The Nascent International Law on Most-Favoured-Nation (MFN) Clauses in Bilateral Investment Treaties (BITs)
The divergent interpretations of the most-favoured-nation clause continue to cause difficulties, and it may be necessary to reconsider the view expressed by the League of Nations Committee of Experts that the subject, which it discussed in detail on the b
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Introduction The divergent interpretations of the most-favoured-nation clause continue to cause difficulties, and it may be necessary to reconsider the view expressed by the League of Nations Committee of Experts that the subject, which it discussed in detail on the basis of a thorough report, can be best dealt with by way of bilateral agreements.1 [T]he “law” on MFN clauses is, in part, in a nascent stage of development — which is why there are such divergent responses by different ad hoc Committees to different MFN Clauses (and sometimes even similarly worded MFN clauses) in Bilateral Investment Treaties.2
Despite early calls after World War II for a need to clarify the scope of MFN clauses in international treaties, this general debate remained rather silent since the International Law Commission suspended its work on the issue in the mid 1970s.3 With regard to bilateral investment treaties (BITs), clauses relating to Most-Favoured-Nation (MFN) treatment did not give rise to any particular
A.R. Ziegler Universita¨t Lausanne, Lausanne, Switzerland e-mail: [email protected] 1 United Nations, Memorandum submitted by the Secretary-General, “Survey of International Law in Relation to the Work of Codification of the International Law Commission”, extract from the Book of the ILC 1949. Document A/CN.4/1/Rev.1, para. 91, United Nations Publications, 1948. Vol. 1, pp. 52–53. 2 Wintershall Aktiengesellschaft v. Argentine Republic, ICSID Case No. ARB/04/14 (Germany/ Argentina BIT), Award, 8 December 2008, para. 92. See on this decision L. Peterson, Investment Arbitration Reporter, 1 (2008) 16, p. 11, online at http://www.iareporter.com (last visited 4 January 2009). 3 It was recently suggested that this work should be resumed in the ILC. For a historic overview, see Ziegler, Most-Favoured Nation (MFN) Treatment, in: Reinisch (ed.), Standards of Investment Protection, 2008, pp. 29–86.
C. Herrmann and J.P. Terhechte (eds.), European Yearbook of International Economic Law 2010, European Yearbook of International Economic Law, DOI 10.1007/978-3-540-78883-6_4, # Springer-Verlag Berlin Heidelberg 2010
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questions until very recently.4 These clauses were normally considered as a relic of the traditional way of negotiating establishment and treatment rights for foreign investors in the nineteenth century. Only very recently, the scope of the MFN treatment clauses has become of interest to arbitrators and legal scholars.5 It is especially the question whether the clause applies also to procedural rights (in particular dispute settlement) and definitions (e.g. the definition of a foreign direct investment or a foreign investor) that remains controversial. This discussion is very different from the more substantive discussion in other areas of international economic law, e.g. in relation to trade under the General Agreement on Tariffs and Trade (GATT), the General Agreement on Trade in Services (GATS) or to trade-related aspects of intellectual property rights under the TRIPs-Agreement of the World Trad
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