MFN is regarded as an important standard code of international commercial transaction. It has been said that MFN clause is one of the commonly adopted principle in the international investment2 domain. The definition of Most favoured-Nation is3 well explained in Article 5 of International law commission Draft Articles4,
Treatment accorded by the granting State to the beneficiary State, or to person or things in a determined relationship with that State, not less favoured than treatment extended by the granting State to a third State or to person things in the same relationship with that third state.
The scope of Most Favoured nation is a two way sword creating controversies related to whether the international investment treaties covers jurisdictional or procedural matters. The inclusion of MFN clauses became a general practice in the numerous bilateral, regional and multilateral investment-related agreements till 1950.
The aim of MFN clause is to reiterate the importance of equality of treatment irrespective of the nationality of the investors5 and eliminate the discriminative forces.MFN clause had a variant approach towards different treaties leading to more problems in identifying the scope and extend protections based on different treaties and their conditional clauses.
There are 2 differing hypothesis raised by experts on the scope of MFN clause such as
MFN clause could be extended to cover jurisdictional matter.
The scope of application of the MFN clause concerned does not cover procedural or jurisdictional matter.
The above hypothesis involves 2 conditional clauses to facilitate the jurisdiction concept. First clause is that the starting point of interpretation process should be a MFN clause. Second clause assumes that the MFN clause allows the incorporation of the provisions of the dispute settlement mechanism included in third-party BITs8.
Overview of Recent Arbitration Cases
Among the numerous cases brought to ICSID9 in recent years, two cases, Maffezini v. Kingdom of Spain10 and Tecnicas MedioAmbientales Tecmed S.A. v. the United Mexican States stand out as raising issues concerning the MFN clause. In Argentina and Spain treaty(hereinafter BIT) ,the claimant can avoid stipulations in the absence of the a friendly settlement and negotiation within six months period, the host state has eighteen months trial period to work on the dispute as the disputes are first filed at the local courts of the host state. Host state should make an attempt to resolve the dispute before the claimant approaches tribunal arbitration as the next step. The invoking of MFN clause by the claimant refers the Article IV (2) of the Argentina-Spain BIT that.
In all matters subject to this, treatment shall be no less favourable than that extended By each Party to the investments made in its territory by investors of a third country11.
The above article guarantees a fair and equitable treatment for the claimant and there can be a replacement