The use of MFN clauses in investment arbitration: the problem of importation

Abstract

Abstract The nature of most-favoured-nation clauses (MFN clauses) is a constant source of debate and controversy. While the traditional position has been that they allow an investor to import provisions from another International Investment Agreement (IIA)—a practice that has been defined by some as ‘importation’1—there is a new trend that considers this a misuse of MFN clauses. This article endorses the latter position and will explain that the practice of importation derives from a misinterpretation of MFN clauses contained in IIAs. This error involves requesting a remedy for the specific performance of the MFN clause without first having claimed its breach. The claimant asks an arbitral tribunal simply to enforce the MFN clause by granting him the same provisions conferred to another investor. However, in this exercise, the investor forgets that, in order for an arbitral tribunal to order such a remedy, it must first be proven that such an obligation exists and was breached by the host state.