Examining New Approaches to the Interpretation of MFN Clauses in International Investment Agreements – Vol. 30 No. 1

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Author: Jeremy R. Stewart*

Published: December 2019

United States
Investment Disputes
States as Parties


Many countries are in the process of reforming their approach to investment treaties, with a view to creating additional certainty and narrowing the scope of substantive treaty obligations. However, a key part of many international investment agreements (“IIAs”), the most-favored nation (“MFN”) clause, presents a significant impediment to this reform process. MFN clauses (as conventionally interpreted) have the potential to play the role of a trojan horse—infiltrating a State’s network of investment treaties by importing broad substantive disciplines into many of the other investment treaties to which that State is party. In so doing, MFN clauses slow down a State’s efforts to reform its network of ITAs by perpetuating many of the broad substantive obligations which some States now seek to constrain.

Against this background, this article examines two competing approaches to the interpretation of MFN clauses in IIAs. By way of a framework, this article uses the following paradigms as a means of conceptualizing MFN provisions in IIAs:

• as a promise by State A to give investors from State B the benefit of any bargain State A strikes with a third State (the “importation approach”); or

• as a promise that State A’s actions will not discriminate against investors from State B relative to its actions towards investors from a third country (the “actual non-discrimination approach”).


This article […] seeks to draw deeper comparisons between MFN clauses in the World Trade Organization (“WTO”) and MFN clauses in IIAs. It also considers the implications of recent developments in State practice with respect to MFN clauses—particularly with respect to the Comprehensive Economic and Trade Agreement (“CETA”), the United States-Mexico-Canada Agreement (“USMCA”), and the EU-Japan Economic Partnership Agreement (“EJEPA”).

Section II gives a broad outline of the traditional approach to the interpretation of MFN clauses by investment tribunals and the challenges to this approach following İçkale.

Section III examines the different function of MFN clauses in the bilateral (or plurilateral) context of IIAs as compared with the multilateral context of the WTO.

Section IV then outlines new approaches to MFN clauses in recent IIAs, and considers the extent to which these new MFN clauses reflect a clarification, or a modification of the status quo.

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*LL.M., Columbia Law School, Class of 2019.