Interpreting Most-Favoured-Nation Clauses in Investment Treaty Arbitrations

In: The Journal of World Investment & Trade
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  • 1 Professor of Law, Thurgood Marshall School of Law, Texas Southern University, Houston, Texas. He may be contacted at ‹omerije@tmslaw.tsu.edu›. The research assistance of Chris Ogolla is gratefully acknowledged.

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  • 1 Between 1995 and 2006 the number of BITS increased from over 1,000 to more than 2,500. See UNCTAD, BILATERAL 1NVESTMEN'f TREATIES 1995-2006: TRENDS IN INVESTMENT PULEMAKINC 1 (2007), available at http://www.unctad.org/en/docs/iteüa20065_en.pd£ 2 Majority of thc recent IcsID arbitrations were brought pursuant to BITS. See Luke Peterson, BILATERAL INVESTMENT TREATIES AND DEVELOPMENT Policy-Making 15 (2004), available at http://www.iisd.org/ pdf/2004/trade_bits.pdf. See also UNCTAD, WORLD 1NVES1'MENT Report: FDI BROM Developing AND TRANSITION EC:ONOMIES: IMPLICATIONS FOR DEVELOPMENT 229 (2006), available at http://www.t111ctad.Org/rt1/ docs/wir2(1(16 en.pdf 3 For example. Article 10 of the Egrypt/Thailand BIT (2000) provides that if a dispute betwecn a (:ontracting Party and an investor has not been settled within six months following the date the dispute was raised by the investor, the dispute "may be submitted upon the request of the investor (his choice being final)" to a cornpetent local court of Icsn) arbitration. See also Art 14(b) of the Australia/Egypt BIT (2001) which provides that each Contracting Party shall "pcrmit its investors to select means oftheir choice to settle disputes relating to investments with the investors of thr other Party, including arbitration conducted in a third country." ' See UNCTAD, supra note 1, at 100 (noting that the usc of arbitration to resolve investor-state disputes is a common feature of BITS). 5 See Jack Coe, Secrecy and Transpareruy in Dispute Resoliitioti.- Transpareucy in the Recnlution of Investor-State Disputes - Adoption, Adaptation, and NAHA Leadership, 54 U. KAN. L. REV. 1339 at 1343-1347 (2006). See also Gabriel Egli, Don't Ciet Bit: Addressinβ Icsm's Inconsistent Application off Most-Favored-Nation Clauses to Dispute Resolution Provisions, 34 PEPI'. L. Rev. 1045, 1057 (2007). 6 For a chronological listing of investment treary awards, sec thc Investment Treaty Arbitration website, available at http://ita.law.uvic.ca/chronological list.htm. BITS and the arbitration awards that arise from them also contribute to the evolution of customary international law on the protection offoreign investment. See Bernard Kishoiyian, 77je [Jtility of Bilateral Investments Treaties in the Formtilatioii of Cllsfomary International Lau" 14 NW. J. IN'r'L L. & Bus. 327, 374 (1994) (noting that BITs and awards "contribute incrementally to the crystallization of customary intemational law").

  • 1 The scope of this clause has been a question oflong-standing concern. Writing in 1909, Hornbeck noted that "there appears a constant disagreement and cvcr-rccurring irritation over what is the meaning. and what are the obligations" arising from MFN clauses. Stanlcy Hornbeck, The A1ost-Fal'Med Natioll Clanse, 3 AM. J. INT'L L. 395, 395 (1909). 4 Article 5 of the International Law CoiiiilÜSSIOII'S (ILC) Draft Artides on Moct-Favored-Natiou Clauses defines MFN trcatment as "treatment accorded by the granting State to the beneficiary State, or to persons or things in a determine relationship with that State, not lcss favorable than trcatmcnt cxtcnded by the granting State to a third State or to persons or things in the same relationship with that third State." [1978] 2 YEAAUOOIC INT'L L.C. 15. "' The Interuational Court ofJustice has noted that one of the objectives ofMFN clauses is "to establish and maintain at all times fundamental equality without discrimination among all of the countries concerned." See Rights, ,�iitioitals of the United Stntes of Alllerica ill Mororar (Fr. V. U.S.) 19521.C.]. 176, 192 (Aug. 27). I UNCTA]) has noted that MFN clauses seck to promote the "equality of competitive opportunities between 111VCStors from different Foreign countries,." UN(: 1 Al), MoST-FAVOURED-NATION TREATMENT 1 (1999), available at http://www.unctad.org/en/docs/psiteiitdl0v3.en.pdf. I= According to the OECD, MFN clauses have "become a significant instrument of eeonornic liberalisation in the investment area" OECD. Mosi-FAVOREI)-NATION TREATMENT IN International INVESTMENT LAW 2 (2004), available at http://www.oecd.org/dataoecd/21/37/33773085.pdf 13 For an excellent review of the ränge of issues that have been the subjrct of debate with regard to the applicability of MFN clauses to dispute resolution, see genernlly Scott Vescl, Clearing a Pntlr Throuigh a 7'cin,qled Jurisprudence: Most-Favored-Nation Clatises and Dispute Settlernent Provisions in Bilateral lrmestrrrenr Treaties, 32 Y ALE J. INT'L L. 125 (2007). 14 The latest investor-state award dealing with the interpretation of MFN clauses is Telenor v. Hungary, IcsiD Case No. ARB /04/15, award of 13 September, 2006, available at http://www.worldbank.org/icsid/cases/pdf/ Atm0415 telcnor-v-hungary-award .pdf. 1> The Convention was drafted by the United Nations International Law Commission and adopted by thc Unitcd Nations Conference on the Law ofTreaties. UN Doc. A/Conf.39/27; 1155 UNTS 331; 8 ILM 679 (1969); 63 Ajii 875 (1969), available at http://untreaty . un .org/iIc/texts/instrumentsl enghshl conventions/U_1969. pdf 16 See, for example, Telenor, supra note 14, at para. 92. 17 See, e.g., David Gantz, An Appellate Merhnniwn for Revierv off Arbitral Decisions ill Investor-State Disputes: Prospects and Challellges, 39 VAND. TKANSNAT't L. 39 (2006). 18 Maffezini v. Spain, Icsiu Case No. AAa/97/7, decision of 25 Januar, 2000, available at http://www.worldbank.org/icsid/cases/emilio_DecisiononJunsdiction.pdf. ty Plama v. Bulgaria, I(aD Case No. AAü/03/24, decision of 8 Fcbruary, 2005, available at http://www.worldbank.org/icsid/cases/plama-decision.pdf 20 See, e.g., Egli, supra note 5, at 1079-1081 (arguing that IcsID tribunals have adopted conflicting approaches to applying MFN).

  • 21See, e.g., Freyer & Herlihy, supra note 124, at 83 (suggesting that a consensus is yet to emerged on the interpretation of MEN clauses in the areas of dispute settlement). 22 While some commentators have used the apparent inconsistency in some of the awards in investor-state arbitrations to question the legitimacy of the process, others have argued that it is premature to characterize the system of investor-state arbitration as broken. See lan Laird & Rebecca Askew, Finality Versus Consistency: Does Investor-State Arbitration Need an Appellate .Sy�fftn? 7 App. YRAC. & PROCESS 285, 300 (2005). z3 Article 31 ofthe Vienna (konvektion, supra note 15, requires that provisions of treaties be given their ordinary meaning bearing in mild their context, and their object and purpose. 24 The Teleiior tribunal expressed the C:onc ern that a broad interpretation of MFN clauses might expose host states to treaty shopping by foreign investors. Scc Telenor, supra note 14, at para. 93. Z5 For example, see generally, B. Lillich, INTERNATIONAL LAW OF STATE WESI'CINSIfiILITY FC)R INJURIES TO ALIENS (1983). zb M. SOnlaraj3h, TIiE INTERNATIONAL LAW ON FOREIGN INVESTMENT 37 (1994).

  • "See C.F. Amens111ghC, STATE Responsibility FOR INJUAIES TO ALIENS 56-61 (1964). See AI50 Somarajah. id. at 121. 21 In the 17th and 18th ccnturics, it was not uncommon for states to use military intervention as a means of protecting the interests of their nationals overseas. See Kenneth Vandevelde, UNITED STATES INVESTMENT TP-EATIES: POLICY AN17 PRACTICE 7-8 (1992). z9 See INTERNATIONAL LAW ASSC)CIATI()N (ILA), First Report on the Toronto Conference on International Law on Foreign Investment 4 (2006), available at http://www.ila-hq.org/pdf/Foreign%20Investment/ Report%202006.pdf. in See Paul Comeaux and Stephan Kinsella, PROTECTING FOREIGN INVESTMENT LINI7EA INTERNATIONAL LAW; LEGAL ASPECTS OB Political Risic 217-222 (1997). lt should be noted that occasionally individuals were peniütted by treaty provisions to bring limited claims against state parties for injuries arising from specific events such as war or revolution. See J. Collier & V. Lowe, THE SETTLEMENT OF DISPUTES IN INTERNATIONAL LAW, chap. 1 (1999). 31 ILA, supra note 29, at 4. 32 Capital exporting countries were keen on the harmonization of international Standard for treatment of foreign investors so that standards would not vary from state to state, depending on investment policy and regulatory regime. See Charles Lipson, STANL71NG GUARD 8-12 (1985). 33 The Hull rule was authored by Secretary of State Cordell Hull in 1932 during a diplomatic exchange in connection with a dispute betwecn the U.S. and Mexico conccrning the expropriation of the assets of U.S. 1'IaClOrialS in Mexico. For a reprint ofthe exchanges, see 3 GREEN H. HACKWORTH, Dickst (F International LAW 228 at 655-65 (1942). 34 See Somarajah, suyra note 26, at 254. The Standard has also been adopted by the U.S. Restatement (Third) on the Law of Foreign Relations, Section 712 (1998). 35 See Andrew Guzman, Miy LDCs Sign Treaties that Hurt 1'hem: Explaining tlve Popularity of Bilateral Investment Treaties, 38 VA INT'L L. 639, 644-51 (1998). See also Somarajah, supra note 26, at 402. 36 The basic tenets of the Calvo doctrine are emphasis on equality before the law of nationals and foreigners, subjection of foreign investment disputes to the exclusive jurisdiction of courts of the host state, rejection of the diplomatic protection of the foreign investor by the home state, and denial of damages to foreigners for injuries resulting from civil wars or disturbances unless provided by law. See Virtus Igbokwe, Determination, Interpretation and Application of Substantive Law in Foreign bll'estl/lC1lt Treaty Arbitration, 23 J. INT'L ARB. 267, 274 (2006).

  • 3�See Somarajah, supra note 26, at 89. Some capital importing countries were ofthe view that the appropriate Standard of compcnsation should bc "adequate" compensation. ld. at 402. 3s See Lipson, supra note 32, at 18, 74. 39 For example. Article 2 of the U.N. Charter of Economic Rights and Duties of States provides that each state has the right to expropriate foreign property, subject to the duty to pay "appropriate" compensation and that states are not required to give preferential treatment to foreign investors. G.A. Res. 3281, U.N. GAOR, 29th Sess., Supp. No. 31, at 50 U.N. Doc. A/9946 �an. 15, 1974), reprinted in 14 I.L.M. 251. For a discussion of the call for a NIEO, Sef Qcüerafly Robert Meagher, AN INTERNATIONAL REDISTRIBUTION OF WEALTH AND 1>(�wER: A Study OF THE Charter OF E(:ONOMIC RIGHTS AND DUTIES 01' STATES (1979). 411 Jeswald Salacuse and Nicholas Sullivan, Do Bus Really Work?: An Evaluation of Bilateral Investment Treaties and their Grand βargaiu, 46 HARV. 1NT'! L.J. 67, 76 (2005). .1 The problcnu with the customary international law regime for the protection of foreign investment included the fact that "the principles that did exist were often vague and subject to varying interpretation," and "offered foreign investors no effective enforcement mechanism to pursue their Claims against host countries that had injured or seized their investments or rcfiued to respect their contractual obligations." Id. at 68-9 42 The Unitcd Nations Conference on Trade and Development (UNCTAD) has noted that 131Ts arc rarely entered into between capital exporting countries because "investment rclations among developed countries are dealt with in a number of instruments adopted under the auspices of the OECD, to which all developed countries belong." .See UN(:TAI, BILATERAL INVESTMENT TItEA'1'IFS 1959-1999, 4 (2000), available at http://www.unctad.org/cn/docs/poiteiiad2.en.pdf. 43 See E.I. Nwogugu, THE Legal PROBLEMS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRIES 119-22 (1965) (tracing the evolution of treaties of friendship, commerce and navigation.) 4t See Todd Shenkin, Trarle-Rrlated Investment Measures in Bilateral Investment Treaties and G4TT: Moving toward a Multilateral Investment Treaty, 55 U. PITT. L. REV. 541, 570 (1994) (noting that early U.S. treaties of friendship and commerce were concerned primarily with trade and shipping issues.) ^5 Attempts to create a multilateral investment treadnent have so far proved unsucccssfirl. For a survey of these attempts, see Franziska Tschofen, Multifateral Approaches to the Treatmellt of Fareigll IIIl'estl1lC/lt 7 Icsin REV. 284 (1992). 46 Joshua Robbins, The Ernergence of Positive Obligations ill Bilateral Investment Treaties, 13 U. MIAnnI INT'L & COM!'. L. REV. 403, 412 (2006). See also Todd Shenkin, Trade-Related ltwestm<'l1t Measures in Bilateral Irrvestment Treaties arrd the GATT: Movirty Toward a Multilateral Investment Treaty, 55 U. PITT L. Rev. 541, 570-76 (1994) (describing the evolution of U.S. treaty practice from treaties of friendship, Commerce and navigation to 131TS.) 41 Salacuse and Sullivan, supra note 40, at 77.

  • °eSeesupra note 1. See also Susan Franck, l1re Legitirnacy Crisis in Investment Treaty Arbitration: Privatizing I'ublic International Law through Inconsistent Decisiolls, 73 FORD. L.R. 1521, 1522-3 (2005). 4'J Most dcvcloping countrics arc adopting investment policies favorable to foreign Investment. See Jurgen Kurtz, A General Inve.stment Agreements in the Wr'o? Lessons from Charter 1 of N.1FTA and the OECD Multilateral Agreement on Investment, 23 U. PA. fNT'L Ecorv. L. 713, 718-724 (2002). so See supra text accompanying note 33. It has been suggested that a partial explanation for this cvolution is the fact that capital importing countries "face a prisoner's dilennna in which it is optimal for them, as a group, to reject thc Hull Rulc, but in which cach individual LDC is better off `defecting' from the group by signing a BIT that gives it an advantage over other Luca in the competition to attract foreign Investors." Guzman, supra note 35 at 666-7. 51 Pierre Sauve, Scaling Back Ambitions on Investment Rule-Making at the Wjo, 2 J.W.I. 529 (2001). s= The right to fair and equitable treatment as a principle of intcrnational law has one of its primary origins in BITS. See Franck, supra note 48, at 1523. e3 Seegellerally Deborah Swenson, H1/y Do Deuelopillg Countries Sign BITS, 12 U.C. Dnms J. INT'� L. & PoL'Y 131 (2005). 54 For exarnplc, the prearnblc to the rccently concluded U.S.-Uruguay BIT notes that "the agreement upon the treatment to be accorded [foreign investments will �tiniulate the flow of private capital and the economic development of the Parties." Available at http://www.ustr.gov/asscts/Tradc_Agrccments/BIT/Uruguay/ asset- upload Jile748 _'005.pdf. 55 Salacuse and Sullivan, for example, suggest that "the basic assurnption behind BiTs are that a bilateral treaty with clear and enforceable rules to protect and facihtate foreign investment reduces the risks that the investor would otherwise face and that such reduction in risks, all things being equal, encourage Investment." Supra note 40 at 77. See also Kenneth Vandevelde, Investrnent Liberalization and Economic Development: The Role ,1 Bilateral Grvestmerrt 'I'reaties, 36 Colum. J. '1'KANSNAT'L. L. 501 at 503 (1998). 56 UNCTAD has noted that an "aggregate statistical analysis does not reveal a significant independent impact of BITS in detenniuing Fm flows." Ifanything, they "play a minor role in influencing global FDI flows and explaining difFcrcnecs in their size among countries." See UNCTAD. WOKLI) INVESTMENT Report 2003, 89-91, available at http://www.unctad.org/en/docs/wir2003overview_en.pdf. See also Mary Hallward-Driemeier, Do Bilateral Investmerrt Treatie.s Attract Fur? Only a Bit ... atid They Coiild Bite (The World Bank Policy Research, Working Paper No. 3121) (2003). But see also Kenneth Vandevelde, The Ecotiomics of Bilateral Investment Treaties 41 HARV. INT'L L.J. 469 (2000) (arguing that the evidence suggests that BITS have at least marginally contributed to increase in capital flows.) 57 In the absence of a broad multilateral investment treaty, Biis have assumed the role of tlie primary mechanism of protecting foreign investment in developing countries. sx These twin goals are inter-related in the sense that the stimulation of forcign investment is often marketed as a consequent of the effective protection of foreign investment. For cxarnple, sec the prcamble to the U.S.-Uruguay BIT, suyra note 54.

  • 59 Guillenno Alvarcz � William Park. 77ie New Faie of Investment Arbitration: NAFIA Chapter 11, 28 YALE j. INT'L L 365, 366 (2003). 611 For a general survey of thc protections available to foreign investors in BITS, see ,�el/er"l1y R. Dolzer & M. Stevens, BILATERAL INVESTMENT Trhatihs (1995). (,1 Susan Franck, 171e Nature und El!!tJf(c11lenf of Invrstor Riqhts under Lrrvestrnent 7'ff'f)f)f.f; De Investment Treatie, Have a Briglrt Fnture, 12 U.C. Davis INT'L L. & Pm'y 47, 48 (2005). 62 See for example, Art. tt(2)(a) of the U.S./Bulgaria BIT (1992) provides that "[iJnvestment shall at all times be accorded fair and equitable treatment." Available at http://www.unctad.org/scctions/dite/üa/docs/bits/us_bulgaria.pdf. (,.1 ILA, supra note 29, at 16. According to an IcsiD tribunal, in approaching the issue of fair and equitable treatment of foreign investors, the relevant question is whether "a tribunal can conclude in the light of all the available facts that the impugned decision was clearly improper and discreditable, with the result that the investment has been subjected to unfair and unequitable treatment,." Mondev International Ltd. v. United States, !cs)t3 Case No. ARti(AF)/99/2, 42 I.L.M. 85 at para. 127 (2003). 1,4 For exanrple, the U.S.-Triuidad and Tobago BIT requires each signatory to "accord to covered investments fair and equitable trcatnrrnt and full protection and security..." Treaty Between the Govemment of the United States and the Govemment of the Republic of Trinidad and 'I'obago Concerning the Encouragcment and Rcciprocal Protection of Investment, Sept. 26, 1994. 65 Alwyn Freeman, RESPONSIt3ILITY OF STATES FOR UNLAWFUL Acrs OF TIIFIR ARMFD FORCES 15-16 (1957). 66 For example. Article u(3)(c) of the U.S./Ecuador BIT (1993) provides that "[e]ach Party shall observe any obligation it may have entered into with regard to investments,." "7 See John Ciafiiey & James Loftis, 'nie 'FJJi'cti"e Ordil/ary Meaninq' of Bris alld the Jurisdiction !f 'J'reaty-Based Tribunals to Hear Contract Clairns, 8J.W.I.T. 5, 27-28 (2007). For a discussion ofhow the agreement ofthe parties to a BIT to honor comrnitments made to investors may elevate contractual disputes to treaty disputes, seegenerally Björn Kunoy, Sillgillg in the Rain: Developments in the interpretation of Urnbrella Clauses. 7 J.W.I.T. 275 (2006); Anthony Sinclair, The Oriqins cf Urnbrella Clauses in the International Law of Investment Protectioll, 20 ARH. INT'L 411 (2004); Stanimir Alexandrov, Breaches of COlltract and Breaches of Treaty: Tlie Jurisdiction of Treaty-Based Arbitration Tribunals to Decide Breach of COl1tract Claims, 5 J.W.I.T. 555 (2004); Thomas Walde, The 'UmbreIla' Clatise irt Investment Arbitration: A Cornment on Original Intentions and Recent Caces, 6 J.W.I.T. 183 (2005). �" For example, Art. 6 of the U.S.-Uruguay BI provides that neither signatory "may expropriate or nationalize investment either directly or indirectly through measures equivalent to expropriation or nationalization, except for a public purpose; in a non-discriminatory manner; on payment of prompt, adequate, and eflective compensation; and in accordance with due process of law ..." Suyra note 54. Although the phrasing of the compensation requirement varies from treaty to treaty, most BITS basically adopt the Hull formula. See Salacuse & Sullivan, supra note 40 at 87.

  • wi For example, Art. 3 ofthe U.S.-Uruguay BIT requires each signatory state to "accord to investors of the other Party treatment no less favorable than that it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, Operation, and sale or other disposition of investments in its territory." Id. 70 For example. Art 4 of the U.S.-Uruguay BiT requires each signatory state to "accord to investors of the other Party treatment no less favorable than that it accords, in like circumstances, to investors ofany non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investment in its territory." Id. " See ILA, supra note 29, at 15. This is sornetimes accomplished by limiting the access of foreigm investors to subsidies targeted at strengthening national industries. See UN(:TAl7, BILATERAL INVESTMENT TIiEATIES IN THE MW -1990s, 64-65(1998). �z OECD, supra note 12 at 16. " Joshua Robbins, supra note 46 at 404. " See generally, Bernard Kishoiyian, 71re Iltility of Bilateral Investment Treaties in the Fomlfllation of Customary International' Law, 14 NW. J. INTL L. & Bus. 327 (1994). 7S See Salacuse & Sullivan, supra note 40, at 88. 76 For a discussion of the use of arbitration in interpreting Bus in disputes between signatory states, sec· Bemardo Cremades, Has the Proliferation eJ Bits Gone Too Far. Is it Now Time for a Multilateral Investment Treaty? 5J.W.I.T. 89, 90-91 (2004).

  • " The International Center for the Settlement of Investment Disputes was established in 1965 to provide a forum for thc resolution of disputes between foreign private investors and host states. See Convention. on thc Settlement of Investment Disputes Between States and Nationals of Other States, Mar. 18, 1965, 17 U.S.T. 1270, 575 U.N.T.S. 159. It has been estimated that more than 1,500 Bus provide for the resolution of disputes under the auspices of 1CSID. See Symposium, Invoking State Responsibility in the Twenty-First Centrlry, 96 AM. J. INT'L L. 798, 812-3 (2002). Other arbitration options available in BITS include arbitrations under the International Court of Arbitration of the International Chamber of Commerce (Icc). arbitration under the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce, and ad hoc arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law (UNC:rntnt.). See Antonio Parra, Provisions on the Settlement of Investment Disputes in Modem Investment La ws , Bilateral Investment Treaties and Multilateral Instruments on Investment, 12 ICSID REV. 287, 296 (1997). The resolution of Brr disputes under the auspices ofIcsiD meshes well with the intent ofthe drafters ofthe ICSIIJ convention to create "an institution designed to facilitate the settlement of disputes between States and foreign Investors [asl a major step toward promoting an atmosphere of mutual confideiices and thus stimulating a larger tlow of private international capital into those countries which wish to attract it." See ICSID, Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965), reprinted in ICSID Convention, Regulations and Rules 40, available at http://www.worldbank.org/icsid/basicdoc/partB.htm. See also Vincent Niiieliielle, I:rforcin,q Arbitration Awards Under the International Convention for the Settlement of Investment Disputes 7 Ar�rt�r. SURV. Irrr't. & COMP. L. 21, 23 (2001) (noting that IcsiD was created to "assure foreign investors of protection under international law from unilateral actions of host countries which could jeopardize their investments"). '" For a discussion of the first ICSID arbitration award based upon the consent provision in a BIT, see Asian Agricultural Products Ltd. v. Sri Lanka, Case No. At�/87/3, 30 I.L.M. 577 (1991). 7') Sce Raul Vinuesa, Bilateral Investment Treaties and the Settlement of Investment Disputes under IcslD: The Latin American Experience, 8 LAW & Bus. Rsv. AM. 501, 503-504 (2002). $° Tai Heng Chen, Pou�er, Authority and Intenrational lnvestment Law, 20 AM. U. INT'L L. REV. 465, 471 (2005). 81 See supra text accompanying note 30. 82 See, e.g.. Art. vi of the U.S./Bulgaria BIT (1992) which embodies the consent of the state signatories to arbitrate investment disputes with covered investors upon the fulfillrnent of certain conditions by the latter. It provides, inter alia: "At any time after six months from the date on which the dispute arose. the national or Company concemed may choose to consent in writing to the subnllssion of the dispute for settlement by conciliation or binding arbitration to the International Centre for the Settlement of Investment Disputes ("Centre") or to the Additional Facility of the Centre or pursuant to the Arbitration Rules of the United Nations Commission on International Trade Law ("UNCITRAL") or pursuant to the arbitration rules of any arbitral institution mutually agreed between the parties to the dispute."

  • s3 Jan Paulsson, Arbitration Without Privity, 10 ICSID Rev. 232 (1995). H4 The foreign Investor, not being a party to the BIT, cannot be said to have made an offer to arbitrate, absent an arbitration clause in the Investment contract between it and the host state. See Bemardo Cremades & David Cairns, Ilie Brave New World of Global Arbitration, J.W.I.I'. 173, 184 (2002). See also Andrea Bjorklund, Cotitract Witl""a Privity: SOl'ereigll O�er aiid Investor Acceptance, 1 Cni. j. Irrr'r. L. 183(2001). 85 Gus Van Harten, The Public-Private Distillcrioll in the International Arbitratioti olllldividllal Claims against the State, 56 INT'L & COMP. L.Q. 371, 377 (2007). sb Jürgen Kurtz has noted that in contrast to a state, a private investor would usually "only consider the extent to which an alleged commercial loss can be rectified through the initiation of the dispute settlement process of an investment treaty." See Jurgen Kurtz, Tlre Staiiiiard and Foreign 7M�fi<mcK<; An Clvensy Fit? 5 J.W.LT. 861, 865 (2004). 87 Van Harten, supra note 85, at 379. 88 Id. 89 The preamble to the U.S.-Uruguay BIT acknowledges "the importance of providing effective means of asserting claims and enforcing rights with respect to investment under national law as well as through international arbitration." Supra note 54.

  • '"' The tribunal in Gas Natural noted that "provision for international investor-state arbitration in bilateral investrnent treaties is a significant substantive incentive and protection for foreign investors." Gas Natural v. Argentina, at para. 31, Icsii) Case No. ARB/03/7, decision ofJune 12, 2005, available at http://www.asil.org/pdfs/ GasNat.v.Argentina.pdf. Similarly, the Platiia tribunal has noted that the arbitration of investmemt disputes "can be a major step toward promoting an atmosphere of mutual confidence and thus stin,ulating a larger flow of private international capital in those countries which wish to attract then." Siprn note 19, at para. 193, citing the Report of the Executive Directors of the ICSID Convention. 91 Maffezini supra note 18, at para. 54. vz Id. 93 National Grid v. The Argentine Republic, para. 76, UNCITRAL arbitration decision of June 20, 2006, available at http://www.invcstmentclaims.com/decisions/NationalGrid-ArgentinaJurisdiction.pdf. va Franciso Orrego Vicuna, quoted in 13array Appleton, A Closer Larnk: All Analysis of Plama n. Bulgaria 2005 App. News 053. 95 Maffezini supra note 18, at para. 54.

  • 96 Ii c, supra note 9. 97 Id. at p. 159. 98 Id. 99 George Fisher, '71,e Most Favored Nation' Clause in G.1TT: A Need,for Reevaluation, 19 S rnN. L. RFV. 841, 841-2 (1967). 100 Ii.c, supra note 9 at 160. '�' Id. '°= The other pillar is the principle of national treatment. See supra, text accompanying note 69. 1111 General Agreement on Tariffs and Trade, Oct. 30, 1947. 61 Stat. A3, T.LA.S. No. 1700. In4 Art. 1 (1) of GATT 1947. Id.

  • 105 MFN clauses are contained in the following agreements of the WTO. Art. 1(1) of General Agreement on Tariffs and Trade 1994 (GATT 1994). See THE LEGAL TEXTS: THE RESULTS OF THE URUGUAY R(UND (F MULTILATERAL TRADE NECOTIATIONS 284 (1999), 1869 U.N.T.S. 183, 33 l.L.M. 1143, 1153, (1994). Art. 2 of the General Agreement on Trade in Services. Id. at 1167. Art. 4 of thc Agreement on Trade-Related Aspccts of Intellectual Property Rights. Id. at 1197. Richard Gardner, Sterling-Dollar Dn'LOMACY: Anglo-American COLLABOItATION IN THE RECONSTRUCTION OF INTERNATIONAL TRADE 4 (1956). 1U7 Kurtz, supra note 86, at 865. 108 Id. at 866. 109 See UNCTAD, supru note 1 at xii. "° Kurtz, supra note 86, at 866. On the difficulties in reversing commitments made in 131TS, see Luke Peterson, 13BILATERAL INVESTMENT TAEATIES AND DEVELOPMENT POLICY-MAKING 36-7 (2004), availabie at http://www.iisd. org/pdf/2004/tradc_bits.pd£ 111 Kurtz, supra note 86 at 866. 112 Id. at 867-872.

  • "■' �3 Id. at 867. 114 Id. 115 See suyra note 105. 116 Kurtz, supra note 86, at 872. 117 See supra text accompanying note 86. 118 Kurtz, suyra note 86, at 869. 11" Vesel, supra note 13, at 184-5. '2° For example, Art. 3(3) of the U.K. Model BIT provides that "for the avoidance of doubt it is confirmed that the [MFN] treatment provided for in paragraphs (1) and (2) above shall apply to the provisions ofArticles 1 to 110this Agreement." Dispute settlement is dealt with in Art. 8 of the Model BIT. 121 For example, while some MFN clauses are expressed to apply to "activities connected with the investments" (see Article 3(2) of the Zimbabwe-Germany BIT (1995), others are expressed to apply to the "management, maintenance, use, enjoyment or disposal of their investments." (See Article 3(2) of the Thailand-Israel BIT (2000). 122 Honibeck, supra note 8, at 397. '23 Vandevelde, UNITED STATE INVESTMENT TREATIES, 71-76 (1992). 124 Dana Freyer & David Herliliy, Most-Favored-Nation Treatment and Dispute Settlemertt ifllflvestmeflt �Ir�/fM�cf!.' Just How 'Favored' is `Most-Favored'? 19 IcsiD) REV. 58, 62-3 (2005).

  • ' Freyer & Herlihy, supra note 124, at 63. 126 Rights of Nationals of the United States ofAmerica in Morocco (Fr. V. U.S.), 1952 1.Cj. 176, 192 (Aug. 27). Similarly, UNCTAD has noted that thc primary purpose ofMFN clauses in BITS is to give "investors a guarantee against certain terms of discrimination by host countries," and to establish "equality of competitive opportunitics between investors from different countries." UNCTAD,, supra note 11, at 1. 127 OECD, supra note 12, at 2. 12< Vandevelde, supra note 123, at 34. This incorporation of other treaties also operates to mitigate lapses in the drafting of Brrs. As Schwarzenberger has noted: It is clear that MFN clauses serve as insurance against incompetent draftsmanship and lack ofimagination on the part of those who are responsiblc for the conclusion of international treaties ... it is thus true that the standard of MFN treatment has the effect of putting the services of the shrewdest negotiator of a third country gratuitously at the disposal of one's own country." Georg Schwarzenberger, The Most-Favored-Nation Standard in British State Practice, 22 BRIT. Y.B. It.rT'L L. 96, 99 (1945). rz9 Vesel, supra note 13, at 142. ° Oec:o, supra note 12, at 2. 131 This would of course depend on how broadly arbitration tribunals interpret the content of these MIN clauses. 132 Vesel, supra note 13, at 142. 133 In the Siemens v. Argentina arbitration, the tribunal supported its intcrprctation of the MFN clause in part by relying on the ostensible objective of MFN Clauses to harmonize the treatment of foreign investors. ICSID Case No. Aim/02/8, decision of August 3, 2004, available at http://www.asil.org/ilib/Siemens_Argentina.pdf.

  • 114Supra note 15. '35 According to lan Brownlic, who participated in the drafting of the convention, the convcntion was aimed at distilling "the comparatively general principles which appear to constitute general rules for the interpretation of treaties." lan Brownlie, PRINCIPLES OF Public It.tTERrvAT�oNnL LAW 35 (2d ed. 1973). 136 Art. 31(1). This provision echoes the view of the Ici that "the first duty of a tribunal which is called upon to interpret and apply the provisions of a treaty, is to endeavor to give effect to them in their natural and ordinary meaning in the context in which they occur." Advisory Opinion, Cotnpetence of the General Assembly for Admission of a State to the United Nations, 1950 IC.J. 4, 8 (Mar. 3). L17 Art. 31 (2). 138 Art. 31(3). 139 Art. 31(4). 140 Art. 32.

  • � International Law Commission, Report ofthe (commission to the General Asscmbly [1966] 2 Y.B. Int'l L. Comm. 218, reprinted in 3 United Nations Conference, on the Law ofTrcatics 39 (2001). 142 See Evan (Middle, The Vienna Convention ort the Law o� Treaties in U.S. Treaty Interpretation, 44 VA. J. INT'L L. 431, 440 (2004). ; International Law Commission, siipra note 141, at 38. i44 See, e.g., National Grid, supra note 93, at para. 80. t4s Freyer and Herlihy, supra note 124 at 62. 146 Id. �4� Id. at 63.

  • 14< Art. 2. �a9 Emelie Smiding, Just How Favored is 'Most-Favored'?: Establishing International Arbitral Jurisdiction in Investor-State Disputes through Most-Favored-Nation Clauses under Bilateral Investment Treaties, 30 (2007) (unpublished LL.M. thesis, Faculty of Law, University of Lund), available at http://www.jur.lu.se/Internet/ Biblioteket/Ex.iii)eiisarbeteii.iisf/O/F94355BD0256A5C9C12572890051527D/$File/exani.pdP0peilElenient. '�° In this respect, a tribunal has cautioned that "what has to be applied is not some abstract principle of Investment protcction in favor of a putative investor who is not a party to the W and who at the time of its conclusion is not even known, but the intention of thc States who are the contracting parties." Telenor, supra note 14, at para. 95. It further added that the task of a tribunal "is to interpret the Bit and for that purpose to apply ordinary canons of interpretation, not to displace, by reference to general policy considerations concerning investor protection" the provisions specifically negotiated by the parties." Id. 151 Vesel, supra note 13, at 143.

  • 152 Id. �s3 In this respcct, a tribunal has cautioned that "an interpretation [of a BIT� which exaggerates the protection to be accorded to foreigii investments may serve to dissuade host States trom admitting foreign investments and so undermine the overall aim of extending and intensifying the partics' mutual economic rclations." See Saluka Investments v. The Czech Republic, para. 300, Ut�carβA� award of 17 March, 2006, available at http://www.pca-cpa.org/ uploadl files/SAL-CZ%20Partial%20A ward%20 170306. pdf 154 Siemens, supra note 133, at para. 81. �s' Stephen Fietta, Most Favoured Nation Treatment and Dispute Resolution under Bilateral Investment Treaties: A Tuming Poinr [2005] INT'L A.L.R. 131, 132. 156 National Grid, supra note 93, at para. 80.

  • IS7 Id. 1S* The lq has explained that it is the base treaty that "establishes the juridical link between thc beneficiary State and a third party treaty and confers upon that State the rights enjoyed by thc third party." Anglo-Iranian Oil Co. Case, judgment of 22 July 1952, 1952 1.Cj. Ree. 109. 159 The ILC has noted that thc principle is generally acknowledgetl by international tribunals and national courts. See ILC, supra note 9, at 27. 's° Pech, supra note 12, at 16. UA Supra note 9. 162 Article 9(1) ofthe draft articles. Id. 1(,-, Article 10(1) of the draft articles. Id. The ILC illustrated the application of the ejusdern gClleris principle by quoting &om McNair: "Suppose that a most-favored-nation clause in a connnercial treaty between State A and State 13 entitled State A to clairn from State B the treatment which State B gives to any other State, that would not entitle State A to claim from State B the extradition of an alleged crinvnal on the ground that State B has agreed to extraditc alleged criminals of thc same kind to State C, or voluntarily does so. The reason, which seem to rest on the common intention of the parties, is that the clause can only operate in regard to thc subject- matter which the two States had in mind when they inserted the clause in their treaty." ILC, id. at 27. 164 ILC, supra note 9, at 25.

  • iss Ambatielos Arbitration, 12 R.I.A.A. 83 (Commission ofArbitration, 1956). 166 Id. at 107. 167 Id. at 107. It is instmctive to note that in the Ic) proceedings during which the Ambatielos case was referred to the Commission of Arbitration, President McNair expressed the view that an MFN clause that covered matters relating to commerce and navigation did not extend to the administration of justice. Consequently, the ejusdem generis principle, in his opinion, precluded the claimant from using the MFN clause to obtain the benefits relating to the administration ofjusticc. Ambatielos, judgment ofMay 19, 1953, 1953 1.cd. REP. 10 at 34. �sri The ILC has argued that it is the subject matter of the MrN clause, not the treaty containing the clause that is the crucial factor. In the commission's view, focusing on the subject-iiiatter of the treaty "would seriously diminish the value of a most-favored-nation clause. ILC, supra note 9, at 30. 1m Id. nn Id.

  • 171 Some tribunals have relied on the Investment protection objective of BITS to support resolving "uncertainties in [the] interpretation of [Bits] so as to favor the protection of covered investments." See Sgs v. Philippines, para. 116, ICSID Case No. AKts/02/6, decision of 29 January, 2004, available at http://www.worldbank.org/icsid/cases/SGSvPliil-final.pdf. Cf. Noble Ventures Inc. v. Komania, para. 52, ICSID Case No. ARB/01/Il, award of 12 October, 2005, available at http://ita.law.uvic.ca/documents/Noble.pdf, where the tribunal noted that "it is not permissible, as is too often done regarding BITS, to interpret clauses exclusively in favor of investors." UNCTAD has noted an emerging trend toward the view that "investment protection should not be pursued at the expense of other essential public policy concerns." UNC;;Aü, supra note 1 at xiii. 172 In Plasma, the tribunal, adopting the words of Sir lan Sinclair, cautioned about the "risk that the placing of undue emphasis on the 'object and purpose' of a treaty will encourage teleological rnethods of interpretation [whichj, in some of its morc cxtreme forrns, will even deny the relevance of the intentions of the parties." Supra note 19, at para. 193. '�� EI Paso Energy v. Argentina, para. 70, IcsjD Case No. A"/03/15, decided on 27 April, 2006, available at http://www.worldbank.org/icsid/cases/ARB0315-DOJ-E.pdf. 174 Id. at para. 70. The tribunal took issue with the view that ambiguities in BITS should be resolved in favor of foreign investors. 175 See, for example, Article IV of the Hungary/Norway BIT which provides that "[Investments made by investors of one Contracting Party in the territory of the other Contracting Party, as also the returns therefrom, shall be accorded treatment no less favorable than that accorded to investments made by Investors of any third State."

  • In Art. u(4) ofGATT 1994 provides that "[tjhc products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favorable than that accorded to like products of national orignn ..." slIpra note 1(l5. ��� United States - Section 337 of the TarifFAct of 1930, B.I.S.D. L/6439-36S/345, adopted on 7 November 1989, at para. 5.11. 171 Korca - Mcasurcs AfFecting Imports of Fresh, Chilled and Frozen Beef, paras. 135-137, Appellate Body Report, 11 Decernbcr 2000, available at http://docsonline.wto.org/DDFDocuments/t/WT/DS/169ABR.doc. 179 Id. 180 Id. 181 Id. 1K2 United States - Standards for Refonnulated and Conventional Gasoline, Panel Report, WT/DS2/R, 29 January 1996.

  • 183 ld. at para. 6.10. 184 For examplc, in critiquing the Maffezini award, Kurtz, supra note 86, at 880, has noted that the tribunal merely assumed that "access to the Spanish courts in the eighteen-month period [was] 'less favorable' than direct arbitral proceedings." In his view this approach demonstrates both "an epistemological belief in the superiority of Investment arbitration" and "a lack of rigorous comparison between the two fonns of adjudication." 185 Supra note 133. �se A "fork-in-the-road" typically requires an investor to elect to pursue his claim either locally or through international arbitration, with one election precluding the other. 187 Siemens, supra note 133, at para. 116. 188 Id. at para. 120. m Id. 190 Id. n" Id.

  • InId. at para. 119.

  • ry3 This is similar to the approach adopted by GA 1 1 /WTO panels. For examples, in the Section 337 case, the panel concentrated on the differences in procedural rules applicable to imported and domestic goods in determining whether the national treatment requirement had been breached. According to the tribunal, "given the differences between the proceedings of the USITC and of federal courts, to provide the complainant with a choice of forurn where imported products are concerned and to provide no corresponding choice where domestically-produced products are concerned is in itself less favorable treatment of imported products and is therefore inconsistent with [the national treatment requirement.]" Supra note 177, at para. 5.18. 194 See discussion on MFN clauses and dispute resolution, infra. 195 See, e.g., Barry Appleton, MFN and International Investment Treaty Arbitration: Have We Lost Sißht of the Forest through the Trees? 2005 App. News 052 ("Most commentators accept that, at the least, MFN clauses give investors the better protection offered in the Substantive provisions of other treaties.") 196 For example, most MFN clauses in BITS exclude treatment accorded to third parties under the terms of a regional or other trading agreements.

  • In [CSID Case No. A)m/Ut/7. award of25 May, 2004, available at http://www.asil.org/ilib/MTDvChile.pdf. 191 Art. 3(1) of the Malaysia-Chile BIT provides that "[ijnvestments made by investors of cither Contracting party in the territory of thc other Contracting Party shall receive treatment which is fair and equitable, and not less favorable than that accorded to investments made by investors of any third state." 100 MTn, supra note 197, at para. 100. 2uo Id. at para 104. 201 hj. z°= Id. at para 205-6. According to the tribunal, a provision such as that found in Article 3(2) of the Croatia- Chile BIT "does not cntitle an investor to a change of the nonnative framework of the country where it invests. All that an investor may expect is that the law be applied." Id at para. 205. z°3 ICSID Case No. Aitβ/00/2, award of May 29, 2003, available at http://www.worldbank.org/icsid/cases/ laudo-051903%20-English.pdf. z°° Tecmed, supra note 203, at para 69. 205 Id. at para. 64.

  • 20(, Id. at para. 69, citing the public policy limitations articulated in Maffezini. These limitations are discussed infra. =�� See Article 28 of the Vicnna Convention which provides that "Unless a different intention appears from the treaty or is otherwise established, its provisions do not bind a party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the treaty with respect to that party." " 20H Siemens, supra note, 133, at para. 106. 209 As they often do tax treatment and treat�nent accorded under regional trading agreements. See, e.g., Malaysia/Chile BIT supra, text accompanying note 201. z�° Tecmed, supra note 203, at para. 69.

  • �' Umbrella clauses are used to describe clauses in BITs by which the host state promises or giiaraiitees the performance of contractual or other obligations entcred into with covered investors. The phrasing of these clauses varies from treaty to treaty. Somc of these clauses require the host state to "constantly guarantee the observance of the commitments it has entered into,' or to "observe any obligation it has assumed, or to "observe any obligation it may have entered into." For example, Article 4(5) ofdic liidia-Netherlaiids Bis provides that "[eJach Contracting Party shall observe any obligation it may have entered into with regard to investments of investors of the other Contracting Party." 212 See, for example, Thomas Wälde, The Umbrella Clanse in Investment Arbitration - A Comment on Original Intentions and Recent Cases, 6 J.W.I.T. 183 (2005). See also OECD, Interpretation nf the Umbrella Clause in Investment Agreements, working paper on international investment, No. 2006/3, October 2006, available at http://www.oecd.o�g/dataoecd/3/20/37579220.pdf zt3 Snpra note 171. =t° EI Paso (Energy, supra note 173, at para. 82. =t5 Id. at para. 70. A similar approach was adopted by thc tribunal in Pan American Energy LLC and BP Argentina Exploration Company v. Argentine Republic, IcsiD Case No. ARB/03/ 1 .3, decision of 27 July 2006, available at http://tta.iaw.uvic.ca/documents/PanAmericanBPJurisdiction-eng.pdf According to the tribunal, "It would be Strange indeed iftlie acceptance of BiT entailed an international liability of the State going far beyond the obligation to respect the standards of protection of foreign investment embodied in the Treaty and rendered liable for any violation of any Commitment in national or intemational law "with respect to investments."' IA. at para. 110. 216 EI Paso Energy, id. at para. 76. Emphasis in the original. =t' ICSID Case No. Aß-H/03/3. decision of 22 April, 2005, available at http://www.worldbank.org/icsid/ cases/impregilo-decision.pdf

  • 218 Art. 11 of the Switzerland-Pakistan Brr require cach party to "constantly guarantee the observance of the commitments it has entered into with respect to investrncnts of the Investors of the other Contracting Party." Id. at para. 220. z�� lt rather argued that "if there is no breach of the Contracts, therc cannot bc a violation of the umbrella clause." Id. at para. 222. 220 ld. at para. 223. zzi Supra note 18. - = See, e.g., Plasma, supra note 19, and Telenor, supra note 14. Both awards are discussed infra. zz3 See, e.g., Vesel, supra note 13, for an evaluation of the awards dealing with dispute settlement.

  • zz^See, e.g., Ma�(jezini, supra note 18. 22S See, e.g., Telenor, supra note 14. 226 Supra note 18. 227 The MFN clause in the Argentine-Spain BIT provided as follows: "In all matters subject to this Agreement, this treatment shall not be less favorable than that extended by each Party to the investments made in its territory by investors of a third country." Maffezini, supra note 18, at para. 38.

  • z=�Maffezini,id. at para. 39. 229 See supra note 227. zso Maffezini, supra note 18, at para. 41. 231 Id. at para. 42. 232 Id. z33 Id. at para. 56. According to the tribunal, "if a third-party treaty contains provisions for the settlement of disputes that are more favorable to the protection of the investor's rights and interests than those in the basic treaty, such provisions may be extended to the beneficiary of the most favored nation clause." It added the proviso that "the third-party treaty has to relate to the same subject matter as the basic treaty." Id. 234 Id. at para. 54. =35 Id. at para. 55.

  • 236 See supra note 227. 237 See supra note 233. 23" Supra note 177. 239 Art. 3(4) of GnTT. Supra note 105. 24U ��,5, - Section 337, supra note 177, at para. 5.10.

  • 241Majfezini,5upra note 18, at para. 62. za'- Id. at para. 63. 243 Id. 244 Id.

  • zns This argument is developed infra in the discussion of host state's consent to arbitration. 246 Maffezini, supra note 18, at para. 63. zr� Id. 248 M. Another tribunal has suggested that the limitations articulated in Maffezini may well contribute to the uncertainties it sought to contain. In its decision, the Salini tribunal noted that "the precautions taken by the [Maffezilli Tribunal] may in practice prove difficult to apply, thereby adding more uncertainties to the risk of 'treaty shopping."' Salini v. Jordan, para. 115, (ase No. ARB/03/13, decision ofNovember 29, 2004, available at http://www.worldbank.org/icsid/cases/salini-dccision.pdf 24" UNCTAD has suggested that Maffezini has demonstrated to states "the importance ofclearly delimiting the scope of applicatiou of MFN Standard." UNCTAD, supra note 1, at 39.

  • 2511 lt has been noted that "[ilt would be an obvious travesty on interpretation for a community decision-rnaker to disregard the shared subjectivitics of the parties and to substitute arbitrary assumptions of his own." Myres S. McDougal, et al, THE INTERPRETATION c7F AGREEMENTS AND World Public C)RDER: Principles OF CONTENT AND PROCEDURE xvii (1967). z�� Supra note 133. 252 Supra note 227. 253 Art. 3 of thc Argentina-Germany BIT provides as follows: "(I) Ncither Contracting Party shall subject investments in its territory by or with the participation of nationals or companies of the other Contracting Party to treatment no less favorable than it accords to investment of its own nationals or companies or investments of nationals or companies of any third State. (2) Neither Contracting Party shall subject nationals or cornpanies of other Contracting Party, as regards their activity in connection with investments in its territory, to treatment less favorable than it accords to its own nationals or companies or to nationals or companies of any third state." z53 Siemens, supra note 133, at para. 81. 2SS Id. at para. 86. zsb Id. at para. 80-1. Z>� Id. at para. 103. 25n See Freyer & Herlihy, supra note 124, at 72.

  • 259Siemens,supra note 133, at para. 106. 260 As one commrntator has noted, "The parties to a treaty containing the clause do not know in what way, or when, a country will be most favored. All that these parties do know is that they must generalize concessions granted to any third country." IttCi)ard Snyder, THE MC)ST-FAVC7ItFD-NATION CLAUSE: AN ANALYSIS WITH PARTICULAR REFERENCE TO iZEC:EN'f' Treaty PRACTICE AND TARIFFS 13 (1948). zbl Siemens, supra note 133, at para. 109. zfiz Id. at para. 105.

  • 263 Vesel, supra note 13, at 167. =�'f Supra, note 90. 26S Gas Natural, supra note 90, at para. 29. 2M Id. at para. 49. 2{,7 Supra, note 93. 2M Id. at para. 92.

  • 2<>''Id. at para. 91. According to the tribunal, "in the context in which the Respondent has consented to arbitration for the resolution of the type of disputes raised by the claimant, 'treatment,' under the MFN clause of the Treaty makes it possible for UK investors in Argentina to resort to arbitration without first resorting to Argentine courts, as is permitted under the US-Argentina Trcaty." Id. at para. 93. ° Icstn Case No. AAB/03/17, decision of 16 May, 2006, available at http://www.worldbank.org/icsid/ cases/pdf/A"0317_1)ccisioiiotijurisdictiori03-17.pdf, 271 Suez, snpra note 271, at para. 59. The tribunal also rejected a plea to interpret MrN clauses rcstrictively, nothing that there was "no rule and no reason" for interpreting such clauses any differently from other provisions of a 131T. Id. at para. 61, 66. = Id. at para. 59. 273 It is noteworthy that the Suez tribunal distinguished cases dealing with the applicability ofMFN clauses to procedural requirements from those dealing with the use of MFN clauses to replace the dispute settlement mechanism contained in a BIT. Although it considered this latter use of MFN clauses "radical," it did not express an opinion on whether an MFN clause may be so used. Id. at para. 65. 27" UNCITRAL arbitration award (final) of 3 September 2001, available at http://ita.law.uvic.ca/documents/ LauderAward.pdt: 275 Article vi(.3) of the BIT provided that "[a]t any time after six months from the date on which the dispute arose, thc national or Company concerned may choose to consent in writing to the Submission of the dispute to settlement by conciliation or binding arbitration." Id. at para. 183. Id. at para. 187, citing Ethyl Corp. v. Canada, UNC:I'1'ttAl. award ofJune 24, 1998, 38 I.L.M. 708 (1999). Supra note 171. 1.

  • 278 ld. at para. 184. 279 See Enron v. Argentina, at para. 88, Ics[D Case No. ARH/OI/3, decision of 14 January 2004, available at http://www.appletOlilaw.com/cases/Enron- and _Ponderosa_Assets- v - Argentina - - --1urisdiction- - _14Jan2004.pdf; (ioctz v. l3urundi, at para. 93, Icsm Case No. ARB/95/3, award of 10 February 1999, available at http://ita.law.uvic.ca/documents/Goetz-Award.pdf. ="° For a case based on an agreement to submit an existing dispute to arbitration, see Compaiiia dcl Desarrollo de Santa Elena v. Costa Rica, at para. 26, IcsID Case No. Aku/96/1, final award of 17 February 2000, available at http://www.worldbank.org/icsid/cases/santaelena_award.pdf. =8� See COB v. Slovakia, at paras. 49-59, ICSID Case No. ARB/97/4, decision of 24 May 1999, available at http://ita.law.uvic.ca/docuntents/CS013 Jurisdiction1999.000.pdf 282 Art. 8(2) ofthe Albania Law on Foreign Investment of 1993, for example, provides that a "foreign investor may submit [a] dispute for resolution and the Republic of Albania hereby consents to the subnrission thereof, to the International Center for Settlement of Investment Disputes." See Tradex v. Albania, decision of 24 December 1996. 2"3 See R. Dolzer & M. Stevens, stipra note 60. 2"4 For example. Art. 1122 of NAFTA provides that "[each party consents to the Submission of a claim to arbitration in accordance with the procedures set out in this Agreement."

  • 2"5 Preamble to the IcsiD Convention, available at http://www.worldbank.org/icsid/basicdoc7partA.htm. 2Sf' Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals ot Other States, 43, supra note 77. 287 See, c.g., Maffezini, supra note 18. 2S8 supra note 248. 2m The investment contract between the parties stipulated that in the event of a contractual dispute between the parties, they were to tirst attempt negotiations and then, if necessary, refer the dispute to local courts or local arbitration. =v" Salini, supra note 248, at para. 70. 2'" Art. 3(1) of the Brr obligates the parties to "grant investments etfected by, and the income accruing to, investors ofthe other Contracting Party, no less favorable treatment than that accorded to investments effected by, and income accruing to, its own nationals or investors of Third States." Id. at para. 104.

  • 2"2Id. at para. 102. 293 Id. at para. 103. 294 Id. at paras. 1 17-8. �E.mpliasis in the original]

  • 295 Id. at para. 119. 296 Supra note 19. 297 Art. 4 of the Bulgaria-Cyprus BIT, available at http://www.uiictad.org/3ectioii%/dite/iia/docs/bits/ bulgaria cypn�s.pDF. =9s Art. 4 of thc Bulgaria-Cypms BIT. 299 The MrN clause provides as follows: "Each Contracting Party shall apply to the investments in its territory by investors of the other Contracting Party a treatment which is not less favorable than that accorded to Investments by investors of third states." Plama, suprn note 19, at para. 187. 3°° Id. at paras. 79, 99. 3oi M. at para. 184. 30= Id. at para. 198. 3f13 Id. '°a In support of this argument. the claimant cited Art. 7(2) of the Uncitrai Model Law on International Commercial Arbitration of 1985 which provides as follows: "The reference in a contract to a document containing an arbitration clause constitutes an arbitration agrecment provided that the contract is in writing and the reference is such as to make that clause part of the contract." 3"s Plama, supra note 19, at para. 200.

  • 306Id. 307 See id. at paras.204, 212. soa One commentator has noted that "it would be difficult if not impossible - to establish a preponderancc of evidence in favor ot jurisdiction on the basis of au MFN clause combined with consent with regards to a third party." Vesel, stipra note 13, at 185. 3°'� Plama, supra note 19, at para. 223. The tribunal argued that states that enter into BITS with a dispute resolution clause "cannot be expected to leave those provisions to future (and partial) replacement by different dispute resolution provisions through the operation of an MFN provision, unless the States have explicitly agreed thereto." Id. at para. 212. ■»« Id. at para. 224. 311 Id.

  • 3�z In fact, as noted by Freyer and Herlihy, thc Plama tribunal "could have reached the same result within the framework of Maffezini, which allows for an exception in cases where a claimant seeks to displace the basic treaty's 's dispute resolution procedures in favor of an entirely different system." Supra note 124, at 77. -113 Supra note 14. 314 This approach was also adopted in an unpublished decision of a tribunal of the Stockholm Arbitration, Bencliader. v. Russia. See Investment Treaty News, August 23, 2006, available at http://www.iisd.org/pdf/2006/ itn_aug23 _2006.pdf. 111 Art. XI ofthe BIT confined IcsiD jurisdiction to expropriation issues. Telenor, supra note 14, at para. 18. 3�fi Art. IV of the BIT provides that "[investments made by Investors of one Contracting Party in the territory of the other Contracting Party, as also the retums therefrom, shall be accorded treatment no less favorable than that accorded to investments made by Investors of any third State." Telenor, supra note 14, at para. 20. 318 Id. at para. 90. Id. at para. 91. 320 Id. 3z� Id. at para. 92.

  • 322Id. at para. 93. 323 Id. at para. 94. .124 Id. at para. 95. Emphasis added.

  • •^ Suez, supra note 271, at para. 65. β, Thc Natinraal Crid tribunal correctly noted this distinction in analyzing the decisions on the applicability of MFN clauses to dispute resolution. See National Grid, supra note 93, at para. 91. 327 Supra note 18. 328 Supra note 19.

  • 329 See the WTO Appellate Body Report in U.S. - Import Prohibition of Certain Shrimp and Shrimp Products 38 I.L.M. 121, 150 (1999). The Appellate Body noted that the interpretation of a treaty should "bcgin with, and focus upon, the text of the particular provision to be intcrprctcd." It, however, acknowledged that "[w]here the meaning imparted by the text itself is equivocal or inconclusive, or where confirmation of the correctness of the reading of the text itself is desired, light from the object and purpose of the treaty as a whole may usefully be sought." Id. 33u In arguing the importance of the contextual aspects of treaty interpretation, Horn and Weiler make the following important observations: There is an appreciable difference in the legitimacy of a decision where the decisor is scen to have recognized fully the context (understood here in its broad sense) of thr text under interpretation and which is seen to infortn its decision whatever the outcome, and a decision in which the decisor seerns oblivious to the context of its decision. Likewise, and no less importantly, there is a difference between a decision which is seen to be aware of its consequences, and is seen to have made its herieneutic choices in full awareness of such consequences. Jurists' prudence is usually a recipe for good jurispmdence, but it is not to be confused with narrow textualisrn. Henrik Hom and Joseph Weiler, EI/ropeall Conununities- Trade Description tJ{Sardilles: Textllalism alld its Disnnrtents in Henrik Horn and Petros Mavroidis (eds), TrtF Wto CASE LAW OF 2002, 253 (2005). Nonetheless, although it is certainly important for tribunals to be cognizant of both the context of treaty provisions and the consequences of their interpretative choices, their interpretation of treaty provisions should still bc primarily informed by the language of the treaty. Contracting Parties make public policy choices through their phrasing of treaty texts. Tribunals ought to respect these choices, and not subvert them because of their views about the deleterious consequences of fidelity to the expressed wishes of the parties. 331 U.S. - Sunsct Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan, para. 7.44, Wro Panel Report, 14 August 2003, available at http://www.wto.int/english/tratope/ dispu e/244r a e.doc. 33z Ehlermann has made a similar argtrnrcnt in the context ofthe WTO dispute resolution systems. See Claus- Dieter Ehlennann, Six Years on the Bench of the 'World Trade Court' in Fredenco Ortino and Ernst-Ulrich Petersmann (eds) THE WTO DISPUTE SEI"1'1.F.MENT SYSTEM 1995-2003, 509-10 (2004).

  • 113 One conmientator has noted that "[u]ntil the mechanisms for resolving investment treaty disputes is improved to offer a process that renders a cearer, more predictable and consistent doctrine about the scope and application of investment rights, sovereigns will be inhibited from making an informed evaluation of utility of entering into investments treaties." Franck, supra note 61, at 51. 3�� Legitirnacy is important for the success of investment treaty arbitration as a method of investor-state disputes, and consistency of decisions is a vital element in ensuring the legitimacy of investment arbitration awards. See Raj Bhala, The Power ofthe Hw: 'lowards dejllre Stare Vecisis ill WTO Adilldicatioll, 33 GEO. Wash. IN'1'1. L. REV. 873, 895 (2001) (noting that consistency, coherence, and pcrsuasivencss arc necessary for Icgitirnizing decisions and reducing domestic opposition). 335 Supra note 18. 330 Id. at paras. 62-3. 337 See text following note 244, supra. 338 Supra note 19.

  • 339Seesupra, text accompanyiug note 309. 3;" See text following note 183, supra. 3+1 For a discussion of thc forces impeding the development of a multilateral investment regime, see Pierre Sauve, Multilateral Ruk) on Investment,: Is Fonuard Movement 13possible? 9 J. INT'L Eco. L. 325 (2006).

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