Interpretation of the Most-Favoured-Nation Clause in Investment Treaties: Jurisdictional Limits and Public Policy

This article examines the limits of applying the most-favoured-nation (MFN) clause in investment treaties when determining the jurisdiction of international arbitration. It argues that attempts to extend the MFN clause to dispute settlement mechanisms affect the fundamental requirement of a State’s consent to arbitration and therefore call for particularly strict treaty interpretation. Drawing on investment arbitration practice, the article demonstrates the inconsistency of approaches to the “procedural” operation of MFN clauses and substantiates the need to distinguish between granting an investor more favourable conditions of protection within an agreed procedural framework and replacing the treaty-based forum or the treaty-based conditions of access to that forum. Special attention is given to public policy as a legal constraint on the consequences of expansive MFN interpretation, including situations where such interpretation may interfere with sovereign limits on the admissibility of international jurisdiction. For the Russian Federation, this is of practical relevance as part of the protection of national interests and the preservation of the treaty-defined limits of the jurisdiction of international judicial and arbitral bodies.