ISBN 92-64-01164-1

International Investment Law: A Changing Landscape

A Companion Volume to International Investment Perspectives
© OECD 2005

Chapter 4

Most-Favoured-Nation Treatment
in International Investment Law *

Most-Favoured-Nation (MFN) treatment is one of the oldest standards of

international economic relations. It is central to WTO disciplines and is as
well a significant instrument of economic liberalisation in the investment
field by spreading more favourable treatment from one investment
agreement to another. The wording of MFN clauses varies, however, and
their interpretation and application requires a careful analysis, on a
case-by-case basis, in accordance with Articles 31 and 32 of the Vienna
Convention. The ejusdem generis principle provides that an MFN clause
can attract the more favourable treatment available in other treaties only
in regard to the “same subject matter”, the “same category of matter”, or
the “same class of matter”. Past arbitral findings show, however, that the
application of this principle has not always been simple or consistent. The
present survey reviews the jurisprudence and invites practitioners to pay
particular attention to the formulation of the MFN clauses in investment
agreements, taking into account established treaty interpretation rules.

* This survey was prepared by Marie-France Houde, Investment Division, OECD Directorate
for Financial and Enterprise Affairs, and Fabrizio Pagani, Legal Directorate, and benefited
from discussions, comments and a variety of perspectives in the OECD Investment
Committee. The document as a factual survey, however, does not necessarily reflect the
views of the OECD or those of its member governments. It cannot be construed as
prejudging ongoing or future negotiations or disputes pertaining to international
investment agreements.

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1. Introduction
Bilateral and regional investment agreements have proliferated in the
last decade and new ones are still being negotiated. Most-Favoured-Nation
(MFN) clauses link investment agreements by ensuring that the parties to one
treaty provide treatment no less favourable than the treatment they provide
under other treaties in areas covered by the clause. MFN clauses have thus
become a significant instrument of economic liberalisation in the investment
area. Moreover, by giving the investors of all the parties benefiting from a
country’s MFN clause the right, in similar circumstances, to treatment no less
favourable than a country’s closest or most influential partners can negotiate
on the matters the clause covers, MFN avoids economic distortions that would
occur through more selective country-by-country liberalisation. Such a
treatment may result from the implementation of treaties, legislative or
administrative acts of the country and also by mere practice.
The present document provides a factual survey of jurisprudence and
related literature on MFN treaty clauses in investment agreements with a view
to contributing a better understanding of the MFN interfaces between such
agreements.
● Section 2 defines the MFN clause, traces back its origins and provides
some examples of such provisions in the two major types of model
investment agreements in existence (the “North American model” and
the “European model”).
● Section 3 summarises the relevant aspects of the extensive work
carried out by the International Law Commission (ILC) between 1968
and 1978 on MFN clauses.
● Section 4 describes recent arbitral awards on the scope of application of
MFN treatment clauses resulting from disputes under investment
treaties.
● Section 5 provides a summing up.

2. Definition, origins and examples of MFN clauses

2.1. Definition
To provide MFN treatment under investment agreements is generally
understood to mean that an investor from a party to an agreement, or its

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investment, would be treated by the other party “no less favourably” with
respect to a given subject-matter than an investor from any third country, or
its investment. 1 MFN treatment clauses are found in most international
investment agreements. Although the text of the MFN clause, its context and
the object and purpose of the treaty containing it need to be considered
whenever that clause is being interpreted, it is the “multilateralisation”
instrument par excellence of the benefits accorded to foreign investors and their
investments.
While MFN is a standard of treatment which has been linked by some to
the principle of the equality of States,2 the prevailing view is that a MFN
obligation exists only when a treaty clause creates it.3 In the absence of a
treaty obligation (or for that matter, an MFN obligation under national law),
nations retain the possibility of discriminating between foreign nations in
their economic affairs.

2.2. Origins4
MFN treatment has been a central pillar of trade policy for centuries. It can
be traced back to the twelfth century, although the phrase seems to have first
appeared in the seventeenth century. MFN treaty clauses spread with the
growth of commerce in the fifteenth and sixteenth centuries. The United States

1. The International Law Commission (ILC) has defined MFN treatment as follows:
“Most-favoured-nation treatment is a treatment accorded by the granting State to
the beneficiary State, or to persons or things in a determined relationship with that
State, not less favourable than treatment extended by the granting State or to a
third State or to persons or things in the same relationship with that third State”,
Article 5 of the Draft articles on most-favoured-nation clauses (ILC Draft), in
Yearbook of the international Law Commission, 1978, Vol. II, Part Two, p. 21.
2. See, especially, the comments of some socialist countries in “Comments of
Member States, organs of the United Nations, specialized agencies and other
intergovernmental organizations on the draft articles on the most-favoured-nation
clause adopted by the International Law commission at its twenty-eighth session”,
in Yearbook of the International Law Commission, 1978, Vol. II, Part Two, p. 162 ff.
3. See Article 7 of the ILC Draft, the related comments and the doctrine here referred
to, Ibidem, p. 24 ff. See also Oppenheim’s International Law, edited by R. Jennings and
A. Watts, and Vol. I, Harlow, 1992, p. 1 326 f.
4. For a thorough history of the MFN clause up to the Second World War, including the
work done by, or under the auspices of, the League of Nations, see the First Report
of the ILC’s Special Rapporteur, Yearbook of the International Law Commission, 1969,
Vol. II, p. 157 ff.

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included an MFN clause in its first treaty, a 1778 treaty with France.5 In
the 1800s and 1900s the MFN clause was included frequently in various treaties,
particularly in the Friendship, Commerce, and Navigation treaties. MFN
treatment was made one of the core obligations of commercial policy under the
Havana Charter where members were to undertake the obligation “to give due
regard to the desirability of avoiding discrimination as between foreign
investors”.6 The inclusion of MFN clauses became a general practice in the
numerous bilateral, regional and multilateral investment-related agreements
which were concluded after the Charter failed to come into force in 1950.
Its importance for international economic relations is underscored by the
fact that the MFN treatment provisions of the GATT (Article I General
Most-Favoured-Nation Treatment) and the GATS7 (Article II Most-Favoured-Nation
Treatment) provide that this obligation shall be accorded “immediately and
unconditionally” (although in the case of the GATS, a member may maintain a
measure inconsistent with this obligation provided that such measure is listed
in, and meets the conditions of, the Annex on Article II Exemptions).

2.3. Examples of MFN Clauses in Investment Agreements

A stock taking of MFN clauses in investment treaties will not yield a
uniform picture. In fact the universe of MFN clauses in investment treaties is
quite diverse. Some MFN clauses are narrow, others are more general.
Moreover, the context of the clauses varies, as does the object and the purpose
of the treaties which contain them. Following is a representative sample of
these clauses.

5. Treaty of Amity and Commerce, 6 February 1778, France-United-States, Article 3, 8

Stat. 12 (“The Subjects of the most Christian King shall pay in the Ports, Havens,
Roads, Countries, Islands, Cities or Towns, of the United States or in any part of
them, no other or greater Duties or Imposts … than those which the Nations most
favoured are or shall be obliged to pay; and they shall enjoy all the Rights, Liberties,
Privileges, Immunities and Exemptions in Trade, Navigation and Commerce …
which the said Nations do or shall enjoy.”); see also idem, Art. 4 (similar provision
with respect to US nationals in France).
6. United Nations Conference on Trade and Employment, Final Act and Related
Documents, April 1948, Article 12 (International Investment for Economic Development
and Reconstruction), par. 2(a)(ii).
7. Of all the WTO Agreements, the General Agreement on Trade in Services (GATS) is
generally considered as dealing more directly with investment issues. Mode 3
applies to the supply of trade in services through “commercial presence”, which is
in essence an investment activity.

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Germany has concluded the largest number of BITs. Article 3(1) and (2) of
the German 1998 Model Treaty combines the MFN obligation with the
national treatment obligation by providing that:
“1) Neither Contracting State shall subject investments in its territory owned or
controlled by investors of the other Contracting State to treatment less favourable
than it accords to investments of its own investors or to investments of investors
of any third State.
2) Neither Contracting State shall subject investors of the other Contracting State, as
regards their activity in connection with investments in its territory, to treatment
less favourable than it accords to its own investors or to investors of any third State.”
This general MFN provision is not restricted in its scope to any particular
part of the treaty containing it. It may also be noted that the 1998 German
model BIT contains another MFN provision which only relates to full
protection and security and to expropriation which are the matters dealt with
by Article 4. Article 4(4) specifically provides that:
“Investors of either Contracting State shall enjoy most-favoured-nation treatment
in the territory of the other Contracting State in respect of the matters provided
for in this Article.”
The same approach is followed by the Netherlands Model BIT which in
addition combines in its Article 3 the MFN obligation with other standards of
treatment, i.e. national treatment (whichever of these two treatments is more
favourable), fair and equitable treatment and full protection and security. The
non-discriminatory treatment is formulated in Article 3(1) and 3(2) as follows:
“1) Each Contracting Party shall ensure fair and equitable treatment of the investments
of nationals of the other Contracting Party and shall not impair, by unreasonable or
discriminatory measures, the operation, management, maintenance, use,
enjoyment or disposal thereof by those nationals. Each Contracting Party shall
accord to such investments full physical security and protection.
2) More particularly, each Contracting Party shall accord to such investments
treatment which in any case shall not be less favourable than that accorded
either to investments of its own nationals or to investments of nationals of any
third State, whichever is more favourable to the national concerned.”
Article 3 of the 1996 Albania/United Kingdom BIT provides that:
“National Treatment and Most-Favoured-Nation Provisions
1) Neither Contracting Party shall in its territory subject investments or returns of
nationals or companies of the other Contracting Party to treatment less favourable
than that which it accords to investments or returns of its own nationals or
companies or to investments or returns of nationals or companies of any third State.
2) Neither Contracting Party shall in its territory subject nationals or companies
of the other Contracting Party, as regards the management, maintenance, use,

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enjoyment or disposal of their investments, to treatment less favourable than

that which it accords to its own nationals or companies or to nationals or
companies of any third State.
3) For the avoidance of doubt it is confirmed that the treatment provided for in
paragraphs 1) and 2) above shall apply to the provisions of Articles 1 to 11 of this
Agreement.”
Articles 1 to 11 cover all the provisions of the Agreement, except the final
clauses.
The typical formulation of an MFN clause in the US and Canadian BITs
covers both the establishment and post establishment phases. It also lists the
various operations covered8 and is explicit in stating that the right only
applies “in like circumstances”, unlike other BITs (particularly the “European
model BIT”) which make no reference to the comparative context against
which treatment is to be assessed. Recent examples are to be found in the
investment chapter of US-Chile Free Trade Agreement9and the US-Singapore
Free Trade Agreement10 concluded in 2003, and the 1997 Canada-Chile Free

8. The final draft text of the US-Central America Free Trade Agreement (CAFTA)
resulting from the negotiations concluded in December 2003 and dated 28 January
2004 contains an interpretation footnote on the scope of application of the MFN
treatment clause in the Investment Chapter of the Agreement (Chapter 10) which
reads:
“The Parties note the recent decision of the arbitral tribunal in Maffezini (Arg.) v.
Kingdom of Spain, which found an unusually broad most-favoured-nation clause
in an Argentina-Spain agreement to encompass international dispute resolution
procedures. See Decision of Jurisdiction §§38-64 (25 January 2000), reprinted in
16 ICSID Rev.-F.I.L.J. 212(2002). By contrast the Most-Favoured-Nation Treatment
Article of this Agreement is expressly limited in scope to matters “with respect to
the establishment, acquisition, expansion, management, conduct, operation, and
sale or other disposition of investments.” The Parties share the understanding
and intent that this clause does not encompass international dispute resolution
mechanisms such as those contained in Section C of this Chapter, and therefore
could not reasonably lead to a conclusion similar to that of the Maffezini case.”
This footnote would be deleted in the final text of the Agreement but the Parties
agreed that it is to be included in the negotiating history as a reflection of the
Parties’ shared understanding of the Most-Favoured-Treatment Article and the
Maffezini case.
The draft text of CAFTA is currently subject to legal review for accuracy, clarity and
consistency. Under the Trade Act of 1992, the Administration must notify
Congress at least 90 days before signing the Agreement. The Administration
expects to notify Congress in the near future of its intent to sign the CAFTA. See
www.ustr.gov/releases/2003/12/03-82.pdf.
9. www.ustr.gov/new/fta/chile.htm. This agreement entered into force on 1 January
2004.
10. www.ustr.gov/new/fta/Singapore/final.htm. This agreement entered into force on
1 January 2004.

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Trade Agreement, which are based on NAFTA language. In the US-Chile FTA,
Article 10.3: Most-Favoured-Nation Treatment reads:
“1) Each Party shall accord to investors of the other Party treatment no less favourable
than that it accords, in like circumstances, to investors of any non-Party with respect
to the establishment, acquisition, expansion, management, conduct, operation, and
sale or other disposition of investment in its territory.
2) Each Party shall accord to covered investments treatment no less favourable than
that it accords, in like circumstances, to investments in its territory of investors of
any non-Party with respect to the establishment, acquisition, expansion,
management, conduct, operation and sale or other disposition of investments.”
In the US-Singapore FTA, National Treatment and MFN treatment are
part of a same article:
“Article 15.4: National Treatment and Most-Favoured-Nation Treatment
3) Each Party shall accord to investors of the other Party treatment no less favourable
than it accords, in like circumstances, to investors of any non-Party with respect to
the establishment, acquisition, expansion, management, conduct, operation and
sale or other disposition of investments in its territory. Each Party shall accord to
covered investments treatment no less favourable than that it accords, in like
circumstances, to investments in its territory of investors of any non-Party with
respect to the establishment, acquisition, expansion, management, conduct,
operation, and sale or other disposition of investments. The treatment each Party
shall accord under this paragraph is “most-favoured-nation treatment”.
4) Each Party shall accord to investors of the other Party and to their covered
investments the better of national treatment or most-favoured-nation treatment.”
In the Canada-Chile FTA, Article G-03: Most-Favoured-Nation Treatment reads:
“1) Each Party shall accord to investors of the other Party treatment no less
favourable than that it accords, in like circumstances, to investors of any
non-Party with respect to the establishment, acquisition, expansion,
management, conduct, operation, and sale or other disposition of investments.
2) Each Party shall accord to investments of investors of the other Party
treatment no less favourable than that it accords, in like circumstances, to
investments of investors of any non-Party with respect to the establishment,
acquisition, expansion, management, conduct, operation, and sale or other
disposition of investments.”
The texts of these agreements are alike in that they make clear that the
intent to use the likeness of the circumstances in which the treatment is granted
as the basis for comparison. Jurisprudence from MFN clauses with a different
basis for comparison, and which focuses on categorizing industries affected by
treatment, or categorizing the types of treaties that require the treatment, may be
of little relevance to the analysis required by these agreements.

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2.4. Restrictions and Exceptions

Many MFN clauses in investment treaties contain specific restrictions
and exceptions, which exclude certain areas from their application. Such
areas may include inter alia regional economic integration, matters of taxation,
subsidies or government procurement and country exceptions. Depending on
the way these exceptions are drafted, the fact that these limitations are
specifically mentioned could be a factor in deciding whether certain other
matters are within the scope of an MFN clause. Consider the following
examples.
The 1998 German Model BIT provides in its Article 3, points 3) and 4)
that:
“3) Such treatment shall not relate to privileges which either Contracting State
accords to investors of third States on account of its membership of, or
association with, a customs or economic union, a common market or a free
trade area.
4) The treatment granted under this Article shall not relate to advantages which
either Contracting State accords to investors of third States by virtue of a
double taxation agreement or other agreements regarding matters of
taxation.”
The Dutch Model BIT contains the following exception to the MFN
obligation in the general treatment article (Article 3):
“3) If a Contracting Party has accorded special advantages to nationals of any third
State by virtue of agreements establishing customs unions, economic unions,
monetary unions or similar institutions, or on the basis of interim agreements
leading to such unions or institutions, that Contracting Party shall not be obliged
to accord such advantages to nationals of the other Contracting Party.”
In addition, Article 4 of the Model, which only deals with the treatment of
taxes, includes in its second part, some exceptions to the MFN treatment and
National treatment obligations provided by the first part of that article. This
article applies to nationals of Contracting Parties or nationals of any third
State which are “in the same circumstances”. The whole Article 4 reads as
follows:
“With respect to taxes, fees, charges and to fiscal deductions and exemptions,
each Contracting Party shall accord to nationals of the other Contracting Party
who are engaged in any economic activity in its territory, treatment not less
favourable than that accorded to its own nationals or to those of any third State
who are in the same circumstances, whichever is more favourable to the
nationals concerned. For this purpose, however, any special fiscal advantages
accorded by that Party, shall not be taken into account:
a) under an agreement for the avoidance of double taxation; or

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b) by virtue of its participation in a customs union, economic union or similar

institution; or
c) on the basis of reciprocity with a third State.”
The MFN limitations in the Agreement between EFTA States and
Singapore state:
“Article 40
2. If a Party accords more favourable treatment to investors of any other State or
their investments by virtue of free trade agreement, customs unions or similar
agreement that also provides for substantial liberalization of investments, it
shall not be obliged to accord such treatment to investors of another Party or
their investments. However, upon request from another Party, it shall accord
adequate opportunity to negotiate the benefits granted therein…
Article 41: Taxation
1. Except as otherwise provided for in this Article, nothing in this Chapter shall
create rights or impose obligations with respect to taxation measures.
2. Article 40 shall apply to taxation measures subject to deviations from national
treatment that is necessary for the equitable or effective imposition or
collection of direct taxes.
3. If a Party accords special advantages to investors and their investments of any
other State by virtue of an agreement for the avoidance of double taxation, it
shall not be obliged to accord such advantages to investors of another Party
and their investments.”
The agreements concluded by Canada and the United States since the
early 1990s have followed the practice of listing “country” exceptions or
reservations to MFN treatment (and other standards) as “non-conforming
measures” in separate annexes to the Agreement. For example, Article 15.12
(Non-Conforming Measures) of the United States – Singapore Free Trade
Agreement reads as follows:
1. Articles 15.4 (National Treatment and Most-Favoured-Nation Treatment)…
do not apply to:
a) any existing non-conforming measure that is maintained by a Party at:
i) the central level of government, as set out by that Party in its Scheduled
to Annex 8A,
ii) a regional level of government, as set out by that Party in its Schedule to
Annex 8A, or
iii) a local level of government;
b) the continuation or prompt renewal of any non-conforming measure
referred to in sub-paragraph a); or

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c) an amendment to any non-conforming measure referred to in

subparagraph a) to the extent that the amendment does not decrease the
confo rm ity of the measure, a s it existed immediately b efore the
amendment, with Article 15.4, 15.8, and 15.9.
2. Articles 15.4, … do not apply to any measure that a Party adopts or maintains
with respect to sectors, sub-sectors, or activities, as set out in its Schedule to
Annex 8B.
3. Neither Party may, under any measure adopted after the date of entry into
force of this Agreement and covered by its Schedule to Annex 8B, require an
investor of the other Party, by reason of its nationality, to sell or otherwise
dispose of an investment existing at the time the measure becomes effective.
4. Article 15.4 does not apply to any measures that is an exception to, or a
derogation from, the obligations under Article 16.1.3 (General provisions) as
specifically provided in that Article.
5. Articles 15.4 and 15.9 do not apply to:
a) government procurement; or
b) subsidies or grants provided by a Party, including government-supported
loans, guarantees, and insurance.
In addition to the measures listed in Annexes I-II, Annex IV of NAFTA is
specifically devoted to exceptions to Most-Favoured-Nation Treatment for
treatment accorded pursuant to all prior bilateral or multilateral international
agreements and for treatment accorded pursuant to all such future
agreements with respect to certain sectors only.11 The scope of the NAFTA and
that of its investment chapter limit its MFN treatment obligation in other
areas as well, including, for example, taxation12 and financial services.13 The
same kind of limitations to the scope of MFN protection appears in the
US-Chile and US-Singapore free trade agreements and the recently concluded
US-Australia free trade agreement.
Some US and Canadian BITs also contain limitations to the MFN clauses that
preclude coverage of the advantages accorded by virtue of multilateral

11. These MFN exceptions apply notably to a) international agreements in force or

signed prior to the entry into force of the NAFTA and b) international agreements
in force or signed after the date of the entry into force of NAFTA in the areas of
aviation, fisheries, maritime matters, telecommunications networks and
transport services (except for measures covered by the Telecommunications
chapter of NAFTA or to the production, sale, licensing or radio or televisions
programming) as well as c) certain state measures or aid programmes.
12. See NAFTA Art. 2103 (“Except as set out in this Article, nothing in this Agreement
shall apply to taxation measures”).
13. See NAFTA Art. 1101(3) [“This Chapter does not apply to measures adopted or
maintained by a Party to the extent that they are covered by Chapter Fourteen
(Financial Services)”].

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agreements or negotiations (such as the GATT/Uruguay Round) to which their BIT

partners may or may not have adhered. Language of this sort (the “GATT
exception”) appeared for the first time in the Article XII(2)(b) 1990 US-Poland BIT.14
Another example is Article G-8 of the Canada-Chile Agreement which provides
that the MFN clause in the investment chapter of that agreement “does not apply
to any measure that is an exception to, or derogation from, a Party’s obligations
under the TRIPS Agreement, as specifically provided for in that agreement”.
The Understanding reached by the United States, the European Commission
and certain acceding and candidate countries regarding their BITs with the
United States on 22 September 2003 describes the means, through individual
protocols, of avoiding potential incompatibilities arising from MFN obligations in
the BITs and the obligations of membership in the European Union.
Finally, it may be noted that some WTO members have listed substantive
provisions in their bilateral investment treaties as involving exemptions to the
MFN obligations of the GATS with a view of protecting a higher level of
treatment in such BITs in relation to GATS commitments.15

14. Kenneth J. Vandevelde, US Bilateral Investment Agreements, the Second Wave, in

Michigan Journal of International Law, Summer 1993, p. 15.
15. Costa Rica has reserved for all sectors, “measures granted under bilateral treaties
for the promotion and protection of investment designed to encourage in a
preferential manner the investments of certain countries covered by such
agreements”. Jordan has notified that “measures extending preferential treatment
are pursuant to bilateral investment treaties”. Kuwait extends the exemption to
multilateral agreements related to the promotion and protection of investment by
notifying “measures taken to promote and protect investments applied in
conformity with bilateral, multilateral agreements and undertakings to which
Kuwait is a party”. Poland has notified provisions on “commercial presence contained
in promotion and protection of foreign investments agreements that go beyond
limitations embodied in Poland’s schedule of specific commitments. Trinidad and
Tobago pre-empted all existing and future bilateral investment and protection
treaties. The United Sates has an MFN exemption for BIT entry and stay obligations
pertaining to the movement of personnel.” Uruguay has notified as measure
inconsistent with Article II “the provisions of bilateral investment promotion and
protection agreements which guarantee investors from the other contracting party
freedom to transfer and invest capital and any other sum related to investments,
and also guarantee investors against the non-commercial risks to which their
investment is exposed”. Singapore has also listed exemptions for preferential
treatment resulting from Investment Guarantees Agreements.
Canada, Chile and Poland have, in addition, invoked an exemption for procedural
measures in their BITs. Chile’s exemption concerning measures establishing
dispute settlement procedures contained in existing or future bilateral treaties on
the protection of investment applies in principle to all countries. Canada and Poland
indicated that they “accept compulsory arbitration of investor/state investment
disputes brought by or in respect of service suppliers of countries with which
Canada/Poland have or may have agreements providing for such procedure”.
In some other cases, country exemptions to Article II of GATS refer to preferential
treatment under sectoral or regional agreements. Bulgaria has notified an MFN
exemption for present and future bilateral agreements concerning the provision

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GATS Article V(1) (Economic Integration) does not prevent, however, any of
its members from being a party to or entering into an agreement liberalising
trade in services between or among the parties to such an agreement, provided
that such an agreement meets the conditions set out in paragraph 1 of that
Article. GATS Article V(6) further provides that a service supplier of any Member
that is a juridical person constituted under the law of a party to an agreement
meeting the conditions of paragraph 1 shall be entitled to treatment granted
under such agreement, provided that it engages in substantive business
operations in the territory of the parties to such agreement. Examples of the
treatment accorded to enterprises of third party investors in accordance with
these provisions is to be found in NAFTA Article 1 101 and 1 139, EC Treaty
Articles 43-48, and Annex G of the draft Understanding between the EU and the
USA concerning Certain Bilateral Investment Treaties, dated 22 September 2003.
16, 17
3. International Law Commission Work16, 17
In 1964 the International Law Commission (ILC) embarked on a
m ul ti -ye a r p roj ec t to p rep ar e a set o f d ra ft a rt ic l es on the MF N

15. legal services through established presence; Thailand for the investment provisions
in the bilateral Treaty of Amity and Economic Relations with the United States; and
Venezuela for bilateral agreements relating to petroleum-related services.
With regard to regional agreements, Costa Rica, El Salvador, Guatemala, Honduras,
Nicaragua, Panama and Venezuela have notified entries for preferences accorded
under the General Treaty of Central American Economic Integration; Côte d’Ivoire for
preferences for insurance firms based in signatories of the CIMA and preferences for
financial service providers based in WAEMU Member States; Cyprus for market access
restrictions for firms based in the EU and EFTA countries; EC 12 for existing and future
Euro-Med agreements; Finland, Iceland, Norway, Sweden for measures aimed at
promoting Nordic co-operation; Pakistan for favourable treatment for financial
institutions set up to undertake Islamic financing transactions; Senegal for preferences
accorded to insurance and financial service providers based in signatories to ECOWAS,
WAEMU and WAMU; South Africa for an exemption on exchange controls for persons
based in the CMA; and the United Arab Emirates for preferential treatment for service
providers based in members of the Gulf Co-operation Council.
16.The following section is drawn from the Report of the International Law Commission to the
General Assembly on the Work of Its Thirtieth Session, [1978], Yearbook of the
International Law Commission, A/CN.4/SER.A/1978/Add.1 (Part 2) (“ILC Report”) and
“Most-Favoured-Nation Clause”, Yearbook of the International Law Commission, 1970,
Vol. II, pp. 201-213.
17.The International Law Commission was established by the General Assembly in 1947
to promote the progressive development of international law and its codification. The
Commission, which meets annually, is composed of 34 members who are elected by
the General Assembly for five-year terms and who serve in their individual capacity,
not as representatives of their Governments. Most of the Commission’s work involves
the preparation of drafts on topics of international law. Some topics are chosen by the
Commission and others referred to it by the General Assembly or the Economic and
Social Council. When the Commission completes draft articles on a particular topic,
the Gene ral A ssembly usually conve nes an inter national conference of
plenipotentiaries to incorporate the draft articles into a convention which is then
open to States to become parties: www.un.org/law/ilc.

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clause.18 The idea for the project originally arose in the context of the ILC’s
work on the law of treaties, and, as noted in the introduction to the draft
articles, they should be interpreted in light of the Vienna Convention on the
Law of Treaties (Vienna Convention).19 In determining to proceed with the
p roj e c t , t h e IL C ack n ow l e d g e d t h e i m po rta n c e of t h e ro le o f t h e
most-favoured-nation treatment obligation in the sphere of international
trade.20 However, the ILC specifically did not confine its studies to that
sphere, but rather explored the application of the clause in as many
spheres as possible.21
In 1978, the ILC adopted the Draft Articles on Most-Favoured-Nation
Clauses and recommended to the General Assembly of the United Nations
that they be used for a Convention on the subject. The General Assembly
did not act upon this recommendation and took no substantive action on
the draft articles. 22 The ILC’s work provides, nevertheless, a general
analysis of MFN clauses and insight into the “ejusdem generis” principle,
which has been used in their interpretation in several judicial and arbitral

18. See Introduction to the 1978 ILC Report, par. 15.

19. Idem, par. 59.
20. Idem, par. 17.
21. Idem, par. 61.
22. See the following acts of the General Assembly: Res. 33/139 (1978), 35/161 (1980),
and 40/65 (1985), and Decision 43/429 (1988).

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cases, including recent ones. 23, 24 The present section summarises the
most general aspects of this work.25

3.1. General principles of an MFN clause26

In examining the ILC’s work, it is important to note first of all that the
Draft Articles elaborated by the Commission were intended to be “without
prejudice to any provision on which the granting State and the beneficiary
State may otherwise agree” (Art. 29).27 Thus, the content of the treatment due
in each specific case is defined by the actual language of the MFN clause in
question. This text must be interpreted in accordance with the principles of
treaty interpretation, as codified in the Vienna Convention. Article 31.1 of the
Vienna Convention states that “a treaty shall be interpreted in good faith in

23. The ILC’s work has been regarded by some countries as reflecting international law.
See, for example, the comments of Colombia, Netherlands, Sweden in “Comments of
Member States, organs of the United Nations, specialised agencies and other
intergovernmental organisations on the draft articles on the most-favoured-nation
clause adopted by the International Law Commission at its twenty-eighth session”, in
Yearbook of the International Law Commission, 1978, Vol. II, Part Two, and Germany in
“Analytical compilation of comments and observations from Governments, organs of
the United Nations which have competence in the subject-matter and interested
intergovernmental organizations: report of the Secretary-General”, UN A/35/443, p. 9.
However, it should be borne in mind that to grant MFN treatment is not an obligation
of customary international law.
24. Some OECD member countries, without denying the relevance of the ILC exercise,
stressed that the peculiarities of each MFN clause and of its context put into serious
question the utility of codification through a Convention. See, for example, the
comments by Luxembourg, in “Comments of member States, organs of the United
Nations, specialised agencies and other intergovernmental organisations on the draft
articles on the most-favoured-nation clause adopted by the International Law
Commission at its twenty-eighth session”, in Yearbook of the International Law
Commission, 1978, Vol. II, Part Two, p. 168 ff., or by the UK in “Analytical compilation of
comments and observations from Governments, organs of the United Nations which
have competence in the subject-matter and interested intergovernmental
organisations: report of the Secretary-General”, UN A/35/443, p. 11. Other countries,
for example the United States, supported the Commission’s draft articles and
favoured their adoption by the Commission, but they took position against their final
codification through an international convention (see ibidem, p. 14).
25. While the ILC studied practically all aspects of the MFN treatment clauses
including the issues of exceptions, and termination or suspension of MFN rights,
the present section focuses on the general interpretation of MFN clauses.
26. Unless otherwise stated, paragraphs 24-47 reproduce the views of the ILC.
27. In this sense, see also Oppenheim’s International Law, op. cit., p. 1 328.

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accordance with the ordinary meaning to be given to the terms of the treaty in
their context and in the light of its object and purpose”.28
In the ILC’s work, the MFN clause is described as taking the form of a
treaty provision whereby a State (the granting State) undertakes an
“obligation” towards another State (the beneficiary State) to accord MFN
treatment in an agreed sphere of relations and that (beneficiary) State accepts
it.29 The clause may also determine the persons or things to whom and to
which the MFN treatment is applicable. Ultimately, the extent of the benefits
to which the beneficiary State may lay claim (for itself or for persons or things
in determined relationship with it) is limited by the treatment extended by the
granting State to a third State (or to persons or things in the same relationship
with a third State).30
The MFN clause may be invoked if the third State (or persons or things in
the same relationship with the third State as are the persons or things
mentioned in the clause with the beneficiary State) have been extended the
favours that constitute the MFN treatment foreseen in the clause. The mere fact
of a more favourable treatment is what is required to set in motion the
operation of the clause. This treatment may be based upon a treaty, another
agreement or a unilateral, legislative or other act or mere practice.31 The
beneficiary State, on the strength of an MFN clause may invoke the clause to
also demand the same benefits as were extended to the third State. Depending
on the drafting of the MFN clause, the mere fact that the third State has not
availed itself of the benefits which were extended to it by the granting State
does not absolve the granting State from the obligation under the MFN clause.32
When two treaties exist, one between the granting State and the
beneficiary State containing the MFN clause, and the other between the

28. In Article 31.2, the word “context” is held to include the preamble and annexes of
the treaty as well as any agreement or instrument made by the parties in
connexion with the conclusion of the treaty. Article 31.3 further states that there
shall be taken into account, together with the context, any subsequent agreement
or practice relating to the treaty together with any relevant rules of international
law. According to Article 31.4, a special meaning can also be given to a term “if it is
established that the parties so intended”. Where the interpretation according to
the provisions of Article 31 needs confirmation, or determination since the
meaning is ambiguous or obscure or leads to a manifestly absurd or unreasonable
result, recourse can be made to the supplementary means of interpretation under
Article 32. These means include the preparatory works (travaux préparatoires) of
the treaty and the circumstances of its conclusion. The Annex reproduces the text
of Articles 31 and 32 in full.
29. Usually, the beneficiary State also makes an MFN pledge in a reciprocal way. See
Idem, Article 4 and Commentary (5).
30. Idem, Article 8(2), and Commentary (1).
31. Idem, Article 8 Commentary (1).
32. Idem, Article 5, Commentary (5).

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granting State and a third State, the treaty that contains the MFN treatment
clause is considered to be the “basic” treaty.33 As was held by the majority of
the Court in the landmark Anglo-Iranian Oil Company case,34 “this is the treaty
which establishes the juridical link between the beneficiary State and a third
party treaty and confers upon that State the rights enjoyed by the third party.
A third-party treaty, independent and isolated from the basic treaty, cannot
produce any legal effect as between […] the beneficiary State and […] the
granting State (it is res inter alios acta)”.35 The beneficiary is entitled, to the
extent provided by the MFN provision under its own treaty, to claim all rights
and favours extended by the granting State to the third State. This extension
can be seen as “ingenious” legal shorthand to treaty process.36
The granting State and the beneficiary State can however limit in the
basic treaty the extent of the favours that can be claimed by the beneficiary. If
the clause contains a restriction, the beneficiary State cannot claim any
favours beyond the limits set by the clause, even if this treatment does not
reach the level of the favours extended by the granting State to a third State.37

3.2. The ejusdem generis principle

The ejusdem generis principle is the rule according to which a MFN clause
can only attract matters belonging to the same subject matter or the same
category of subject as to which the clause relates.

33. Idem, Article 8, Commentary (1).

34. Anglo-Iranian Oil Co. case (Preliminary objection), Judgment of 22 July 1952 (I.C.J.
Reports 1952, p. 109). The decision of the Court contributed greatly to the
clarification of the legal theory. Before the Court’s decision, several legal writers
presented the operation of the MFN treatment clause as an exception to the rule
pacta tertiis nec nocent nec prosunt (i.e. that treaties produce effects only as between
the contracting parties). Legal theory is now unanimous in endorsing the findings
of the majority of the Court in the Anglo-Iranian case. As the ILC said, rather than
being an exception to this ru le, it confirms it, se e ILC Report, A rtic le 8,
Commentary (2).
35. Idem, Article 8, Commentary (2).
36. G. Schwarzenberger also wrote regarding the relation between the pacta tertiis rule
and the MFN clause: “This drafting device […] contributes greatly to the
rationalization of the treaty-making process and leads to the automatic
self-revision of treaties which are based on the most-favoured-nation standard. It
makes unnecessary the incorporation in the treaty between grantor and the
beneficiary of the most-favoured-nation treatment of any of the relevant treaties
between the grantor and third States and their deletion whenever such treaties
cease to be in force. So long as this last-mentioned aspect of the matter is kept in
mind, most-favoured-nation clauses are correctly described as drafting (and
deletion) by reference”. G. Schwarzenberger, International Law as applied by
International Courts and Tribunals, London, 3rd ed, 1957, p. 243 and Yearbook of the
International Law Commission, 1970, Vol. II, p. 204.
37. ILC Report, Article 8, Commentary (8).

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Article 9 of the ILC Draft Articles provides that the beneficiary State of a
MFN clause should acquire, for itself or for the benefit of persons or things in
a determined relationship with it, only those rights which fall within the
limits of the subject matter of the MFN clause, and only with respect to
persons or things which are specified in the clause or implied from its subject
matter to benefit from it. Draft Article 10 goes on to suggest that the rights
acquired should be those that the granting State extends to a third State
within the limits of the subject matter of the MFN clause and only if the
beneficiary persons or things belong to same category of persons or things
which benefit from the treatment extended to the third party and have the
same relationship with that State.38

a) What subject matter?

The Commentary to Draft Articles 9 and 10 underlines that the rights of
the beneficiary are limited, with respect to the subject matter, in two ways,
namely by the clause itself, which refers to a certain matter, and secondly by
the rights conferred by the granting State on the third State. Although the
meaning of the rule is clear, its application is not always easy. The
Commission considered the following cases.
In the Anglo-Iranian Oil Company case (1952)39 – which resulted from the
nationalisation by the Government of Iran of the oil industry – the United
Kingdom invoked the MFN clauses of the agreements concluded with Iran
in 1857 and 1903 to seek the treatment foreseen in the Treaty of Friendship,
Establishment of Commerce of 1934 between Iran and Denmark and similar
agreements concluded with Switzerland and Turkey in 1934 and 1937 that
guaranteed the persons and property of the parties treatment in accordance
with international law. The Court dismissed the claim on the basis that it had
no jurisdiction.40
In the case concerning Rights of Nationals by the United States of America
in Morocco (1952)41 – which dealt in particular with the extent of the consular
jurisdiction which the United States could exercise in the French Zone of

38. Idem, p. 26.

39. ICJ Reports, 1952, p. 93 and www.icj-cij.org/icjwww/idecisions/isummaries/
ifussummary.
40. The Court found that it would have had jurisdiction only when a dispute related
to the application of a treaty or convention concluded by Iran after its Declaration
of acceptance of the jurisdiction of the Court, under Article 36(2) of its Statute.
This Declaration was made on 19 September 1932, i.e. after the UK/Agreements
of 1857 and 1903. This case was, nevertheless, mentioned by the ILC because it
analysed MFN clauses by comparing the rights of a beneficiary State under a basic
agreement with a granting State, with those provided by the granting State to
third States.
41. Morocco Case (France v. U.S.A), ICJ Pleadings, 1952, Vol. I.

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Morocco and the question of fiscal immunity of US citizens – the International

Court of Justice concluded that the United States was not entitled, by virtue of
the MFN treatment clauses in its 1836 treaty with Morocco, to exercise
consular jurisdictional rights in the French zone of Morocco other than those
strictly included in that Agreement. The Court held in this connection that the
United States had acquired additional consular jurisdiction by the effect of
such MFN clauses, but that those MFN-derived benefits had come to an end
with the termination by Great Britain of all its rights and privileges of a
capitulatory character by the Franco-British Convention of 1937. The Court
also concluded that the MFN clause did not provide the basis for fiscal
immunity, given that no other State enjoyed it for the benefit of its nationals.42
The Court’s comments seemed to imply, however, that the scope of the MFN
clause in a treaty was confined to the matters dealt with in that Convention.
In the Ambatielos case (1952,43 1953,44 1956 45), the Greek government,
relying upon Article X (MFN clause) and article XV (National treatment) of the
Treaty of Commerce and Navigation concluded by Greece and the United
Kingdom in 1886 and a Declaration annexed to the Treaty of Commerce and
Navigation of 1926, invoked provisions embodied in earlier treaties between
the United Kingdom and third States (Denmark, Sweden and Bolivia) to claim
that Ambatielos, a Greek ship-owner, had suffered a denial of justice in regard
to a dispute it brought before the English courts. By its Judgments of 1 July
1952 and 19 May 1953, the International Court of Justice found that it had
jurisdiction to decide whether the United Kingdom was under the obligation
to submit to arbitration the difference as to the validity of Ambatielos’ claim,
in so far as it was based on the Anglo-Hellenic Treaty of 1886. At the same
time, the Court held that it had no jurisdiction to go into all the merits of the

42. The United States invoked the Peace Treaty between Morocco and the United Sates
of 1836. That treaty dealt with a variety of matters including navigation, trade and
consular jurisdiction. It explicitly provided for the United States consular jurisdiction
in all disputes between United States citizens or protégés. The United States claimed
additional rights to consular jurisdiction on the basis of an MFN clause in that Treaty,
for all cases in which a United States citizen or protégé was merely a defendant. The
third party treaties of Morocco, invoked by the United States, were the General Treaty
with Great Britain of 1856 and the Treaty of Commerce and Navigation with Spain
of 1861. These treaties granted jurisdiction in all cases in which the respective
nationals were merely defendants. The Court found that “the United States acquired
by virtue of the most-favoured nation clauses, civil and criminal jurisdiction in all
cases in which the United States were defendants,” but that those jurisdictional
benefits were extinguished upon termination by Spain and Great Britain of their
respective treaties with Morocco. See www.icj-cij.org/icjwww/idecisions/isummaries/
ifussummary520827.htm. The full text of the treaty is available at www.yale.edu/
lawweb/avalon/diplomacy/barbary/bar1836t.htm.
43. IC.J Reports 1952.
44. ICJ Reports 1953.
45. United Nations, Reports of International Arbitral Awards, Vol. XII, United Nations, 1963.

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case. The case was subsequently submitted to a Commission of Arbitration

which ultimately rejected the claim, in its Award of 6 March 1956, on the basis
that the provisions contained in other Treaties invoked by the Greek
government provided for “privileges, favours or immunities” no more
favourable than those resulting from the national treatment clause. However,
the ILC referred to this case because the Commission of Arbitration said:
“The most-favoured-nation clause can only attract matters belonging to the same
category of subject as that to which the clause itself relates.” Regarding the
specifics of the case, it held that: “… It is true that the administration of justice”,
when viewed in isolation is a subject-matter other than “commerce and
navigation”, but this is not necessarily so when it is viewed in connection with the
protection of the rights of traders. Protection of the rights of traders naturally
finds a place among the matters dealt with by Treaties of commerce and
navigation. […] Therefore it cannot be said the administration of justice, in so far
as it is concerned with the protection of these rights, must necessarily be excluded
from the application of the most-favoured-nation clause, when the latter includes
“all matters relating to commerce and navigation”.46
The International Law Commission also relied on decisions of national
courts.47 In a 1913 French case,48 the French Court of Cassation decided against
the invocation of certain procedural requirements for bringing suit found in a
French-Swiss Convention on jurisdiction and execution of judgment, in favour
of German nationals as a result of an MFN clause in an 1871 Franco-German
commercial treaty applying to the “admission and treatment of subjects of the
two nations.” The Court concluded that “these MFN provisions pertain
exclusively to the commercial relations between France and Germany,
considered from the point of view of the rights under international law, and
that they do not concern the rights under civil law and that “the most-

46. The submissions of the parties and the opinions expressed in this case also
provide useful insights into the operation of the MFN clause and the ejusdem
generis rule. For instance, in invoking this principle, the counsel for the United
Kingdom stated that “the clauses conferring most favoured nation rights in
respect of a certain matter, or class of matter, can only attract the rights conferred
by other treaties in regard to the same matter of class of matter. […] This
furnishes the conclusive answer to any suggestion that Article X can attract any
provisions in other treaties except provisions about commerce and navigation. It
cannot attract provisions dealing with the administration of justice and related
matters”. The Counsel of Greece argued on the other hand that access to the
courts and administration of justice in commercial matters is not outside the
“genus” of the favours referred to in the MFN clause of the Greek/UK treaty. They
a re part of “in all matte rs relat ing to commerce ”. See Ye ar book of the
International Law Commission, 1970, Vol. II, par. 69.
47. See “Digest of decisions of national courts relating to the most-favoured-nation
clause”, prepared by the UN Secretariat for the ILC, A/CN.4/269, 29 March 1973.
48. This description is drawn from the ILC Report, Article 10, Commentary (4).

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favoured-nation clause may be invoked only if the subject of the treaty

stipulating it is the same as the particularly favourable treaty the benefit of
which is claimed”.
In Lloyds Bank v. de Ricqlès and Gaillard (1930),49 the Commercial Tribunal
of the Seine dismissed a claim by Lloyds Bank, which having been ordered to
give security for costs, invoked Article I of the Anglo-French Convention
regulating commercial maritime relations of 28 February 1882 to benefit from
the provisions of a Franco-Swiss Treaty of 15 June 1889, which gave Swiss
nationals the right to sue in France without being required to give security for
costs. Lloyds argued that Article I of the Anglo-Convention engaged the
parties to give each other “immediately and unconditionally the benefit of
every favour, immunity or privilege in matters of commerce and industry
which have been conceded by one [of] the parties to any third nation
whatsoever, whether within or beyond Europe”. The Tribunal held that a party
to a convention of a general character such as the Anglo-French Convention
could not claim the MFN clause the benefits of a special convention such as
the Franco-Swiss Convention, which dealt with one particular subject, namely
freedom from the obligation to give security for costs.50
In reference to this case, the International Law Commission suggested
that, under the reasoning of this case, there would be a dilemma facing the
drafters of an MFN clause of either drafting the clause in too general terms,
risking the loss of its effectiveness through a strict interpretation of the
ejusdem generis rule, or of drafting it too explicitly, enumerating its specific
domains, in which cases the risk consists in the possible incompleteness of
the enumeration.51
The ILC Commentary stated that it is only the subject-matter of the clause,
not the treaty or agreement containing the clause that must belong to the same
category. In other words, it is not necessary that the treaty or agreement
including the clause be of the same category as that of the benefits that are
claimed under the clause. To hold otherwise would seriously diminish the value
of the MFN clause. However, the text of the treaty including the MFN clause does
serve as part of the context for its interpretation under Article 31(1) of the
Vienna Convention on the Law of Treaties.
In its Commentary (11) to Draft Articles 9 and 10, the Commission
observed that, since the effect of the MFN process is, by means of the
provisions of one treaty, to attract those of another, unless this process is

49. This summary of the case is based on the ILC Report, Article 10, Commentary (5).
50. In other words, in this case as well as the previous one, the Tribunals adopted the
view that MFN clauses could not be invoked to compare treatment provided under
two treaties dealing with different subjects.
51. Idem, Commentary (6) to articles 9 and 10.

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strictly limited to cases where there is a substantial identity between the

subject matter of the two sets of clauses concerned, the result could be to
impose upon the granting State obligations it never contemplated.

b) What categories of persons or things?

A similar reasoning was proposed by the Commission for gauging the
application of the MFN treatment to particular categories of persons or things.
In essence, the beneficiary State may claim MFN treatment only for the
category of persons or things that receives or is entitled to receive certain
treatment or certain favour, under the right of a third State. Furthermore, the
persons or things in respect of which the MFN treatment is claimed must be in
the same relationship with the beneficiary State as are the comparable
persons or things with the third States.52 There are cases where the MFN
clause is silent on the persons or things that may benefit from it. In such case,
the ILC suggests, the subject matter of the clause – for instance customs
duties, commerce, shipping – would implicitly determine the class of persons
or things that can benefit from it – importers, merchants, vessels.53

4. Recent cases
Among the numerous cases brought to ICSID in recent years,54 two cases,
Maffezini v. Kingdom of Spain and Tecnicas MedioAmbientales Tecmed S.A.
v. the United Mexican States stand out as raising issues concerning the MFN
clause. One issue is whether an MFN clause applies to dispute settlement
mechanisms and questions of jurisdiction. Five new cases have emerged since
Maffezini v. Kindgom of Spain and Tecnicas MedioAmbientales Tecmed S.A. v.
the United Mexican States, four under BITs and one under the Energy Charter
Treaty (ECT). None of the investor-State claims brought under NAFTA Chapter
Eleven has resulted in a finding of a breach of the MFN clauses.

4.1. BITs

Maffezini v. Spain (2000)

Maffezini v. Kingdom of Spain55 concerned a dispute arising from the
treatment allegedly received by the Argentine investor Emilio Agustin

52. Idem, Commentary (15) to articles 9 and 10.

53. Supra note 18, p. 27.
54. By the latest account, 32 new cases have been registered by the Centre in 2003
and 13 in 2004, as compared to 15 such claims in 2002 and only 12 and 5 in 2001
and 2000.
55. Emilio Agustin Maffezini v. Kingdom of Spain (ICSID No. Apr/97/7), Decision on
Jurisdiction of 25 January 2000 and Award of the Tribunal of 13 November 2000.
These decisions are available at www.worldbank.org/icsid/cases.

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Maffezini from Spanish entities, in connection with his investment in an

enterprise for the production and distribution of chemical products in the
Spanish region of Galicia. Spain (the Respondent) objected to the tribunal’s
jurisdiction since Mr. Maffezini (the Claimant) had failed to comply with an
exhaustion of local remedies requirements set forth in the Argentine-Spain
BIT. Mr. Maffezini admitted that the dispute had not been referred to the
Spanish courts prior to its submission to ICSID, but he argued that the MFN
clause in the Argentine-Spain BIT would allow him to invoke Spain’s
acceptance of ICSID arbitration contained in the Chile-Spain BIT and that
none of the exceptions from MFN in the Argentine-Spain BIT applied to the
dispute settlement provisions at issue in the case.
On 25 January 2000, the Tribunal decided that, 56 by virtue of the MFN
clause of the 1991 Argentine-Spain Bilateral Investment Treaty, the claimant
had the right to import the more favourable jurisdictional provisions of the
1991 Chile-Spain Agreement and, as a result, to resort to international
arbitration without being obliged to submit its dispute to Spanish courts for a
period of eighteen months beforehand.57 Paragraph 2 of Article IV of the
Argentina/Spain BIT provides that after guaranteeing a fair and equitable
treatment for investors (paragraph 1):
“In all matters subject to this Agreement, 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 country.”58
In this connection, the Tribunal referred to the ejusdem generis principle59
and the reasoning found in the Ambatielos case (namely that the MFN clause
can apply to provisions concerning the “administration of justice”). The
Tribunal also stated that today’s dispute settlement arrangements are
“inextricably related” to the protection of foreign investors as shown below:
“Notwithstanding the fact that the basic treaty containing the clause does not refer
expressly to dispute settlement as covered by the most-favoured-nation clause, the
Tribunal considers that there are good reasons to conclude that today dispute

56. Decision on Jurisdiction of 25 January 2000, www.worldbank.org/icsid/cases/

emilio_DecisiononJurisdiction.pdf.
57. The Tribunal noted that the Argentine-Spain BIT provides domestic courts with
the opportunity to deal with a dispute for a period of eighteen months before it
may be submitted to arbitration. Article 10(2) of the Chile-Spain BIT, however,
imposes no such condition. It provides merely that the investor can opt for
arbitration after the six-month period allowed for negotiations has expired. See
Supra note at paragraph 39.
58. Idem, at paragraph 38. The Spanish original of the clause reads as follows: “En
todas la materias regidas por el presente Acuerdo, este tratamiento no sera menos
favorable que el ortorgado por cada Parte a las inversions realizadas en su
territorio por inversores de un tercer pais.”
59. Idem, at paragraph 56.

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settlement arrangements are inextricably related to the protection of foreign

investors, as they are also related to the protection of rights of traders under
treaties of commerce. Consular jurisdiction in the past, like other forms of
extraterritorial jurisdiction, were considered essential for the protection of rights of
traders and, hence, were regarded not merely as procedural devices but as
arrangements designed to better protect the rights of such persons abroad.60 It
follows that such arrangements, even if not strictly a part of the material aspect of
the trade and investment policy pursued by treaties of commerce and navigation,
were essential for the adequate protection of the rights they sought to guarantee.
International arbitration and other dispute settlement arrangements have
replaced these older and frequently abusive practices of the past. These modern
developments are essential, however, to the protection of the rights envisaged
under the pertinent treaties; they are closely linked to the material aspects of the
treatment accorded…”
The Tribunal concluded that:
“… if a third-party treaty contains provisions for the settlement of disputes that
are more favourable 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-favoured-nation clause as they are fully compatible with the ejusdem
generis principle…”61
Under the broad MFN clause of the Argentine-Spain treaty, which
expressly referred to “all matters subject to the Agreement”62 the Tribunal did
not accept the respondent’s claim that “under the principle ejusdem generis the
most-favoured-nation clause can only operate in respect to […] substantive
matters or material aspects of the treatment granted to investors and not to
procedural or jurisdictional questions”.63
In rendering its decision, the Tribunal observed that in some BITs the
MFN clause explicitly embraces the provisions on dispute settlement.64 In
other treaties it refers to all rights contained in the agreement without
mentioning dispute settlement.65

60. Footnote omitted.

61. Supra, note 56 at 56.
62. The Tribunal also referred to the 1992 Agreement between Chile and the
Belgian-Luxembourg Economic Union as an example of other MFN treaty clauses
applying to “all rights contained in the present Agreement”. Supra Note 56 at 53,
footnote 21.
63. Idem, at 15.
64. The Tribunal cited in this connection the investment treaties concluded by the
United-Kingdom.
65. Idem at par. 52, 53.

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However, the Tribunal stated the following limits to its interpretation of

the clause:
“… As a matter of principle, the beneficiary of the clause should not be able to
override public policy considerations that the contracting parties might not have
envisaged as fundamental conditions for their acceptance of the agreement in
questions, particularly if the beneficiary is a private investor…
Here it is possible to envisage a number of situations not present in the
instant case. First, if one contracting party has conditioned its consent to
arbitration on the exhaustion of local remedies, which the ICSID Convention
allows, this requirement could not be bypassed by invoking the most-favoured-
nation clause in relation to a third-party agreement that does not contain this
element since the stipulated condition reflects a fundamental rule of international
law. Second, if the parties have agreed to a dispute settlement arrangement which
includes the so-called fork in the road, that is, a choice between submission to
domestic courts or to international arbitration, and where the choice once
made becomes final and irreversible, this stipulation cannot be bypassed by
invoking the clause. This conclusion is compelled by the consideration that it
would upset the finality of arrangements that many countries deem important
as a matter of public policy. Third, if the agreement provides for a particular
arbitration forum, such as ICSID, for example, this option cannot be changed
by invoking the clause, in order to refer the dispute to a different system of
arbitration. Finally, if the parties have agreed to a highly institutionalized
system of arbitration that incorporates precise rules of procedure, which is the
case, for example, with regard to the North America Free Trade Agreement
and similar arrangements, it is clear that neither of these mechanisms could
be altered by the operation of the clause because these very specific provisions
reflect the precise will of the contracting parties. Other elements of public
policy limiting the operation of the clause will no doubt be identified by the
parties or tribunals. It is clear, in any event, that a distinction has to be made
between the legitimate extension of rights and benefits by means of the
operation of the clause, on the one hand, and disruptive treaty-shopping that
would play havoc with the policy objectives of underlying specific treaty
provisions, on the other hand.” 66

66. At pp. 23-24. Footnotes omitted.

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Tecmed v. Mexico (2003)67,

67, 68
68

In this case, decided on 29 May 2003, the Respondent was found to have
breached its obligations under the 1996 Mexico/Spain BIT as set forth in
Articles 4(1) (Fair and Equitable Treatment) and 5(1) (Nationalisation and
Expropriation) in respect to the Mexican government’s failure to re-license the
Spanish investor Tecmed’s hazardous waste “Cytrar” in the state of Sonora. In
considering the challenges made to the Arbitral Tribunal’s jurisdiction and the
timely submission by the Claimant of some of its claims, however, the
Tribunal was called upon to decide whether the “most favourable conditions”
foreseen in Article 8(1) of the Agreement entitled the claimant to a retroactive
application of its claim in view of a more favourable treatment in connection
with that matter which would be afforded to an Austrian investor under the
Austria/Mexico BIT of 29 June 1998. This article reads:69
“If the provisions of law of one of the Contracting Parties or obligations under
international law at the margins of the present Agreement, current or future,
between the Contracting Parties, result in a general or specific regulation
according to which it should be given to investments of investor of the other
Contracting Party, a treatment more favourable than that it is envisaged in the
present Agreement, such regulation shall prevail over the present Agreement, to
the extent that it is more favourable.”70
In arguing for this result, the claimant referred to the Maffezini judgment.
The Tribunal did not examine the provisions of the Austria/Mexico BIT or the
MFN provisions of the Mexico-Spain BIT and, referring to paragraphs 62
and 63 of Maffezini, discussed above, it specifically ruled that:
“… matters relating to the application over time of the Agreement, which involve
more the time dimension of application of its substantive provisions rather than

67. Técnicas Medioambientales Tecmed, S.A. v. United Mexican States [ICSID Case
No. ARB(AF)/00/2] www.worldbank.org/icsid/cases/laudo-051903%20-English.pdf.
68. It has also been reported that the German investor claimant in Siemens AG v.
Argentine Republic, ICSID case No. ARB/02/08 may also use the Mafezzini
construction in this case. See “Investor-State Arbitration: A Hot Issue in Latin
America, Guido Santiago Tawil, M. & M. Bomchil, Buenos Aires. Horacio D. Rosatti
makes a similar observation on the implications of the Mafezzini case in “Bilateral
Investment Treaties, Binding International Arbitration and the Argentine
Constitutional System”, in La Ley, 15 October 2003.
69. Article 8(1) is a separate article from the MFN treatment clause in Article 4(2) of
the Agreement.
70. The Spanish original of the clause is as follows: “1. Si de las disposiciones legales
de una de las Partes Contratantes, o de las obligaciones emanadas del Derecho
Internacional al margen del presente Acuerdo, actuales o futuras, entre las Partes
Contratantes, resultare una reglamentación general o especial en virtud de la cual
deba concederse a las inversiones de inversores de la otra Parte Contratante un
trato más favorable que el previsto en el presente Acuerdo, dicha reglamentación
prevalecerá sobre el presente Acuerdo, en cuanto sea más favorable.”

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matters of procedure or jurisdiction, due to their significance and importance, go

to the core of matters that must be deemed to be specifically negotiated by the
Contracting Parties (emphasis added). These are determining factors for their
acceptance of the Agreement, as they are directly linked to the identification of the
substantive protection regime applicable to the foreign investor, and particularly,
to the general (national or international) legal context within which such regime
operates, as well as to the access of the foreign investor to the substantive
provisions of such regime. Their application cannot therefore be impaired by the
principle contained in the most favoured national clause.”71
Similarly, the Tribunal found that Title II(4) and (5) of the Appendix to the
Mexico/Spain Agreement (relating to dispute settlement):
“… contains requirements relating to the substantive admissibility of claims by
the foreign investor, i.e. its access to the substantive protection regime
contemplated under the Agreement. Consequently, such requirements are
necessarily a part of the essential core of negotiations of the Contracting Parties;
it should therefore be presumed that they would not have entered into the
Agreement in the absence of such provisions. Such provisions, in the opinion of
the Arbitral Tribunal, therefore fall outside the scope of the most-favoured-nation
clause contained in Article 8(1) of the Agreement.”72
In considering the substantive merits of the case, the Tribunal found no
violation of the MFN clause of the Agreement.73

74
Siemens A.G. v. Argentina (2004)74
On 3 August 2004, an ICSID Tribunal upheld jurisdiction in a claim filed in
May 2002 by Siemens A.G. under the Argentina-Germany bilateral investment
treaty for expropriation and alleged breaches by Argentina of said treaty with
respect to the termination of an agreement with a local Siemens subsidiary.
Argentina objected to ICSID jurisdiction on the ground, inter alia, that the
claimant had not complied with the requirement in the treaty that claimants
pursue domestic court remedies for 18 months before resorting to international
arbitration. The claimant argued that, under the MFN clause of the treaty, it was

71. Paragraph 69 ends with a footnote making a cross reference to paragraphs 25-26
and 62-63 of the Maffezini Decision on Jurisdiction.
72. Idem, p. 24, paragraph 74.
73. “The Claimant has failed to furnish convincing or sufficient evidence to prove, at
least prima facie, that the Claimant’s investment received, under similar
circumstances, less favourable treatment than that afforded to nationals of the
State receiving the investment of a third State, or that said investment was
subject to discriminatory treatment upon the basis of considerations relative to
nationality or origin of the investment or the investor.” Ibid, p. 73, paragraph 181.
74. Siemens A.G. v. The Argentine Republic (ICSID No. ARB/02/8), available at http://
ita.law.uvic.ca/documents/CMS_FinalAward.pdf.

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entitled to the treatment provided by the dispute-settlement provision of the

Argentine-Chile BIT, which did not impose any such requirement. The Tribunal
accepted this argument and rejected Argentina’s objections to the application of
the MFN clause.75 The Tribunal considered that the MFN clause should be
interpreted in accordance with the plain meaning of its terms in their context
and in the light of the object and purpose of the treaty which, as expressed in its
title and preamble, was “to protect” and “to promote” investment.76 The
tribunal held that, on a plain and contextual reading, the terms “treatment” and
the phrase “activities related to the investment” found in the treaty’s MFN
clause “are sufficiently wide to include dispute settlement”.77 It also considered
that the treaty provision requiring that local remedies be pursued for 18 months
did not require the exhaustion of local remedies “as this rule has been
understood under international law”.78

MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile (2004)79
79

On 21 May 2004, an ICSID Tribunal found that Chile had breached its
obligations under the fair and equitable treatment provisions of the
Chile-Malaysia bilateral investment treaty (BIT) in regard to a real estate
project by MTD Equity, a Malaysian company, in Santiago, Chile. The claimants
based part of their claims on the argument that, by operation of the MFN
clause of the Chile-Malaysia treaty, they were entitled to benefit from the
treatment of the provisions of the Chile-Croatia BIT and the Chile-Denmark
BIT regarding the granting of permit awards. The Tribunal considered that “the
legal basis of the claim valid based on the wide scope of the MFN clause”80 in
the Chile-Malaysia BIT. It also agreed that “to include as part of the protections
of the Chile-Malaysia treaty those included in the Chile-Denmark BIT and the
Chile Croatia BIT “is in consonance” with the objective of the Chile-Malaysia
BIT “to protect investments and create conditions favorable to investments”.81
It concluded, however, the treatment foreseen in the Chile-Croatia BIT and the
Chile- Denmark BIT did not provide an entitlement to a change in Chilean

75. Supra Note, paragraph 110.

76. Supra Note, paragraphs 80-81.
77. Supra Note, paragraph 103.
78. Supra Note, paragraph 104.
79. MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile (ICSID Case No. ARB/
01/7), available at www.worldbank.org/icsid/cases/awards.htm.
80. Supra Note, paragraph 187. The first paragraph of the MFN clause of the
Chile-Malaysia BIT – Article 3(1) – reads as follows : “Investments made by
investors of either Contracting Pary in the territory of the 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”.
81. Supra Note, paragraph 104.

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laws and regulations.82 The Respondent was found to have breached its BIT
obligations on the ground that Foreign Investment Committee’s approval of
MTD’s investment was made in full knowledge that this was against the urban
policy of the Government, constituting a breach of the fair and equitable
treatment obligation of the Chile-Malaysia treaty.83

Salini Costruttori and Italstrade v. Jordan-Argentina (2004)84

84

On 9 November 2004, an ICSID Tribunal upheld jurisdiction in a claim filed

in August 2002 by Salini Costruttori S.P.A. and Italstrade S.P.A. under the
Jordan-Italy bilateral investment treaty (BIT) for alleged non performance of
Jordan’s obligations under a dam construction project. Jordan objected to ICSID
jurisdiction on the ground that contractual disputes were governed by the
dispute settlement provisions of the contract and that claimants could not, by
virtue of the MFN clause of the Jordan-Italy BIT, avail themselves of the more
advantageous dispute settlement provisions in other BITs such as that of
Article IX of the Jordan-US BIT85 (Article IX gave to US investors in Jordan “the
right to submit investment disputes to ICSID regardless of any clause in the
investment agreemen t providing for a diffe rent dispute settlement
mechanism”).86 The Tribunal rejected the latter claimants’ argument. It
observed that the circumstances of this case were different than that of the
Maffezini v. Spain case.87 Indeed, the MFN clause in the Jordan-Italy BIT does not
include any provision providing extending its scope of application to dispute
settlement. Furthermore, it considered that the Claimants had submitted
nothing from which it might be established that the common intention of the
Parties was to have the MFN clause apply to dispute settlement… On the
contrary the common intent of the Parties to exclude contractual claims from
ICSID jurisdiction was clear.88 From this the Tribunal concluded that the MFN
clause of the Italy-Jordan BIT did not apply in so far as dispute settlement
causes are concerned.89 It upheld jurisdiction on other grounds.90

82. Supra Note, paragraph 206.

83. Supra Note, paragraph 189.
84. Construttori S.p.A. and Italstrade S.p.A. v. the Hashemite Kingdom of Jordan,
(ICSID Case No. ARB/02/13), available at www.worldbank.org/icsid/cases/awards.htm.
85. Supra Note, paragraph 23.
86. Supra Note, paragraph 21.
87. Idem.
88. Supra Note, paragraph 118.
89. Supra Note 1, paragraph 119.
90. Supra Note, paragraph 179.

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Camuzzi International S.A. v. The Republic of Argentina (2005)91

91

On 10 June 2005, an ICSID Tribunal upheld jurisdiction in a claim filed in

April 2003 by Camuzzi International S.A. under the Argentina-Belgium-
Luxembourg Economic Union bilateral investment treaty (the treaty) for alleged
breaches by Argentina of Camuzzi’s shareholder’s interests in three local
transport and distribution electrical companies as a result of the economic
measures adopted by Argentina under the “Public Emergency Law of 2002”.
Argentina objected to ICSID jurisdiction on a number of grounds. Unlike the
Siemens A.G. v Argentina case,92 however, Argentina did not object to Camuzzi’s
claim that under the MFN clause of the treaty (Article 4), Camuzzi did not need
to comply with the requirement to pursue domestic court remedies for
18 months before resorting to international arbitration. The claimant argued
that under this MFN clause – which covered “all matters subject to the
treaty”93 – it was entitled to the treatment provided by the dispute-settlement
provision of the Argentine-United States BIT, which did not impose such
requirement. The Tribunal concurred with this argument, stating that the
waiting period of 18 months foreseen in Article 12(2) and 12(3) of the treaty was
not applicable in this case94 and allowed the case to proceed on the merits.95

4.2. NAFTA
Two claimants under NAFTA’s investment chapter have relied on MFN
provisions. In the final awards of both cases, however, the tribunals rejected
the applicability of these MFN provisions. As a result, neither case illuminates
the principle subject of this article, i.e., the operation of MFN clauses.

ADF v. United States of America (2002)

The ADF case is the only completed NAFTA claim in which the claimant
alleged a breach of the MFN treatment clause, Article 1103. According to the
Tribunal’s 9 January 2003 award, ADF’s Article 1103 claim was an attempt to
mitig ate th e impact of the NAFTA Free Trade Commission ’s (F TC’s)
Interpretation on the Article 1105 claim.96 However, the Tribunal dismissed
the Article 1103 claim. It found that, pursuant to Article 1108(7)(a), the MFN
article did not apply to ADF’s claim because the case involved government

91. Camuzzi International S.A. v. The Republic of Argentina (ICSID No. ARB/03/7),
available at http://ita.law.uvic.ca/documents/Camuzzi2jurisdiction.pdf.
92. See summary above.
93. Supra Note, paragraph 19.
94. Camuzzi International S.A. v. The Republic of Argentina (ICSID No. ARB/03/7)
paragraph 28 and paragraph 34(iii).
95. Supra Note, paragraph 66.
96. ADF Group Inc. v. United States of America (Award, 9 January 2003), paragraph 136.
www.state.gov/documents/organization/16586.pdf.

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procurement.97 As a result, the tribunal did not engage in a rigorous analysis

of ADF’s Article 1103 claim.

Pope & Talbot Inc. v. Canada (2001, 2002)

In Pope and Talbot, the claimant did not allege a breach of Article 1103, but
rather a breach of Article 1105. However, the Final Merits Award of Pope and
Talbot rendered on 10 April 2001 suggested that an MFN clause could lead to
import into the NAFTA what the tribunal described as more favourable “fair and
equitable treatment” provisions contained in some BITs.98 The Tribunal then
observed that this formulation entitles investors to fair and equitable treatment
without regard to any limitations inherent in international law since these
agreements provided that “investors must at all times be accorded fair and
equitable treatment […] and shall in no case be accorded treatment less than
required by international law”. The Tribunal then considered that, because
NAFTA investors could benefit from this more favourable treatment by virtue of
Article 1103, it would make no sense for NAFTA Parties to deny those rights
under Article 1105 only to find them revived pursuant to Article 1103. The
Tribunal also stated that the NAFTA Parties were unlikely to have intended, in
article 1105, to treat each other’s investors less favourably than those from other
countries.99 On that basis, the Tribunal found a violation of Article 1105.

97. Idem, paragraph 196.

98. See Pope & Talbot Inc. v. Government of Canada (Tribunal Decision – 10 April 2001),
paragraphs 111, 115. The Tribunal appears to have relied on the BITs of “at least
Canada and the United States”. However it did not cite in the award any
provisions of Canadian BITs or any secondary sources that cite Canadian FIPA
p r o v i s i o n s w h i l e t h e U S B I T s t h a t i t c i t e d p r e d a t e d t h e N A F TA .
www.dfait-maeci.gc.ca/tna-nac/documents/Award_Merits-e.pdf. Since both the USA
and Canada have taken exceptions from MFN for all prior agreements, (NAFTA
Annex IV), it is not clear how prior BITs of the United States could be relevant to
interpreting the MFN clause in relation to Canada.
99. Idem, paragraphs 105-118.

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Shortly after the issuance of the Merits Award, the NAFTA Free Trade
Commission (FTC) issued a binding interpretive note on Article 1105.100 This
was followed some months later by the Tribunal’s issuance of the Damages
Award. In that award, the Tribunal accepted, as a working basis,101 the FTC
interpretation, which clarified that Article 1105 does not require treatment in
addition to or beyond that which is required by customary international law
minimum standard of treatment, but maintained its prior award in favour of
the claimant, concluding that Article 1105 was breached even under the FTC’s
interpretation. The Tribunal, however, found it “unnecessary to consider
issues relating to Articles 1102 or 1103 which had been raised following upon
the Interpretation”.102
The Pope & Talbot Tribunal’s reasoning in the merits phase has not been
followed in subsequent NAFTA cases.103

4.3. ECT

Plama Consortium Limited v. the Bulgaria (2005)104

104

On 8 February 2005, an ICSID Tribunal upheld jurisdiction in a claim filed

in December 2002 by Plama Consortium Limited under the ICSID arbitration
provisions of the Energy Charter Treaty (ECT) and the MFN provision of the
Bulgaria-Cyprus bilateral investment treaty for alleged breaches by Bulgaria of
the ECT for misconduct as regard a Nova Plama oil refinery in Northern
Bulgaria. While the Tribunal rejected Bulgaria’s objections as to the
jurisdictional issues raised with respect to the ECT, it accepted Bulgaria’s

100. Paragraph 2 of the FTC’s Interpretation provides that the concepts of “fair and
equitable treatment” and “full protection and security” do not require treatment
in addition to or beyond that which is required by customary international law
minimum standard of treatment. Paragraph 3 states that a determination that
there has been a breach of another provision of the NAFTA, or of a separate
international agreement, does not establish that there has been a breach of
Article 1 105.
101. While the Tribunal noted that “it might appear” that its own interpretation was
different from the one adopted by the FTC, it concluded that even applying this
“restrictive interpretation” to the facts of the case, would lead to the exact same
conclusions it reached in its previous Award. See Pope & Talbot Inc. v. Government
of Canada (Tribunal Decision – 31 May 2002, at 47, 56 and 69 www.dfait-maeci.gc.ca/
tna-nac/documents/damage_award.pdf.
102. Idem, at 66.
103. In the Loewen case, the Tribunal said that, to the extent that the Pope & Talbot
Tribunal had suggested an interpretation of Article 1 105 different from that
adopted by the FTC, it should be disregarded [The Loewen Group, Inc and Raymond
L. Loewen v. United States of America, ICSID case No. ARB (AF)98/3), Final Award,
23 June 2003, see www.state.gov/documents/organization/22094.pdf].
104. Plama Consortium Limited v. Republic of Bulgaria (ICSID Case No. ARB/03/24)
available at www.worldbank.org/icsid/cases/plama-decision.pdf.

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contention that the MFN provision of the Bulgaria-Cyprus treaty did not entitle
the claimant to invoke ICSID jurisdiction under broader investor-state arbitration
clauses in other BITs – such as the Bulgaria-Finland BIT – as compared to the
dispute settlement provisions in the Bulgaria-Cyprus treaty which are concerned
only with disputes relating to expropriation. The Tribunal based its finding, inter
alia, on available evidence to the effect that “at the time of the conclusion of the
treaty, Bulgaria and Cyprus limited specific investor-state dispute settlement to
the provisions set forth in the BIT and had no intention of extending those
provisions through the MFN provision”.105 The Tribunal also took the view that
the “intention to incorporate dispute settlement (in the scope of application of
the MFN) must be clearly and unambiguously expressed”106 and concluded
accordingly that the MFN provision of the Bulgaria-Cyprus BIT to ICSID
arbitration cannot be interpreted as providing consent to submit a dispute under
the Bulgaria-Cyprus BIT to ICSID arbitration.

5. Summing up
The main points in the present survey may be summarised as follows:
● MFN treatment has long been a core standard of international
economic relations. It provides for equal competitive opportunities
between nations in respect to the matters to which the particular MFN
clause applies, be they in the field of trade, investment, or any field of
economic co-operation. Although its application to international
investment is more recent than that for international trade, it is widely
accepted, together with national treatment, as one of the most
important standards of treatment for investors and their investments.
● Despite their prevalence in investment treaties, MFN clauses do not
have a universal meaning. Indeed, the formulation and application of
MFN clauses varies widely among investment treaties. In some cases,
the scope of application of the clauses extends to the entire content of
the treaty; in others, the clause is limited to only some of the matters
addressed by the treaty. The proper application and interpretation of a
particular MFN clause in a particular case requires a careful
examination of the text of that provision undertaken in accordance
w ith the treaty interpretation rules as se t out in the Vienn a
Convention
● The ejusdem generis principle has been applied in the jurisprudence of
international tribunals and national courts and by diplomatic practice.
According to this principle, an MFN clause can attract the more

105. Supra Note, paragraphs 195-197.

106. Supra Note, paragraph 204.

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favourable treatment available in other treaties only in regard to the

same “subject matter”, the same “category of matter” or the same
“class of matter”. While the principle is clear, its application is not
always simple or consistent. This principle can provide some useful
guidance. However the interpretation and application of a particular
MFN clause must be undertaken, as noted above, based on the text of
the provision and according to the general rules of interpretation as
embodied in the Vienna Convention.

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ANNEX 4.A1

ANNEX 4.A1

Vienna Convention on the Law of Treaties107

Article 31. General Rule of Interpretation
1. A treaty shall be interpreted in good faith in accordance with the ordinary
meaning to be given to the terms of the treaty in their context and in light
of its object and purpose.
2. The context for the purpose of the interpretation of a treaty shall comprise,
in addition to the text, including its preamble and annexes:
– any agreement relating to the treaty which was made by one or more
parties in connexion with the conclusion of the treaty;
– Any instrument which was made by one or more parties in connexion
with the conclusion of the treaty and accepted by the other parties as an
instrument related to the treaty.
3. There shall be taken into account, together with the context:
– Any subsequent agreement between the parties regarding the
interpretation of the treaty or the application of its provisions;
– any subsequent practice in the application of the treaty which
establishes the agreement of the parties regarding its interpretation;
– any relevant rules of international law applicable in the relations
between the parties.
4. A special meaning shall be given to a term if it is established that the
parties so intended.

Article 32. Supplementary Means of Interpretation

Recourse may be had to supplementary means of interpretation,
including the preparatory work of the treaty and the circumstances of its

107. Concluded in Vienna on 23 May 1969. Came into force on 27 January 1990.
Ratified by 70 countries.

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conclusion, in order to determine the meaning when the interpretation

according to article 31, or to determine the meaning when the interpretation
according to article 31:
a) leaves the meaning ambiguous or obscure; or
b) leads to a result which is manifestly absurd or unreasonable.

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