazakhstan BIT, Ibid., Articles 2, 3, 7 and 9; Rumeli Telekom and Telsim Mobil v Kazakhstan, above n 14, paras 557–565.
52.
Ibid., para 560.
53.
Rumeli Telekom and Telsim Mobil v Kazakhstan, above n 14, para 560.
54.
Ibid.
55.
Rumeli Telekom and Telsim Mobil v Kazakhstan, above n 14, para 572.
56.
Ibid., para 573.
57.
Rumeli Telekom and Telsim Mobil v Kazakhstan, above n 14, paras 573–574.
58.
Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Kazakhstan for the Promotion and Protection of Investments (UK-Kazakhstan BIT), signed on 23 November 1995, (entry into force on 23 November 1995); also see, Ibid., para 574.
59.
Rumeli Telekom and Telsim Mobil v Kazakhstan, above n 14, para 575.
60.
EDF v Argentina, above n 14.
61.
UNCTAD, ‘Bilateral Investment Treaties in the mid-1990s,’ United Nations, 1998, 56.
62.
Christoph Schreuer, ‘Travelling the BIT Route: of Waiting Periods, Umbrella clauses and Forks in The Road,’ (2004) Journal of World Investment, 231–256.
63.
Katia Yannaca-Small, ‘Interpretation of the Umbrella Clause in Investment Agreements,’ in OECD (eds), International Investment Law: Understanding Concepts and Tracking Innovations (OECD: 2008).
64.
SGS Societe Generale de Surveillance SA v the Islamic Republic of Pakistan (SGS v Pakistan), ICSID Case No. ARB/01/13, Decision on Objections to Jurisdiction, 6 August 2003.
65.
Yannaca-Small, above n 63.
66.
Eureko B.V. v Republic of Poland, Partial Award 19, August 2005, para. 246, available at www.itlaw.com.
67.
Yannaca-Small, above n 63.
68.
UNCTAD, World Investment Report 2015, (United Nations: 2015), available at www.unctad.org; Jude Antony, ‘Umbrella Clauses since SGS v Pakistan and SGS v Philippines-A Developing Consensus,’ (2013) 29(4) Arbitration International, 607–640.
69.
DF v Argentina, above n 14.
70.
Ibid.
71.
EDF v Argentina, above n 14, Ibid., paras 1–50.
72.
Agreement between the Government of the Republic of France and the Government of the Republic of Argentina for the Encouragement and the Protection of Mutual Investments (Argentina-France BIT), signed on 3 July 1991, (entry into force on 3 March 1993).
73.
Bilateral Investment Treaty between Argentina and Belgium-Luxemburg Economic Union (Argentina-Luxemburg BIT), signed on 28 June 1990, (entry into force on 20 May 1994).
74.
Ibid., Argentina-Luxembourg BIT, Article 10(2); also, it was referred in the decision that Article 7(2) of the 1991 Argentina-Germany BIT, signed on 9 April 1991, (entry into force on 8 November 1993) is drafted in a similar way; for further references, see, EDF v Argentina, above n 14, paras 921–937.
75.
EDF v Argentina, above n 14, paras 938–942.
76.
Ibid., paras 921–937. Ejusdem generis principle implies that MFN can only import more favourable standards of the same category as explicitly mentioned in the clause itself. For more details on ejusdem generis, see Chap. 3.
77.
EDF v Argentina, above n 14, para 928.
78.
Ibid., para 932.
79.
EDF v Argentina, above n 14, para 931.
80.
Ibid., paras 936–937.
81.
EDF v Argentina, above n 14, paras 936–937.
82.
EDF v Argentina, above n 14, Annulment Proceeding, Decision dated 5 February 2016, paras 234–239.
83.
Ibid., Decision on Annulment.
84.
Franck Charles Arif v Moldova, Award dated 8 April 2013, above n 14.
85.
Agreement between the Government of the French Republic and the Government of the Republic of Moldova on Mutual Encouragement and Protection of Investments (France-Moldova BIT), (title originally in French, translated by this researcher), signed on 8 September 1997, (entry into force on 3 November 1999).
86.
Franck Charles Arif v Moldova, above n 14, pages 10–25.
87.
Ibid.
88.
The basic BIT contained MFN clause in Article 4. A relevant part of the clause is quoted by the tribunal in its Award, above n 14, page 95, para 394.
89.
Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Moldova (Moldova-UK BIT), signed on 19 March 1996 (entry into force on 30 July 30 1998), Article 2 contained an umbrella clause as follows: ‘Each Contracting Party shall observe any obligation it may have entered into with regard to investments of nationals or companies of the other Contracting Party.’
90.
Treaty between the United States of America and the Republic of Moldova concerning the Encouragement and Reciprocal Protection of Investment (USA-Moldova BIT), signed on 21 April 1993 (entry into force on 25 November 1994), Article II.3 contained an umbrella clause as follows: ‘Each Party shall observe any obligation it may have entered into with regard to investments.’
91.
Franck Charles Arif v Moldova, above n 14, Award, page 96, para 396. To establish this point, the tribunal quoted from the Rejoinder by Moldova in which it admitted that MFN can apply to substantive obligations.
92.
Ibid., Award, page 96, para 395.
93.
Franck Charles Arif v Moldova, above n 14, page 96, Para 396.
94.
Ickale v Turkmenistan, above n 15.
95.
Ibid.
96.
Ickale v Turkmenistan, above n 15, paras 1–3.
97.
Agreement between the Republic of Turkey and Turkmenistan Concerning the Reciprocal Promotion and Protection of Investments (Turkey-Turkmenistan BIT), signed on 2 May 1992 (13 March 1997).
98.
Agreement between the Government of the Arab Republic of Egypt and the Government of Turkmenistan Concerning the Promotion and Reciprocal Protection of Investments (Turkmenistan-Egypt BIT), signed on 23 May 1995, Article 3; Agreement between the Government of Bahrain and the Government of Turkmenistan for the Promotion and Protection of Investments (Turkmenistan-Bahrain BIT), signed on 9 February 2011, Article 2.2; Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Turkmenistan for the Promotion and Protection of Investments (Turkmenistan-United Kingdom BIT), signed on 9 February 1995 (entry into force on 9 February 1995), Article 2(2).
99.
Ickale v Turkmenistan, above n 15, para 315.
100.
Ibid., para 323.
101.
Ickale v Turkmenistan, above n 15, para 321. The basic BIT MFN explicitly contained the terms, ‘similar situation.’
102.
Ibid., para 321.
103.
Ickale v Turkmenistan, above n 15, para 329.
104.
Caron and Shirlow, above n 1.
105.
For example, Empresas Lucchetti, S.A. and Lucchetti Peru, S.A. v The Republic of Peru, ICSID Case No. ARB/03/04, Award, dated 7 February 2005; Parkerings-Compagniet AS v Republic of Lithuania (Parkerings v Lithuania), ICSID Case No. ARB/05/8, Award, dated 18 September 2009; AES Summit Generation Limited and AES-Tisza Eromu Kft v The Republic of Hungary (AES v Hungary), ICSID Case No. ARB/07/22, Award, dated 23 September 2010; Rachel S. Grynberg, Stephen M. Grynberg, Miriam Z. Grynberg and RSM Production Company v Grenada, ICSID Case No. ARB/08/16, Award, dated 31 March 2011; Apotex v USA, Award, above n 15.
106.
Sergei Paushok V Mongolia, above n 14.
107.
Ibid., page 1, paras 1–9.
108.
Sergei Paushok V Mongolia, above n 14, page 1, para 6.
109.
Ibid.
110.
Sergei Paushok V Mongolia, above n 14, pages 15–28.
111.
Agreement between the Government of the Russian Federation and the Government of Mongolia About Encouragement and Mutual Protection of Investment (Mongolia-Russian Federation BIT) (the title is originally in Russian, translated by this researcher), signed on 29 November 1995, (entry into force on 26 February 2006).
112.
Treaty between the United States of America and Mongolia Concerning the Encouragement and Reciprocal Protection of Investment (US-Mongolia BIT), signed on 6 October 1994, (entry into force on 13 December 2001).
113.
Page 43, Para 242; Agreement between the Government of Mongolia and the Government of the Kingdom of Denmark Concerning the Promotion and Reciprocal Protection of Investments (Denmark-Mongolia BIT), signed on 13 March 1995, (entry into force on 2 March 1996).
114.
Sergei Paushok V Mongolia, above n 14, page 46, para 254.
115.
Denmark-Mongolia BIT, above n 113; Ibid., Sergei Paushok V Mongolia, page 124–125, paras 514–518.
116.
Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Mongolian People’s Republic for the Promotion and Protection of Investments (UK-Mongolia BIT), signed on 4 October 1991, (entry into force on 4 October 1991); Sergei Paushok V Mongolia, above n 14, page 124–125, paras 514–551.
117.
Ibid., Sergei Paushok V Mongolia, page 125, para 518.
118.
Sergei Paushok V Mongolia, above n 14, page 137–138, para 570.
119.
Teinver v Argentina, above n 14.
120.
Agreement for the Promotion and Reciprocal Protection of Investments between the Kingdom of Spain and the Republic of Argentina (Argentina-Spain BIT), signed on 3 October 1991, (entry into force on 28 September 1992).
121.
See, Chap. 5.
122.
Treaty between United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment (Argentina-US BIT), signed on 14 November 1991, (entry into force on 20 October 1994).
123.
Argentina-Spain BIT, above n 120, Article 3(1).
124.
Argentina-US BIT, above n 122.
125.
Teinver v Argentina, above n 14, Award, dated 21 July, paras 866–896.
126.
Ibid., para 896.
127.
Chemtura v Canada, above n 15.
128.
Mesa Power v Canada, Award, above n 15.
129.
Bilcon v Canada, above n 15.
130.
Apotex v USA, Award, above n 15.
131.
Mesa Power v Canada, above n 15, see Canada’s Rejoinder on the Merits, dated 2 July 2014, paras 42, 152.
132.
Ibid., para 42.
133.
Mesa Power v Canada, above n 15, Award of the tribunal, para 402.
134.
Apotex v USA, above n 15, see Counter Memorial on Merits and Objections to Jurisdiction of Respondent United States of America, dated 14 December 2012, para 389.
135.
Apotex V USA, above n 15, Award of the tribunal, para 8.77.
136.
Chemtura v Canada, above n 15, Award, paras 235–36.
137.
Batifort and Heath, above n 5.
138.
For a definition of multilateralisation by MFN, see Stephan W Schill, ‘Multilateralization through Most-Favoured Nation Treatment,’ in The Multi-lateralization of International Investment Law, (Cambridge University Press, 2010) 121–196. Schill has described the phenomena of multilateralisation of International Investment Law by MFN as follows:

MFN clauses oblige the State granting MFN treatment to extend to the beneficiary State the treatment accorded to third States in case this treatment is more favourable than the treatment under the treaty between the granting and the beneficiary State. The clauses break with general international law and its bilateralist rationale that, in principle, permits States to accord differential treatment to different States and their nationals, and instead ensure equal treatment between the State benefiting from MFN treatment and any third State.

Also, see, James Harrison, ‘The International Law Commission and the Development of International Investment Law, (2013) 45 Georg Washington International Law Review 413 at 430 where Harrison has commented on Schill’s idea of multilateralisation of IIAs especially by MFN. Schill, Ibid., at 65 and 69. Schill argued that the principles in IIAs are more or less identical while ‘divergences in the treaty texts are arguably limited enough so as to allow the conclusion that one can observe the existence of relatively uniform treaty texts that form the basis of any international investment treaty.’ Harrison critiqued Schill’s argument as it is based on an assumption of universality that may not be justified since states have autonomy to draft investment treaty texts.
139.
Above n 14.
140.
White Industries v India, above n 14.
141.
Ibid.
142.
White Industries v India, above n 14, paras 3.2.12–3.2.16.
143.
Ibid., para 3.2.18.
144.
White Industries v India, above n 14.
145.
Ibid., paras 3.2.29–3.2.26.
146.
White Industries v India, above n 14, paras 3.2.59–3.2.65.
147.
Ibid.
148.
White Industries v India, above n 14, Agreement between the Government of Australia and the Government of the Republic of India on the Promotion and Protection of Investments (Australia-India BIT), signed on 26 February 1999, (entry into force on 4 May 2000), (unilaterally denounced by India on 23 March 2017).
149.
Ibid., White Industries v India, para 2.1.1.
150.
Agreement between the State of Kuwait and the Republic of India for the Encouragement and Reciprocal Protection of Investment (India-Kuwait BIT), signed on 27 November 2001, (entry into force on 28 June 2006).
151.
Ibid.
152.
White Industries v India, above n 14, para 4.4.5. The claimant cited the quote from, Chevron Corporation and Texaco Petroleum Company v The Republic of Ecuador, PCA Case No. 34877, Partial Award on Merits, dated 30 March 2010.
153.
Ibid., para 11.2.1.
154.
White Industries v India, above n 14, paras 5.4.1–5.4.4.
155.
Ibid., para 11.2.2.
156.
White Industries v India, above n 14, para 11.2.3.
157.
Ibid., para 11.2.4.
158.
White Industries v India, above n 14, para 16.
159.
Bayindir v Pakistan, above n 14.
160.
Ibid.
161.
Bayindir v Pakistan, above n 14, paras 1–48.
162.
Ibid., paras 1–48.
163.
Agreement between the Islamic Republic of Pakistan and the Republic of Turkey Concerning the Reciprocal Promotion and Protection of Investments (Pakistan-Turkey BIT), signed on 16 March 1995 (entry into force on 3 September 1997) (presently replaced by the Pakistan-Turkey BIT 2012).
164.
Bayindir v Pakistan, above n 14, para 154.
165.
Vienna Convention on the Law of Treaties (VCLT), signed on 23 May 1969, 1155, 1-18232 United Nations Treaty Series 332 (entered into force on 27 January 1980), Article 31(2).
166.
For more details on this, see this chapter.
167.
Bayindir v Pakistan, above n 14, paras 146–160.
168.
Ibid.
169.
Bayindir v Pakistan, above n 14, para 149.
170.
Ibid.
171.
Bayindir v Pakistan, above n 14, paras 146–160.
172.
Ibid., para 152.
173.
Bayindir v Pakistan, above n 14, paras 146–160.
174.
Lord McNair, The Law of Treaties (Oxford Clarendon Press, 1961) 400.
175.
Bayindir v Pakistan, above n 14, para 159.
176.
See, Chap. 3.
177.
Bayindir v Pakistan, above n 14, paras 412–420.
178.
Ibid., para 416.
179.
Bayindir v Pakistan, above n 8, paras 417–418.
180.
Ibid., paras 417–418.
181.
Schill, above n 1.
182.
Most IIAs contain exceptions to MFN in respect of privileges agreed by the host-state with the third states in any past or future regional economic treaties, FTAs, customs unions, common market or similar regional organisational agreements for avoiding double taxation. MFN in the basic treaty cannot import that obligation even if they are substantive in nature. See Chap. 2 (drafting trends) for details.
183.
Some treaties exclude taxation from the general scope of the treaty itself.
184.
Under this exception, parties may derogate from their MFN obligation in respect of intellectual property (IP) rights if that is done in a manner consistent with the TRIPS agreement. For details, see Chap. 2 (drafting trends).
185.
Ibid.
186.
Gemplus v Mexico, above n 15, part X of the decision; also see, Societe Generale v the Dominican Republic, LCLA Case No. UN 7927, Award on Preliminary Objections to Jurisdiction, dated 19 September 2008, paras 40–41.
187.
Metal-Tech v Uzbekistan, above n 15, paras 1–10; and, Societe Generale v the Dominican Republic, Ibid.
188.
Ibid.
189.
Agreement between the State of Israel and the Government of the Republic of Uzbekistan for the Promotion and Reciprocal Protection of Investments (Israel-Uzbekistan BIT), signed on 4 July 1994, (entry into force on 18 February 1997).
190.
Agreement between the Government of the Hellenic Republic and the Government of the Republic of Uzbekistan on the Promotion and Reciprocal Protection of Investments (Greece-Uzbekistan BIT), signed on 1 April 1997, (entry into force on 8 May 1998).
191.
Metal-Tech v Uzbekistan, above n 15, para, 145.
192.
Schill, above n 1, at 524.
193.
For more details, see, Chap. 2 (drafting trends).
194.
For example, Ickale v Turkmenistan, above n 15. For more details on as to why MFN operates within ejusdem generis, see Chap. 3.
195.
Parkerings v Lithunia, above n 105, paras 366–371; Bayindir v Pakistan, above n 14, para 390. For more details of the application of ejusdem generis, see Chap. 3.
196.
Bayindir Insaat v Pakistan, above n 14.
197.
Ibid.
198.
Bayindir Insaat v Pakistan, above n 14, paras 417–418.
199.
CMS v Argentina, above n 15.
200.
Ibid., para 4.
201.
CMS v Argentina, above n 15.
202.
Treaty between United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment (Argentina-US BIT), signed on 14 November 1991, (entry into force on 20 October 1994).
203.
Ibid., Article XI.
204.
CMS v Argentina, above n 15, para 343.
205.
Ibid., para 377.
206.
CMS v Argentina, above n 15.
207.
GEA v Ukraine, above n 15, para 334. In this case, the claimant alleged a breach of the MFN clause of the Agreement between the Federal Republic of Germany and Ukraine on the Promotion and Mutual Protection of Capital Investments (Germany-Ukraine BIT) (signed on 15 February 1993).
208.
Ibid., GEA v Ukraine, para 342.
209.
GEA v Ukraine, above n 15, para 342.
210.
Ibid.
211.
North American Free Trade Agreement between Canada, the USA and Mexico (NAFTA), signed on 17 December 1992 (entry into force on 1 January 1994).
212.
Cargill v Mexico, above n 15.
213.
Ibid., paras 233–234.
214.
Al-Warraq v Indonesia, above n 14.
215.
Ibid.; Agreement on Promotion, Protection and Guarantee of Investments amongst the Member States of the Organization of the Islamic Conference, signed on 5 June 1981 (entry into force on February 1988).
216.
Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Indonesia for the Promotion and Protection of Investments (UK-Indonesia BIT), signed on 27 April 1976 (entry into force on 24 March 1977).
217.
Al-Warraq v Indonesia, above n 14, Para 381.
218.
Ibid., para 397.
219.
Al-Warraq v Indonesia, above n 14, para 551.
220.
Ibid., para 552.
221.
MTD v Chile, Decision on Annulment, above n 33.
222.
The doctrine of lex specialis suggests that if two laws are governing the same subject matter, the specific law would prevail over the general. For, MFN as lex specialis, see, Batifort and Heath, above n 5.
223.
Batifort and Heath, above n 5.
224.
UABE Energija v Latvia, above n 15.
225.
Ibid., paras 1–6.
226.
Lithuania-Latvia BIT, signed on 7 February 1996 (entry into force on 23 July 1996).
227.
Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), (entry into force on 14 October 1966).
228.
Agreement between the Government of Latvia and the Government of Romania on the Promotion and Protection of Reciprocal Investments (Latvia-Romania BIT), signed on 27 November 2011, (entry into force on 22 August 2002).
229.
Lithuania-Latvia BIT, above n 226, Article 3(2).
230.
Latvia-Romania BIT, above n 228, Article 2(2).
231.
Ibid., Art 3(1).
232.
UABE Energija v Latvia, above n 15, para 1105.
233.
Ibid., 1110.
234.
UABE Energija v Latvia, above n 15, para 1112.
235.
Metal-Tech v Uzbekistan, above n 15, para 145.
236.
Ibid.
237.
Eunjung Lee, Treaty Shopping in International Investment Arbitration: How Often has it occurred and How Has it been perceived by Tribunals? (LSE Working Paper Series: 2015) at http://www.lse.ac.uk/internationalDevelopment/pdf/WP/WP167.pdf at 1.
238.
Ibid., at 24.
239.
Lee, above n 237.
240.
For example, see Parkerings v Lithuania, above n 105, Award, para 369.
241.
For example, see ADF v USA, above n 15.
242.
For example, see Metal-Tech Ltd v Republic of Uzbekistan, above n 15.
243.
ATA Construction v Jordan, above n 14.
244.
Agreement between the Hashemite Kingdom of Jordan and the Republic of Turkey Concerning the Reciprocal Promotion and Protection of Investments (Jordan-Turkey BIT), signed on 2 August 1993, (entry into force on 23 January 2006).
245.
ATA Construction v Jordan, above n 14, para 30.
246.
Ibid., para 34.
247.
ATA Construction v Jordan, above n 14, paras 35–37.
248.
Ibid., para 37.
249.
ATA Construction v Jordan, above n 14, para 73.
250.
Ibid.
251.
ATA Construction v Jordan, above n 14, para 73.
252.
Treaty between the Government of the United States of America and the Government of the Hashemite Kingdom of Jordan Concerning the Encouragement and Reciprocal Protection of Investment with Annex and Protocol (USA-Jordan BIT), signed on 2 July 1997, (entry into force on 12 June 2003).
253.
ATA Construction v Jordan, above n 14, para 73.
254.
Ibid., para 84.
255.
ATA Construction v Jordan, above n 14, para 123.
256.
Indian Law Commission, Analysis of the 2015 Draft Model Indian Bilateral Investment Treaty, (Report No. 260, August 2015). <http://lawcommissionofindia.nic.in/reports/Report260.pdf>.
257.
UNCTAD, ‘Most-Favoured-Nation Treatment’ UNCTAD Series on Issues in International Investment Agreements II, (UN, 2010) 63–64.
258.
Parkerings v Litunia, above n 105, para 369.
259.
Ibid.
260.
Pope and Talbot Inc. v Government of Canada, (UNCITRAL Arbitration, Award on the Merit Phase-2, dated 10 April 2001) paras 78–79.
261.
UNCTAD, above n 257, at 64.
262.
Ibid.
263.
UNCTAD, above n 257.
264.
Ibid.
265.
UNCTAD, above n 257, at 65. UNCTAD referred Pope and Talbot Inc.
266.
Pope and Talbot v Canada, above n 260, para 93.
267.
Ibid.
268.
Pope and Talbot v Canada, above n 260.
269.
Windstream Energy v Canada, above n 15, para 397.
270.
Ibid., para 410.
271.
Windstream Energy v Canada, above n 15, para 414–416.
272.
Okezie Chukwumerije, ‘Interpreting Most-Favoured-Nation Clauses in Investment Treaty Arbitrations’ (2007) 8 Journal of World Investment and Trade 597–646.
273.
Caron and Shirlow, above n 1. The authors commented that, assessing total situation ‘could quickly become unworkable and would introduce significant unpredictability into this area of law.’
274.
Ickale v Turkmenistan, above n 15.
275.
Jurgen Kurtz, The MFN Standard and Foreign Investment: An Uneasy Fit,’ (2004) 5 Journal of World Investment and Trade 861, at 886.
276.
Emmanuel Gaillard, ‘Abuse of Process in International Arbitration,’ (2017) ICSID Review, 1–21, at 16.
277.
Cementownia Nowa Huta S.A. v the Republic of Turkey, ICSID Case No. ARB(AF)/06/2, Award, para 113; Chevron Corporation and Texaco Petroleum Corporation v the Republic of Ecuador, UNCITRAL Interim Award, 1 December 2008, para 143; Phoenix Action Ltd v the Czech Republic, ICSID Case No. ARB/06/5, Award, dated 15 April 2009, para 143.
278.
Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals (Cambridge University Press, Reprinted Edition, 2004); also see, WTO Appellate Body-Decision on US Import prohibition of certain shrimps and shrimp products, WT/DS58/AB/R of 12 December 1998, para 158. The WTO Appellate Body confirmed that, ‘the principle of good faith, at once a general principle of law and general principle of international law, controls the exercise of rights by states.’
279.
Ibid., Bin Cheng.
280.
Bin Cheng, above n 278.
281.
OAO Tatneft v. Ukraine, above n 14.
282.
Bayindir v Pakistan, above n 14, Award, paras 177–179.
283.
Ibid., para 197.
284.
For details, see Sect. 4.2.
285.
Ibid.
286.
For details, see Sect. 4.2.
287.
The case is reviewed in Sect. 4.2.

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Tanjina Sharmin

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Sharmin, T. (2020). Application of MFN to the Substantive Benefits. In: Application of Most-Favoured-Nation Clauses by Investor-State Arbitral Tribunals. International Law and the Global South. Springer, Singapore. https://doi.org/10.1007/978-981-15-3730-1_4

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