Most favoured nation clauses in investment treaty arbitration
Produced in partnership with Ben Sanderson

The following Arbitration practice note produced in partnership with Ben Sanderson provides comprehensive and up to date legal information covering:

  • Most favoured nation clauses in investment treaty arbitration
  • What is a most favoured nation clause?
  • Example MFN provision
  • MFN clauses in practice
  • The debate on MFN and jurisdiction clauses

Most favoured nation clauses in arbitration'>investment treaty arbitration

What is a most favoured nation clause?

A 'most favoured nation' (MFN) clause is commonly found in investment treaties. The clause provides a standard of protection that the host state will not treat foreign investors any less favourably than investors under other treaties. In the absence of an MFN clause, each state to the bilateral investment treaty (BIT) is free to discriminate economically between investors from different countries.

The purpose of an MFN clause is to standardise the levels of protections offered to foreign investors under all BITs signed by the host state. If the substantive protections offered by the host state in one BIT are less that it has provided in a BIT with another state, the investor can seek to rely on the MFN clause to import the higher standard of protection from the more favourable BIT, effectively replacing the less favourable language of the BIT upon which the claim is brought. For example, an investor might seek to import the more favourable language of an expropriation clause offered in the BIT between the host state and a third country. MFN clauses, therefore, serve to raise the host state’s obligations to investors in line with the strictest standard created in any BIT that the host state has agreed.

Example MFN provision

By way of example, the UK-Argentina BIT contains

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