Jurisdictional Impact of Most Favoured Nation Clause

by Edoardo Stoppioni

This paper was first published as ‘MPILux Working Paper 3 (2017)’. The full and final text is now available online as an entry of the Max Planck Encyclopedia of International Procedural Law, published by OUP at www.mpeipro.com.

Introduction: In investment arbitration, the MFN clause can assume different functions. Most notably, the clause can be used to broaden the scope of an investor's rights. To this effect, MFN clauses are meant to expand the perimeter of the investment protection provided by the host State, by attracting those more favourable conditions that the State offers to nationals of third countries. A debate burgeoned on the possibility to extend the MFN effect to procedural rights. Starting from an analysis of all the different arguments raised in such a debate, it results that the use of the MFN clause to modify limitations on arbitral recourse or to establish a direct access to an international tribunal is highly controversial. The starting point must be the analysis of the wording of the clause, customary rules of treaty interpretation push to proceed to a BIT by BIT analysis. In case the treaty remains silent, an undeniable war of presumptions has divided arbitrators. In such case, only the Plama position reflects the general principle of international law according to which dispute settlement mechanisms are of a consensual nature. Adopting the public international law vision of international litigation, one must conclude that the need for an explicit and unambiguous consent of the State, progressively built by PCIJ and ICJ case law, invalidates the Maffezini presumption. State consent should in no case be presumed in the international legal order, where no inherent right to a judge exists but where all courts and tribunals have a compétence d'attribution.