The discussion in this chapter focuses on whether the most-favored-nation (mfn) clause can successfully be invoked in order to incorporate more favorable treatment from third-party treaties compared to the procedural preconditions contained in the basic treaty. Before engaging in the relevant analysis, it is first necessary to clarify several points. The first is the distinction between the concepts of “jurisdiction” and “admissibility.” Jurisdiction refers to an international court’s or tribunal’s ability to entertain a particular dispute. Without it, the court or tribunal in question simply does not have the power to decide the case before it and issue a binding decision. Admissibility, on the other hand, refers to a claimant’s ability to be heard by a competent court or tribunal and relates to certain defects of a given claim per se.1 These defects are curable. In other words, the difference between jurisdiction and admissibility is that “[j]urisdiction is an attribute of a [court or] tribunal and not of a claim, whereas admissibility is an attribute of a claim but not of a [court or] tribunal.”2
In the context of investment arbitration, the distinction between jurisdiction and admissibility is important from the perspective of mfn clauses. An United Nations Conference on Trade and Development (unctad) report categorizes cases concerning the application of mfn clauses to procedural treatment into two groups. The first group includes cases where claimants have invoked an mfn clause in an attempt to replace dispute settlement provisions with preconditions for submitting a claim to international arbitration
In his research, August Reinisch has identified the growing trend among investor-state dispute settlement (isds) tribunals to recognize the conceptual categorization as an important issue.4 For Sharmin, such conceptual categorization indicates that on the issue of mfn clause application, admissibility issues are potentially less fatal than jurisdictional ones. As a result, tribunals can wield their discretion in order to bypass admissibility issues via reliance on an mfn clause, but they cannot apply an mfn clause as easily in order to overcome jurisdictional preconditions.5
- 2.If the dispute cannot thus be settled within six months following the date on which the dispute has been raised by either party, it shall be submitted to the competent tribunal of the Contracting Party in whose territory the investment was made.6
Some observers believe that shortening a seemingly arbitrary waiting period that must be observed prior to the submission of a dispute affects the timing of
For example, the International Law Commission (ilc) uses the term “admissibility of claims” as the title of Article 44 of its Draft Articles on State Responsibility. That provision states that “[t]he responsibility of a State may not be invoked if: (b) The claim is one to which the rule of exhaustion of local remedies applies and any available and effective remedy has not been exhausted.”8 In the International Court of Justice (icj) case concerning Application of the International Convention on the Elimination of All Forms of Racial Discrimination (“cerd”) (Georgia v Russian Federation), the Court was asked to interpret Article 22 of the cerd. That provision stipulates that “[a]ny dispute between two or more States Parties with respect to the interpretation or application of this Convention, which is not settled by negotiation or by the procedures expressly provided for in this Convention, shall, at the request of any of the parties to the dispute, be referred to the International Court of Justice for decision, unless the disputants agree to another mode of settlement.” The icj determined that the ordinary meaning of Article 22 required the establishment of “preconditions before the seisin of the Court.”9
The Court will however first address the drc’s argument that the objection based on non-fulfilment of the preconditions set out in the compromissory clauses, and in particular in Article 29 of the Convention, is an objection to the admissibility of its application rather than to the jurisdiction of the Court. The Court recalls in this regard that its jurisdiction is based on the consent of the parties and is confined to the extent accepted by them (see paragraph 65 above). When that consent is expressed in a compromissory clause in an international agreement, any conditions to
which such consent is subject must be regarded as constituting the limits thereon. The Court accordingly considers that the examination of such conditions relates to its jurisdiction and not to the admissibility of the application.10
For the same reason, Professor Brigitte Stern stated in her dissenting opinion in the Impregilo award that there appears to be “no legal reason” to categorize the types of conditions of the State’s consent as either “conditions of admissibility” or “conditions of jurisdiction.”11 She argued that, although such a distinction appears to explain tribunals’ divisive decisions on applying the mfn clause on procedural treatment, there is nevertheless no principle which requires tribunals to decide whether an mfn clause applies to issues of admissibility instead of jurisdiction.12
1 The Discussion Started by the Maffezini Case
The possibility of mfn clauses including dispute settlement clauses within their scope of application was, in fact, analyzed before the Maffezini case. Grigera Naón, for example, argued that, depending on its wording, an mfn clause in a basic treaty could be construed so as to give access to a private investor to a more favorable dispute resolution mechanism envisaged in another international investment agreement (iia).13 The Maffezini tribunal interpreted the relevant mfn clause relatively broadly by allowing the clause to incorporate “more favorable” dispute settlement provisions from third-party treaties. After Maffezini, the question of whether mfn clauses could be used to import supposedly better procedural treatment has become one of the most hotly debated issues in investment arbitration.
The dispute between Mr. Maffezini and Spain concerned the discontinuance of his company’s activities due to an internal financial crisis allegedly attributed to Spain. It included misinforming the claimant on the project’s costs
Article iv of the Argentina-Spain bit provided that “[i]n all matters subject to this Agreement, this treatment shall not be less favorable than that extended by each Party to the investments made in its territory by investors of a third country.”15 Article x of the Argentina-Spain bit, moreover, required disputing parties to first attempt to resolve the dispute amicably for six months before submitting their dispute to the Spanish courts. Only when no decision had been made on the merits of the dispute after 18 months from the initiation of domestic adjudication proceedings, or when both parties agreed, could the claim be submitted to international arbitration at the request of either disputing party.16 To avoid the 6-month precondition, the claimant invoked the mfn clause in the basic treaty in an attempt to incorporate Article 10(2) of the Spain-Chile bit, which contains no such precondition.17
In response to the disputing parties’ respective contentions about whether the mfn clause could be invoked to import a shorter domestic adjudication period, the Maffezini tribunal first addressed the mfn clause’s scope by referring to the Anglo-Iranian case. In that case, the icj stated that the basic treaty established the juridical link between the foreign investor’s home state and a third-party treaty and conferred upon the home state the third party’s rights. Otherwise, a third-party treaty that was independent and isolated from the basic treaty could not produce any legal effect between the contracting parties due to the res inter alios acta principle.18 The tribunal explained that what this implied for mfn treatment was that the subject matter to which the mfn clause in the basic treaty applies should first be determined before it can be invoked to import provisions from third-party treaties.19
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 that the administration of justice, in so far as it is concerned with the protection of these rights, must necessarily be excluded from the field of application of the most-favored-nation clause, when the latter includes ‘all matters relating to commerce and navigation’. The question can only be determined in accordance with the intention of the Contracting Parties as deduced from a reasonable interpretation of the treaty.20
The pca Commission accepted that the mfn clause applied to issues of just administration and found that the clause complied with the ejusdem generis rule.21 As such, the Maffezini tribunal determined that although the Argentina-Spain bit did not expressly include a reference to dispute settlement in its mfn clause, there still existed “good reasons to conclude that today dispute 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.”22
A fact frequently noted by later tribunals is that the Maffezini case featured a broadly worded mfn clause. In fact, the mfn clause in the Argentina-Spain bit provided for the widest scope of all mfn clauses examined in Spanish bits. The expression “all matters subject to this Agreement” opened the possibility for tribunals to extend it to dispute settlement provision without coming into conflict with the ejusdem generis principle.
[I]f a third-party treaty contains provisions for the settlement of disputes that are more favorable to the protection of the investor’s rights and interests than those in the basic treaty, such provisions may be extended to the beneficiary of the most favored nation clauses as they are fully compatible with the ejusdem generis principle.25
To support this conclusion, the tribunal took into account the negotiating history of the basic treaty, as well as the state practice of Argentina and Spain. It noted that the Argentina-Spain bit was a compromise between the two countries because, at the time of its conclusion, Argentina had required prior exhaustion of local remedies in its treaties while Spanish policy tended to allow direct submission to international arbitration.26 Up to the conclusion of the Argentina-Spain bit, Spain had followed a consistent pro-arbitration policy that allowed arbitration right away after several months of amicable negotiation.27 Additionally, the Argentina-Spain bit was the only Spanish treaty that formulated its mfn clause broadly enough to include “all matters subject to this Agreement.” While all other Spanish treaties provide a narrower formulation of the mfn clause.28
- 1.
[I]f one contracting party has conditioned its consent to arbitration on the exhaustion of local remedies. The operation of the mfn clause cannot bypass this requirement because such arrangement manifests a fundamental rule of international law; - 2.[I]f the parties have agreed to a dispute settlement arrangement that provides a ‘fork-in-the-road’ clause which requires an irrevocable choice between the domestic Court and international arbitration. This cannot be bypassed by the mfn clause because it would ‘upset the finality of arrangements that many countries deem important as a matter of public policy’;
- 3.[I]f the parties agree to a particular arbitration forum like icsid, such option cannot be replaced by mfn clause with a different system of arbitration; [and]
- 4.A highly institutionalized arbitration system that incorporates precise rules of procedure agreed to by contracting parties such as that of nafta cannot be bypassed by the mfn clause since such provision reflects the contracting parties’ accurate will.29
In reaching this conclusion, the tribunal expressed its worries on the subtle distinction between the legitimate extension of treaty rights, which might lead to “the harmonization and enlargement of the scope of such arrangements,” and disruptive treaty shopping, which could wreak havoc with respect to the policy objectives underlying specific treaty provisions.30 Given the dispute at hand, the tribunal determined that the mfn clause could incorporate the more favorable dispute settlement provision in the Spain-Chile bit. According to the tribunal, the requirement that claimants first resort to domestic courts, as provided by the Argentina-Spain bit, did not constitute a fundamental issue of public policy. This was evident from the treaty’s context, the negotiating history that led to its conclusion, and the subsequent treaty practice of Argentina and Spain.31
The Maffezini decision was criticized for inferring the contracting states’ consent to arbitration through looking at a combination of two bits via the mfn clause included in the basic treaty.32 The dispute in Maffezini concerned
Moreover, the tribunal’s approach also gave rise to the question as to whether a different outcome would have been reached if a Spanish investor had brought an arbitration against Argentina. In other words, whether a tribunal would have viewed the consistent Argentine treaty practice against arbitration as a public policy consideration and refused to incorporate a third-party dispute settlement provision via the mfn clause in the basic treaty.35 It is also not clear on what basis the tribunal came up with its non-exhaustive list of public considerations as part of its interpretation of the mfn clause in the basic treaty, especially given that the respective intentions of the contracting parties could not be inferred from the basic treaty itself.36
The reasoning and conclusion of Maffezini tribunal has led to fierce debate. A critical division has emerged among subsequent tribunals as to whether an mfn clause may be invoked in order to modify the preconditions contained in dispute settlement provisions in the basic treaty through the importation of “more favorable” preconditions (or the lack thereof) from third-party treaties. As such, in the upcoming sections, the following issues are examined: (1) the characteristics of procedural preconditions in the context of the operation of mfn clauses, and specifically whether these preconditions go to admissibility
2 Exhaustion of Local Remedies and Dispute Settlement Provisions
This section will review the nature of temporal preconditions, first to establish its relationship with the exhaustion of local remedies requirement and then to explore whether it relates to a claim’s admissibility or the jurisdiction of investment tribunals. The ultimate purpose is to discuss whether and to what extent mfn clauses in basic treaties are capable of incorporating temporal preconditions from third-party treaties.
2.1 Exhaustion of Local Remedies?
Consent of the parties to arbitration under this Convention shall unless otherwise stated, be deemed consent to such arbitration to the exclusion of any other remedy. A Contracting State may require the exhaustion of local administrative or judicial remedies as a condition of its consent to arbitration under this Convention.41
In her article commenting on the Maffezini decision, Professor Brigitte Stern defined the requirement in the basic treaty that only domestic courts may be approached for 18 months before international arbitration may be resorted to (the 18-month requirement) as the exhaustion of certain local remedies in Spain. She is of the view that this was an explicit condition of the consent to international arbitration by both Argentina and Spain.42
However, the 18-month requirement and other similar provisions are not considered a traditional requirement of the elr rule by tribunals because it does not require the exhaustion of domestic remedies.43 According to Schreuer, these requirements do not technically form part of an obligation to exhaust local remedies because “the parties are free to turn to icsid, once the time has elapsed.”44 Moreover, the actual periods of time specified in these types of provisions are usually short and it is thus unrealistic to expect the proper exhaustion of local remedies to take place before they run their course. This makes one wonder whether the contracting parties expected a settlement to be achieved within these periods when concluding the provisions in question. Indeed, some scholars have deemed the need for prior domestic litigation as by nature constituting a mere extension of the waiting period required before international arbitration may be resorted to.45
The decision in Maffezini is perhaps understandable. The case concerned a curious requirement that during the first 18 months, the dispute is tried in the local courts. The present Tribunal sympathizes with a tribunal that attempts to neutralize such a provision that is nonsensical from a practical point of view.47
The tribunal added, however, that “such exceptional circumstances should not be treated as a statement of general principle guiding future tribunals in other cases where exceptional circumstances are not present.”48
Bearing in mind that under Article 26, second sentence, of the icsid Convention a Contracting State can require the exhaustion of local remedies as a condition of its consent to arbitration under the Convention, it is open to two States to agree to a limited recourse to local remedies as a condition of their consent to arbitration under their bilateral treaty. Their having made such a choice, the period selected had to be of sufficient time to permit a Contracting Party’s legal system to at least have an opportunity to address the dispute. A prior recourse provision of say, 6 months would hardly permit any real opportunity for the parties to frame the issues, let alone permit a court to consider the dispute. On
the other hand, from a claimant’s perspective, a limited period of time is preferable to a requirement of full exhaustion of local remedies (and 18 months would be seen as preferable to 36 months or more).49
Similarly, in ics (i), the tribunal determined the 18-month precondition to be mandatory and jurisdictional. In so doing, it stated that the precondition is neither a procedural waiting period nor a traditional elr requirement. In the words of the tribunal, it was “a choice of forum for the submission of disputes in the first instance and not merely a question of ripeness.”50 Given the apparent trend towards the strict application of procedural prerequisites in public international law, the tribunal decided that such requirement could only be satisfied by submitting the investment dispute to the Argentine courts for a period of 18 months or until a final decision is rendered, whichever event came first.51
2.2 Jurisdiction or Admissibility?
A further question relevant to the mfn clause’s operation goes to the nature of temporal preconditions: do they concern the consent of contracting states to the jurisdiction of an international tribunal or court, meaning that they cannot be avoided, or are they instead related to the admissibility of a claim, meaning that it becomes a question of the discretion of a tribunal whether they can be bypassed through an application of an mfn clause? In this context, the decision of the ics (i) tribunal is a good example of the line of tribunals that have considered these preconditions to be jurisdictional in nature, and thus mandatory. On the other hand, the Maffezini decision and proponents of the approach think of temporal preconditions as an issue of admissibility and, therefore, tend to be of the view that they can be circumvented through reliance on mfn clauses. The analysis in the following subsections will unpack these two schools of thought.
2.2.1
Cases arising under the Argentina-Spain bit have resulted in relatively consistent reasoning on this issue by tribunals. The Telefónica case constitutes a reversal of Maffezini to the extent that it involved a Spanish investor bringing a claim against the Argentine government. As part of its objections to the tribunal having jurisdiction, Argentina contended that Telefónica had not seen out the 18-month period required by Article x of the Argentina-Spain bit.52 The tribunal agreed with the claimant that the mfn clause covered dispute settlement mechanisms in third-party treaties. According to the tribunal, in view of the broad text of the mfn clause at issue, according foreign investors direct access to arbitration was a “typical matter where the mfn treatment is relevant, traditional and recognized as applicable.”53
In reaching its decision in this regard, the tribunal referred to the Ambatielos case, which entailed a similarly worded mfn clause in the 1886 Greece-UK Agreement (where the operative phrase was “all matters relating to commerce and navigation,”), and a similar claim from the Greek government (the right of access by a Greek investor to the British justice system on equal footing with nationals from other states).54 The tribunal accordingly held that exempting the claimant from submitting the dispute to domestic courts before international arbitration pertained to the “treatment” that Argentina applied “within its territory” to Spanish investors, who sought to bring their dispute, which alleged a breach of certain substantive provisions of the bit in respect of their investment in Argentina, before an icsid arbitral tribunal.55 As such, the dispute settlement requirement in question fell within the scope of the mfn clause.
The Argentina-Spain bit was also the basis for the claim brought in the Teinver case, where the claimant sought to invoke the mfn clause in order to incorporate a dispute settlement provision in the Argentina-United States (U.S.) bit. The tribunal undertook an extensive exposé on isds tribunals’ discussions on applying mfn clauses to dispute settlement provisions. It relied on the unctad jurisdiction-admissibility taxonomy discussed above and indicated that the mfn clause in the Argentina-Spain bit was unusual on the basis
Furthermore, cases concerning issues of jurisdiction and admissibility involved particular factual and legal circumstances that required individual examination. Specifically, the claimant in casu had not invoked the mfn clause in relation to jurisdictional issues, for example through seeking to replace the scope of the forum of rules applicable to the arbitration, but rather to avoid the requirement that a claim first be brought in domestic courts for a certain period, i.e., the claimant’s argument related to admissibility of its claim. For this purpose, the “all matters” wording was, in the tribunal’s view, unambiguously inclusive enough for the 18-month requirement to be avoided through an application of the mfn clause in the basic treaty.57
The approaches taken in relation to disputes arising out of the Argentina-Germany bit have been less consistent on this issue. While the Siemens and Hochtief tribunals decided that the 18-month requirement could be avoided, the Wintershall and Daimler tribunals came to the opposite conclusion.58 As in the case of the Argentina-Spain bit, the Argentina-Germany bit contained a dispute resolution provision in Article 10 that required a six-month amicable settlement period, after which the 18-month requirement kicked in. Notably, however, the wording of the mfn clause in the Argentina-Germany bit was not as broad as that in the Argentina-Spain bit. Specifically, it referred more restrictively only to “activity in connection with investments” instead of “all matters.” The protocol to the basic bit indicated “activity” to include “the management, utilization, use, and enjoyment of an investment.”59
In Siemens, the dispute concerned the Argentine government’s suspension and subsequent termination of a contract to establish migration control and personal identification systems.60 The claimant relied on the mfn clause contained in the basic treaty and tried to circumvent the 18-month requirement, contending that such precondition was merely a rule of procedure instead of an obstacle to jurisdiction.61 The tribunal affirmed the possibility of invoking
The tribunal explained that, like other investment treaties, the Argentina-Germany bit “[had] a distinctive feature special dispute settlement mechanism not normally open to investors.” Therefore, access to such mechanism constituted a part of the protection offered by the basic treaty and fell within reach of the mfn clause. The tribunal took account of the Maffezini case in particular. It found that although the mfn clause in the dispute before it referred only to “treatment” and was formulated more narrowly than the mfn clause at issue in Maffezini, the term “treatment” and the expression “activities related to the investments” were nevertheless broad enough to include dispute settlement.63 The tribunal also concurred with the public policy considerations formulated by the Maffezini tribunal. It pronounced that a specific requirement consistently included in similar treaties executed by Argentina would indicate the existence of a particular policy that the Argentine government had sought to pursue over time.
To this end, the tribunal examined several treaties signed by Argentina in 1991, including the Argentina-Germany bit (April 1991), the Argentina-Chile bit (August 1991), the Argentina-Spain bit (October 1991), and the Argentina-U.S. bit (November 1991). The tribunal found that not every treaty signed by Argentina in 1991 required prior submission to local courts. It inferred that the lack of consistency among Argentinean bits in the same year “[did] not support the argument that the institution of proceedings before the local court [was] a ‘sensitive’ issue of economic or foreign policy or that it [was] an essential part of the consent of the respondent to arbitration.”64
In 2012, the tribunal in Hochtief adopted a similar interpretive method as the one adopted by the Siemens tribunal. The Hochtief tribunal came to the conclusion that it had jurisdiction over the claims by applying the mfn clause in the Argentina-Germany bit. In view of the more restrictive mfn clause, the majority of the tribunal considered that dispute settlement was an aspect of the “management” of an investment and should therefore be covered by the mfn clause. The tribunal pronounced that the procedural right to enforce the substantive right was “one component of the bundles of rights and duties that
The tribunal distinguished the operation of the mfn clause from jurisdictional issues.67 It stated that to eschew the 18-month precondition via an application of the mfn clause did not allow the claimant to submit cases that could not be submitted originally under the dispute settlement provision in Article 10 of Argentina-Germany bit.68 In this regard, applying the mfn clause did not, for the tribunal, implicate jurisdiction in any respect. Its reasoning related to the “implicit limitation” of the mfn clause, i.e., the tribunal found that the mfn clause could not operate to create additional rights beyond those offered by the basic treaty.69
According to the tribunal, the Argentina-Chile bit could not put the claimant in a position that it could not be put in via the reach of the mfn clause in the Argentina-Germany bit. The operation of the mfn clause only enabled the claimant to utilize arbitration “more quickly and more cheaply, without first pursuing litigation in the courts of Argentina for 18 months.”70 After a decade of development in investment arbitration after Maffezini, the Hochtief tribunal rendered a more detailed, albeit similar, decision on the application of an mfn clause in relation to the 18-month and similar requirements. It was thus considered by commentators as a manifestation of the “Maffezini spirit.”71
Three cases brought under the Argentina-UK bit on the application of mfn clauses in relation to procedural preconditions are examined below, namely National Grid, ics (i), and awg.72 Among these cases, only the ics (i) tribunal ruled out the possibility of the dispute settlement mechanism falling within the scope of the mfn clause contained in the basic treaty. Article 3 of the Argentina-UK bit provided an mfn clause similar to that in the Argentina-Germany bit. It accorded mfn treatment to foreign investors “as regards their
Concerning these provisions, the awg tribunal noted that Article 3(2) accorded mfn treatment to “the management, maintenance, use, enjoyment or disposal” of foreign investments. It determined that “the right to have recourse to international arbitration is very much related particularly to investors’ maintenance of an investment.” Therefore, the awg tribunal decided that UK investors were entitled, in accordance with Article 3(2), to import more favorable dispute settlement provisions from the Argentina-France bit, which did not include an 18-month requirement. In reaching this conclusion, the tribunal relied on Article 7 of the Argentina-UK bit in particular. Article 7 provided a detailed list of issues to be excluded from mfn treatment in Article 3. Dispute settlement was not included on this list. As a result, the tribunal inferred that –
the failure to refer among these excluded items to any matter remotely connected to dispute settlement reinforces the interpretation that the most-favored-nation clause includes dispute settlement.74
For the avoidance of doubt it is confirmed that the treatment provided in paragraphs (1) and (2) above shall apply to the provisions of Articles 1 to 11 of this Agreement.75
The tribunal inferred that such paragraph was “intended to clarify what had been the United Kingdom’s preexisting intention in negotiating its bits: that
The National Grid tribunal took the same approach as the Maffezini tribunal. It explained that –
the Tribunal considers that … ‘treatment’ under the mfn clause of the treaty makes it possible for UK investors in Argentina to resort to arbitration without first resorting to Argentine courts, as it permitted under the U.S.-Argentina Treaty. Therefore, the Tribunal rejects this objection to its jurisdiction.77
The above cases show some consistent features that deserve attention. The first is how the various tribunals employed the ejusdem generis principle from the Ambatielos case and applied it in relation to broadly worded mfn clauses to extend their jurisdiction. Second, it is also interesting that a number of tribunals were happy to adopt the public policy reasoning offered by the Maffezini tribunal and applied it in the context of state practice. The third issue is the notable neglect of the formulation of mfn clauses and the extent to which such neglect affected the outcomes of these cases.
2.2.1.1 The Failure by Tribunals to Properly Apply the Ejusdem Generis Principle
The tribunal decisions discussed above relied on the ejusdem generis principle, as well as the fact that mfn clauses in question were all worded broadly enough to justify the conclusion that the mfn could be applied in such a manner as to override the 18-month requirement in dispute resolution provisions of the various basic treaties at issue. In doing so, tribunals took it for granted that “matters” or “treatment” in this context naturally included procedural and jurisdictional issues. In other words, the tribunals operated on the presumption that both substantive and procedural rights could be assimilated through an application of the relevant mfn clauses in issue.78
The Ambatielos decision is often cited as a positive example for this purpose. However, a careful reading of the Ambatielos decision suggests that the pca Commission did not apply the mfn clause in order to alter a procedural provision, but rather to provide Greek nationals the same substantive protection
According to the Daimler tribunal, an application of the ejusdem generis principle could merely assist with delineating the treaty clauses’ “outer limits” from the perspective of application. Without more, the principle alone cannot be relied on to categorically exclude international dispute settlement from the potential scope of an mfn clause, nor can it be relied on without more to substantiate a conclusion that it falls within the scope of such clause with any certainty.81 In this sense, the tribunals following the Maffezini approach have presumed that procedural and substantive treatment have the same character, which in turn entails at least an implicit assumption that both types of treatment serve an investment protection function.82 By contrast, Douglas has argued that there is a fundamental difference between substantive and procedural treatment, stating that while the former accords treaty protection in a legal instrument (treaty), the latter addresses the jurisdiction of a court or tribunal authorized to solve disputes arising out of the legal instrument. Therefore, according to Douglas, they are not ejusdem generis.83
The Maffezini tribunal explained the rationale of assimilating both procedural and substantive treatment. It was of the view that, “dispute 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.”84 Therefore, it is arguable that applying the ejusdem generis principle on the basis that there is no real distinction between substantive and
In the end, whether mfn clauses in basic treaties are able to incorporate “better” procedural preconditions in third-treaties relates to contracting parties’ intention as expressed in treaty texts. Tribunals should respect treaty texts as the authentic source for contracting parties’ intention. They should not render interpretations that prioritize investment protection.
2.2.1.2 Public Policy Considerations
Employed by the Maffezini tribunal to draw a line between treaty-shopping and the legitimate extension of rights and benefits, the origins of the four public policy considerations were nevertheless left unidentified.85 Among the non-exhaustive public policy considerations listed by the Maffezini tribunal, only the requirement to exhaust of local remedies seems to have an explicit genesis; that is, it ostensibly comes from Article 26 of the icsid Convention. Therefore, the Maffezini tribunal has made it difficult for later tribunals who seek to take the same approach (albeit that they are under no obligation to do so) to identify and apply possible public policy considerations.86 As a result, an application of these public policy factors sometimes lead to conflicting interpretations and even treaty-shopping.87
Tribunals that have followed the Maffezini approach have tended to identify public policy considerations from state practice.88 In Siemens, for example, the tribunal took the view that a specific requirement consistently included in similar treaties executed by Argentina could indicate the existence of a particular policy preference. It thus announced that the 18-month requirement could not be a sensitive national policy issue because Argentina had signed contemporaneous treaties with different prescriptions on this issue. To this end, it compared three treaties signed in the same year between Argentina and Chile (August 2, 1991), the U.S. (October 3, 1991), and Spain (November 14, 1991). The tribunal observed that these treaties included different requirements on the
In Daimler, however, despite the case also being brought under the Argentina-Germany bit, the tribunal reached the opposite conclusion given more or less the same set of facts. The Daimler tribunal took note of Argentina’s contemporary state practice at the time of the treaty’s conclusion. The tribunal noted that during the period May 22, 1990 to May 17, 1994, Argentina concluded a total number of 29 treaties. Of these 29 treaties, 10 of them contained an 18-month requirement and among the 17 treaties that entered into force, 9 of them included an 18-month requirement.90 Using the date of entry into force of treaties as a benchmark, the tribunal came to the conclusion that the claimant’s expansive interpretation of the mfn clause in the Germany-Argentina bit would not be in accordance with the effet utile rule, since it indicated that the 18-month requirements in Argentinean treaties concluded after the Argentina-Germany bit would be interpreted as void ab initio by virtue of Article 10. As a result, Argentina had “needlessly and inexplicably included the domestic courts provision in nine subsequent treaties, including the German-Argentine bit.”91
That the Siemens tribunal refused to import the “fork-in-the-road” requirement from the Argentina-U.S. bit is also noteworthy since such requirement is among the four public policy considerations listed by the Maffezini tribunal. Although this can be explained by the absence of a stare decisis doctrine in investment arbitration, it is curious that the Siemens tribunal would follow the reasoning of Maffezini and deviate from it at the same time. This also reveals the limited value of the public policy considerations elaborated by the Maffezini tribunal.
In this connection, Egli suggests that the adoption of an express policy by one of the contracting states may help resolve this issue. He believes that “the adoption of a policy to define the scope of the mfn clause within the provisions of the bit itself demonstrates a state’s public policy.”92 Moreover, Egli argues that a host state can rely on its explicit expression of public policy to oppose an expansive interpretation.93 This requires more detailed treaty drafting in
2.2.1.3 Neglect to Consider the Precise Formulation of Dispute Settlement Clauses
Another aspect is the above tribunals’ neglect of the precise formulation of dispute settlement clauses in basic treaties. Contrary to what the Maffezini tribunal expected, such a failure might do little to harmonize approaches to investment arbitration.94 First, in the Argentina-Spain bit, Article x(2) used the term “shall” in relation to the 18-month requirement. It is fair to reach the conclusion that by using “shall” instead of “may” or “should” in Article x(2), Argentina and Spain intended to condition their consent to arbitration on the 18-month requirement being satisfied.95 Taking such an approach would result in different outcomes in relation to the waiting periods that the Maffezini approach have effectively overridden.96
Additionally, the Maffezini tribunals failed to consider that the mfn clause in the Argentina-Spain bit was linked to fair and equitable treatment (fet). As shown in chapter 3, such formulations indicate the contracting parties’ intent to limit the scope of an mfn clause to “more favorable” fet. Therefore, extending the scope of an mfn clause to dispute settlement provisions again goes explicitly against the ejusdem generis principle.
In addition, the territorial restriction is also an overlooked element. Article x(2) of the Argentina-Spain bit accords mfn treatment “in the territory” of host states. However, the Maffezini approach does not shed much light on the meaning of this term, which may impose essential territorial restrictions. The Daimler tribunal correctly pronounced that international arbitration provisions are extra-territorial by nature and thus do not qualify as a treatment “in the territory” of a host state. The territorial limitation implied by the term “in the territory” established that Germany and Argentina did not anticipate international arbitration to fall within the mfn clause’s scope.98
Moreover, the Daimler tribunal considered the “in its territory” modifier as a significant restriction on the mfn clause’s use of the general term “treatment,” a logical corollary of which should have been, at least for the tribunal, that treatment outside the contracting parties’ territory did not fall within the scope of this clause.99 According to the tribunal, while domestic adjudication constituted an activity within the host state’s territory, international arbitration took place independently outside the host state’s territory and control. Therefore, it did not fulfill the territorial qualification of the mfn clause.
It is difficult to see how an mfn clause containing this phrase could be applied to international arbitration proceedings without discounting the explicit territorial limitation upon the scope of the clause. This pragmatic incongruity prevents the Tribunal from presuming – in the absence of any – that the Contracting Parties to the present treaty implicitly intended to include international dispute resolution within the purview of the mfn clause. If such were their intent, it would seem strange that they should impose a territorial limitation so at variance with that aim.102
In this regard, the tribunal found that the movement which took an expansive approach to the interpretation of mfn clauses had been approved of primarily in isds case law starting from the Maffezini tribunal. Arbitral practice has been split since Maffezini, suggesting the absence of established opinio juris.103 Moreover, evidence has shown that there is not yet a consistent and universal treaty practice. While the recent Germany Model bit neither endorsed nor rejected the Maffezini approach, it nevertheless sustained the mfn clause’s territorial limitation.104
2.2.2 Requiring Remedies to Be Pursued in Local Courts as an Issue of Jurisdiction
In his dissenting opinion in Hochtief, Mr. Thomas believed that the 18-month requirement was both mandatory and jurisdictional in nature. He explained that the contracting parties’ consent to arbitration was included only in Article 10 (the dispute settlement provision), but not in Article 3 (the mfn clause). Moreover, for a perfected arbitration agreement, the prior treaty-based consent referred to above should be accepted by the claimant as an entirety, including in relation to the attached requirements.
However, by invoking the mfn clause from the Argentina-Chile bit, the claimant ignored the conditions attached to the respondent’s offer. As a result, instead of accepting the basic bit’s standing offer, the claimant in that case made a counteroffer entailing different terms.107 In the end, the disputing parties’ consent did not match due to this particular modus operandi.108 According to Mr. Thomas, the only way to resolve this type of conundrum in favor of the
The Wintershall tribunal held that the 18-month requirement in Article 10 (2) was a fundamental jurisdictional precondition instead of a procedural clause. It believed that the contracting parties’ consent to international arbitration i.e., the standing offer, was premised on the submission of the entire dispute to the courts of the competent jurisdiction in the host state.110 Therefore, such a requirement could only be bypassed by some legitimate extension of rights and benefits based on the mfn clause’s explicit text.111
Moreover, the tribunal referred to the third public policy exception specified by the Maffezini tribunal in relation to application of mfn clauses, which excluded a particular arbitration forum from the mfn clause’s scope.112 It explained that even allowing for the possibility of applying the mfn clause to dispute settlement, the claimant’s assertion could not be supported since it attempted to replace the dispute settlement provision in the Argentina-Germany bit with the strikingly different system of arbitration contained in the Argentina-U.S. bit.113
a claimant wishing to raise an mfn claim under the German-Argentine bit – whether on procedural or substantive grounds – lacks standing to do so until it has fulfilled the domestic courts proviso … since the Claimant has not yet satisfied the necessary condition precedent to Argentina’s consent to international arbitration, its mfn arguments are not yet properly before the Tribunal. The Tribunal is therefore presently without jurisdiction to rule on any mfn-based claims unless the mfn clauses themselves supply the Tribunal with the necessary jurisdiction.115
the mfn clause must constitute more than a mere prohibition of discrimination between investors based on their provenance: the mfn clause must also be in itself a manifestation of consent to the arbitration of investment disputes according to the rules that the mfn provision might attract from other comparator treaties.119
In her dissenting opinion in Impregilo, Professor Brigitte Stern opposed the decision of majority of the tribunal, arguing as she did that Article 8 of the Argentina-Italy bit provided a conditional offer to arbitrate, i.e., the offer to arbitrate was conditional on the 18-month requirement.120 She believed that such qualifying conditions and restrictions in dispute settlement provisions are jurisdictional requirements which must be fulfilled in order to sustain the
[S]lowly but steadily we are walking … towards a general system of compulsory arbitration involving states for all matters relating to international investments.124
3 What Constitutes “More Favorable” Treatment?
Another question goes to what constitutes “more favorable” treatment. Tribunals have differed a fair deal in this regard. As mentioned in the previous chapter, this element requires an effective comparison between foreign investors from the beneficiary state and a third state.125 Tribunals that uphold the mfn clause’s ability to extend to temporal preconditions have nonetheless overlooked this element.
3.1 The Approach Considering Domestic Court as Less Favorable
In Maffezini, the tribunal did not conduct a comparison between domestic adjudication and international arbitration. The only relevant sentence is where the tribunal noted that the traders and investors have “traditionally felt that their rights and interests are better protected by recourse to international
[A]ssurance of independent international arbitrations is an important – perhaps the most important – element in investor protection. Unless it appears clearly that the state parties to a bit or the parties to a particular investment agreement settled on a different method for resolution of disputes that may arise, most-favored-nation provisions in bits should be understood to be applicable to dispute settlement.130
In Teinver, the respondent argued that Article vii(2) of the Argentina-U.S. bit was not more favorable than Article x(2) of the Argentina-Spain bit. Therefore, there was no advantage from which the claimant could benefit. The tribunal held that Article vii(2) of the Argentina-U.S. bit was “clearly” more favorable than Article x(2) of the Argentina-Spain bit since the former provided the possibility to access arbitration with fewer procedural preconditions. Additionally, although Article vii(2) of the Argentina-U.S. bit contained a “fork-in-the-road” requirement, it should have been inapplicable because the
The above findings of the tribunals that have adopted the Maffezini approach have been criticized for missing a detailed, case-by-case comparison between domestic adjudication and international arbitration before reaching a conclusion.132 The potential defects of domestic adjudication have indeed been extensively discussed. Without differentiating each host state’s individual situations, domestic adjudication has by and large been considered insufficient to cope with mass claims through the adoption of a fair and effective procedure.133 As such, international arbitration is utilized to “keep dispute resolution out of the courts of plodding through the long corridors of national judicial bureaucracies.”134
A claimant that enjoyed some success in the local courts would surely advert to that fact in support of any claimed breach of the treaty. Likewise, if the respondent demonstrated an obstructionist defensive posture in the local proceedings, that too would figure in the way in which a subsequent claim was formulated. It might lead to an additional cause of action.135
According to Sharmin, tribunals taking the expansive Maffezini approach to mfn interpretation in order to circumvent the need for domestic adjudication have ignored the need of host state, in particularly that of developing countries. This in turn has deepened these countries’ doubts around the legitimacy of isds and has contributed to the ongoing wave of isds backlash.136
3.2
“Fork-in-the-road” clauses are included in some investment treaties. They require investors to choose between domestic litigation and international arbitration, and such choice, once made, becomes final to the exclusion of the other option.137 Tribunals have at times been confronted with claims to replace the original dispute settlement provision with one that entails a shorter waiting period, but also where the new provision entails a fork-in-the-road requirement. The most extreme decision in this regard is the one rendered by the Siemens tribunal. In that case, the tribunal applied the mfn clause to incorporate the shorter waiting period in the Argentina-Chile bit without also importing the fork-in-the-road requirement.
According to the tribunal, as the mfn clause’s name indicates, the rationale of mfn treatment lies only in according more favorable treatment.138 However, the Siemens tribunal in fact incorporated “super-favorable” treatment that was not enjoyed by either Chilean or German investors. As argued in chapter 3 above, mfn clauses should not be viewed as a tool for multilateralizing investment protection if an intention to create such a tool is not explicitly expressed in the wording chosen for a given treaty, otherwise it will lead to abuse of rights and jeopardize the legitimacy of isds. However, by adopting an expansive mfn interpretation which was not contemplated by the contracting parties, the Siemens tribunal in fact considered the mfn clause as a pro-investor tool the aim of which was to multilateralize investment protection, which enabled unwarranted treaty-shopping via the mfn clause.
The Claimant … must rely upon the whole scheme as set out in either Article 10 of the Argentina-Chile bit or Article 10 of the Argentina-Germany bit. In this case it has chosen to rely upon Article 10 of the Argentina-Chile bit.141
By contrast, the Daimler tribunal took a different view from the Hochtief tribunal on the question of whether Article x of the Argentina-Chile bit was more favorable than Article 10 of the Argentina-Germany bit. It referred to the ilc’s Commentary on the Draft Articles on most-favored-nation clauses, stating that “different” does not necessarily mean “less favorable,” which is an interpretation that has been incorrectly adopted by prior tribunals like those in Maffezini and Siemens.142
The tribunal also mentioned the neglect of an essential truth in relation to the Ambatielos decision by tribunals. Although the pca Commission in Ambatielos admitted the mfn clause’s ability to cover dispute settlement provisions, it eventually found that the comparator treaties’ clauses were not actually more favorable.143 Therefore, an application of the mfn clause in question made no difference. The Daimler tribunal believed that the point of mfn clauses was to “ensure overall equality of treatment in the sense of creating a level playing field between foreign investors from different countries, even if this is sometimes accomplished through non-identical means.”144 To reach such equality, tribunals could not rely solely on the claimant’s subjective preference about which option was more favorable.
In this regard, the tribunal conducted a comparative examination on the two dispute settlement mechanisms at issue. It noted that Article 10 of the Argentina-Germany bit allowed the claimant to still resort to international arbitration after having spent 18 months before the domestic court if it was not satisfied at that point. By contrast, the fork-in-the-road clause under Article x of the Argentina-Chile bit entitled investors only to one irreversible chance to get a satisfactory outcome: either in front of the domestic court or before an international tribunal. At best, Article 10 might provide a quicker or cheaper result. Therefore, Article 10 and Article x are just two procedures for dispute resolution “on an equal par with those investors.”145
After comparing the two articles’ wordings, the tribunal found that while Lithuanian investors in Argentina were subject to a shorter period of six months before domestic courts, they were nevertheless subject to a “fork-in-the-road” provision. This clause required them to make an irrevocable submission to either a domestic court or international tribunal. By contrast, UK investors in Argentina could still resort to international arbitration if they were not satisfied with results in the domestic courts after 18 months – here investors would have two bites at the proverbial apple as the tribunal noted. Therefore, unless the claimant submitted evidence on a general need for it to urgently resort to international arbitration that rendered the 18-month litigation period a “consistent disadvantage,” the Lithuanian investors were not necessarily entitled to a more favorable dispute settlement mechanism compared with UK investors.148
Besides the Hochtief tribunal, the Impregilo tribunal also held that more choices indicated more favorable treatment for investors. It conducted a textual comparison concerning this issue.
- 1.Any dispute regarding an investment between an investor of one of the Contracting Parties and the other Party, arising out of or relating to this Agreement, shall, to the extent possible, be settled through friendly consultation between the parties to the dispute.
- 2.
If the dispute cannot be settled amicably, it may be submitted to the competent judicial or administrative courts of the Party in whose territory the investment is made. - 3.Where, after eighteen months from the date of notice of commencement of proceedings before the courts mentioned in paragraph 2 above, the dispute between an investor and one of the Contracting Parties has not been resolved, it may be referred to international arbitration.
Each Contracting Party shall, within its own territory, accord to investments made by investors of the other Contracting Party, to the income and activities related to such investments and to all other matters regulated by this Agreement, a treatment that is no less favorable than that accorded to its own investors or investors from third-party countries.149
The condition to be complied with is a double one: first bringing the dispute before the domestic courts and then waiting for 18 months before proceeding to international arbitration. This condition has not been complied with by Impregilo.151
However, the tribunal admitted that the mfn clause had the ability to avoid the application of such a requirement in Article 3(1). It explained that the term “treatment” and “all matters regulated by this Agreement” in Article 3(1) were both wide enough to cover the dispute settlement rules. In coming to this
The abovementioned decisions in Impregilo and Hochtief in 2012 were considered a manifestation of the Maffezini spirit by commentators in that they allowed the mfn clause in the basic treaty to be applied in order to avoid the 18-month requirement, especially in the face of a broadly-worded mfn clause.154 Indeed, despite a decade of development in investment arbitration, the two tribunals rendered a similar decision in relation to the application of mfns on the 18-month requirement, albeit that their decisions were rooted in more detailed analyses.
3.3 The Risk of Treaty-shopping: The Siemens Approach
As stated above, the Maffezini tribunal warned about the risk of unwarranted treaty shopping when adopting an expansive interpretation of the mfn clause at issue and suggested that public policy considerations be examined in order to strike a balance. However, the Siemens tribunal adopted a rather adventurous approach when it came to whether the operation of the mfn clause from the basic treaty should extend to all provisions of the third-party treaty as a whole.
The Tribunal recognized that there may be merit in the proposition that, since a treaty has been negotiated as a package, for other treaties
to benefit from it, they also should be subject to its disadvantages. The disadvantages may have been a trade-off for the claimed advantages. However, this is not the meaning of an mfn clause. As its own name indicates, it relates only to more favorable treatment.156
According to Fietta, the Siemens tribunal’s position has incurred doubt for allowing the claimant to cherry-pick the benefits from various treaties containing an mfn clause without considering any counterbalance to these benefits in different treaties.157 As a result, the decision of the Siemens tribunal has effectively led to a situation with a potentially infinite number of permutations and combinations of dispute resolution possibilities that different investors can draw on to best fit their individual circumstances.158 The Plama tribunal also observed that entitling foreign investors to pick and choose provisions from various bits can result in a host state facing a large number of permutations of potential dispute settlement provisions without knowing which will apply in which circumstances. According to the tribunal, “such a chaotic situation – actually counterproductive to harmonization – cannot be the presumed intent of Contracting Parties.”159
In his article “Clearing a Path Through a Tangled Jurisprudence: Most-Favored-Nation Clauses and Dispute Settlement Provisions in Bilateral Investment Treaties,” Vesel rightly points out that –
[i]f claimants are allowed to borrow a filing deadline from one treaty, an evidentiary rule from another, and a statute of limitations from a third, the result will be chaotic and unworkable.160
As a result, the mfn clause in Siemens enabled German investors to enjoy the benefits of a provision the obligations contained in which Argentina had never agreed to with any countries.161 Through its interpretation, the tribunal allowed German investors to enjoy the amalgamation of different dispute settlement mechanisms accorded by Argentina, i.e., a dispute settlement procedure in
Another consequence is that the tribunal has opened the door to a “potentially infinite variety of dispute resolution permutations and combinations that different investors might rely upon to meet their individual circumstances,”163 which was not intended even by the Maffezini tribunal.164 Although the Siemens tribunal agreed with Maffezini tribunals statements, it nevertheless failed to explain why the “fork-in-the-road” provision in the Argentina-Chile bit should not limit the operation of the mfn clause in the basic treaty, since it was one of the four public considerations mentioned by the Maffezini tribunal.165
Although it also took an expansive approach to mfn interpretation, the Hochtief tribunal adopted a more cautious approach. As mentioned above, it denied the treaty-shopping effect of the mfn clause in question, which would manufacture a synthetic set of conditions to which no state’s nationals would be entitled.166 Therefore, the claimant could not avail itself of the absence of the 18-month requirement in the Argentina-Chile bit and ignore the “fork-in-the-road” requirement in Article 10(2). The tribunal demonstrated in this regard that the claimant had to rely on the whole scheme as set out in either Article 10 of the Argentina-Chile bit or Article 10 of the Argentina-Germany bit.167
After the decision on jurisdiction in Siemens, Argentina and Panama exchanged diplomatic notes in their “interpretive declaration” in relation to the 1996 bit. The declaration clarified Argentina and Panama’s mutual understanding that the mfn clause does not extend to dispute resolution clauses and that this had always been their intention.168 The Daimler tribunal also took into account the inserted footnote in the negotiating history of the Central America-Dominican Republic-United States Free Trade Agreement (dr-cafta), the annex to the 2006 Switzerland-Colombia bit, and an issue
4 Conclusion
If the State has given its consent to substantive rights of investors and these are entitled to benefit from the mfn clause where more [favorable] substantive treatment is found in treaties with third States, it is difficult to understand why this would not be equally available to the means of enforcing such rights.171
Accordingly, for Vicuña and others similarly minded, the 18-month requirement should serve as an admissibility obstacle that can be overcome by an application of an mfn clause.
The opposing view has a number of prongs. First, it points out that procedural and substantive treatment are not necessarily interrelated. mfn clauses extend only to substantive rights – to the exclusion of procedural rights – because the procedural rights relate to the conditions for contracting states’ consent to international arbitration, i.e., ratione voluntatis that cannot be
The view taken in this book is that mfn clauses do not ipso facto apply to procedural preconditions in dispute settlement provisions since the dispute settlement provisions cannot merely be assumed to go to the admissibility of claims as opposed to the jurisdiction of tribunals.
Secondly, as argued in chapter 3, the limitations contained in the texts of specific mfn clause should be taken into account. Therefore, tribunals should conduct a detailed textual examination of the respective clauses in each case. In this regard, such examination should entail a proper, good faith application of Articles 31 and 32 of the Vienna Convention on the Law of Treaties by tribunals. Specifically, when a 18-month or similar requirement is drafted using mandatory terms like “shall,” it most probably indicates the contracting parties’ intention to condition their consent to arbitration on the procedural precondition. In this scenario, it is appropriate to consider such procedural precondition as going to jurisdiction, not admissibility.
Furthermore, the good faith principle requires tribunals to adopt responsible interpretations of mfn clauses instead of allowing mfn clauses to apply to procedural issues on the basis of often unfounded presumptions. It goes against the good faith principle for tribunals to allow cherry-picking by claimants of treaty terms. This will lead to results that were unlikely to be anticipated by contracting parties when they included an mfn clause in a given treaty. Worse still, a pro-investor, expansive approach to mfn clause interpretation based on the presumption that all mfn clauses are intended to multilateralize investment protection will raise legitimate doubts on the part of states in relation to the objectivity of isds tribunals and the legitimacy of isds mechanisms.
Hochtief Aktiengesellschaft v Argentine Republic, Decision on Jurisdiction dated 24 October 2011, icsid Case No. arb/07/31 278 [95].
Hochtief v Argentina (n 1)[90]. See generally: Filippo Fontanelli, Jurisdiction and Admissibility in Investment Arbitration (brill 2018); August Reinisch, ‘Jurisdiction and Admissibility in International Investment Law’ (2017) 16 The Law & Practice of International Courts and Tribunals 21; Michael Waibel, ‘Investment Arbitration: Jurisdiction and Admissibility’ [2014] University of Cambridge Faculty of Law Research Paper No. 9/2014 Available at ssrn: <
United Nations Conference on Trade and Development (ed), Most-Favoured-Nation Treatment: A Sequel (United Nations 2010) 66–7.
Reinisch (n 2) 21–43.
Tanjina Sharmin, Application of Most-Favoured-Nation Clauses by Investor-State Arbitral Tribunals: Implications for the Developing Countries (Springer 2020) 165.
Argentina – Spain bit (1991), available at: <
Ruth Teitelbaum, ‘Who’s Afraid of Maffezini? Recent Developments in the Interpretation of Most Favored Nation Clauses’ (2005) 22 Journal of International Arbitration 225, 232; Hochtief v Argentina (n 1).
International Law Commission, ‘Draft Articles on Responsibility of States for Internationally Wrongful Acts, with Commentaries’ (2001) Yearbook of the International Law Commission, Vol ii, Part Two. Available at: <
Application of the International Convention on the Elimination of All Forms of Racial Discrimination (Georgia v Russian Federation), Judgment of 1 April 2011, icj [141].
Case concerning Armed Activities on the Territory of the Congo (New Application: 2002) (Democratic Republic of the Congo v Rwanda), Judgment of 3 February 2006, icj [91–93].
Impregilo S.p.A. v Argentine Republic (i), Award Dated 21 June 2011, Concurring and Dissenting Opinion of Professor Brigitte Stern, icsid Case No. arb/07/17 [83].
Impregilo v Argentina (i) (n 11), footnote 56.
Horacio A Grigera Naón, ‘The Settlement of Investment Disputes between States and Private Parties’ (2000) 1 The Journal of World Investment & Trade 59, 74.
Maffezini v Spain (n 6). For the summary of the case, see: <
Argentina – Spain bit (1991) (n 6); Maffezini v Spain (n 6) [38].
Maffezini v Spain (n 6) [19].
Maffezini v Spain (n 6) [1].
Maffezini v Spain (n 6) [44].
Maffezini v Spain (n 6) [45].
The Ambatielos Claim (Greece, United Kingdom of Great Britain and Northern Ireland), Arbitral Award of the Commission of Arbitration in 1956, 107.
Maffezini v Spain (n 6) [50].
Maffezini v Spain (n 6) [54].
For a general introduction of the Calvo Doctrine, see supra Chapter 1. See also: Manuel R Garcia-Mora, ‘The Calvo Clause in Latin American Constitutions and International Law’ (1950) 33 Marquette Law Review 16.
Maffezini v Spain (n 6) [55].
Maffezini v Spain (n 6) [55].
Maffezini v Spain (n 6) [57].
Maffezini v Spain (n 6) [58].
Maffezini v Spain (n 6) [60].
Maffezini v Spain (n 6) [63].
Maffezini v Spain (n 6) [63].
Maffezini v Spain (n 6) [64].
Brigitte Stern, ‘icsid Arbitration and the State’s Increasingly Remote Consent: Apropos the Maffezini Case’ in Steve Charnovitz, Debra P Steger and Peter Van den Bossche (eds), Law in the Service of Human Dignity (1st edn, Cambridge University Press 2005) 252.
Siemens ag v The Argentine Republic, Decision on Jurisdiction dated 3 August 2004, icsid Case No. arb/02/8.
Scott Vesel, ‘Clearing a Path Through a Tangled Jurisprudence: Most-Favored-Nation Clauses and Dispute Settlement Provisions in Bilateral Investment Treaties’ (2007) 32 Yale Journal of International Law 160.
Vesel (n 34) 157.
Plama Consortium Limited v Republic of Bulgaria, Decision on Jurisdiction, 8th February 2005, icsid Case No. arb/03/24 [221].
Argentina – Spain bit (1991) (n 6); Argentina – UK bit (1990), available at <
For the customary international law nature of the Exhaustion of Local Remedy rule, see for example: M Valenti, ‘The Most Favoured Nation Clause in bits as a Basis for Jurisdiction in Foreign Investor – Host State Arbitration’ (2008) 24 Arbitration International 447, 452; Martin Dietrich Brauch, ‘Exhaustion of Local Remedies in International Investment Law’ [2017] International Institute for Sustainable Development (iisd) 33; Chittharanjan Felix Amerasinghe, Local Remedies in International Law (2nd edn, Cambridge University Press 2004); Ian Brownlie, Principles of Public International Law (7th ed, Oxford University Press 2008).
Brauch (n 38) 2.
Brauch (n 38) 7.
icsid Convention (1965).
Stern (n 32) 252.
F Orrego Vicuna, ‘Reports of Maffezini’s Demise Have Been Greatly Exaggerated’ (2012) 3 Journal of International Dispute Settlement 299, 320; Valenti (n 38) 453.
Christoph Schreuer, The icsid Convention: A Commentary: A Commentary on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (Cambridge Univ Press 2009) 393.
Vesel (n 34) 157.
Siemens v Argentina (n 33) [104].
Plama v Bulgaria (n 36) [224].
Plama v Bulgaria (n 36) [224].
Hochtief v Argentina (n 1), Separate and Dissenting Opinion of J. Christopher Thomas, Q.C. [7]. It has also been argued that prior domestic litigation is an alternative safeguard for States. See: Orrego Vicuna (n 43) 320.
ics Inspection and Control Services Limited v The Argentine Republic (i), Award on Jurisdiction dated 10 February 2012, pca Case No. 2010-9 [261].
ics v Argentina (n 50) [251].
Telefónica S.A. v Argentine Republic, Decision on Jurisdiction dated 25 May 2006, icsid Case No. arb/03/20 [17].
Telefónica v Argentina (n 52) [100].
Ambatielos claim (n 20); Telefónica v Argentina (n 52).
Telefónica v Argentina (n 52) [102].
Autobuses Urbanos Del Sur S.A., Teinver S.A. and Transportes de Cercanías S.A. v Argentine Republic, Decision on Jurisdiction Dated 21 December 2012, icsid Case No. arb/09/1 [171].
Teinver v Argentina (n 56) [186].
Daimler Financial Services ag v Argentine Republic, Award Dated 22 August 2012, icsid Case No. arb/05/1; Wintershall Aktiengesellschaft v Argentine Republic, Award dated 8 December 2008, icsid Case No. arb/04/14 124.
Argentina – Germany bit (1991) (n 37).
Siemens v Argentina (n 33).
Siemens v Argentina (n 33) [32].
Argentina – Chile bit (1991). A copy of which is available at: <
Siemens v Argentina (n 33) [103]. See also: Orrego Vicuna (n 43) 315.
Siemens v Argentina (n 33) [105].
Hochtief v Argentina (n 1) [66].
Hochtief v Argentina (n 1) [68].
Hochtief v Argentina (n 1) [86].
Hochtief v Argentina (n 1) [86].
Hochtief v Argentina (n 1) [79].
Hochtief v Argentina (n 1) [85].
MJ Valasek and EA Menard, ‘Impregilo SpA v Argentine Republic and Hochtief ag v The Argentine Republic: Making Sense of Dissents: The Jurisprudence Inconstante of the mfn Clause’ (2012) 27 icsid Review 21, 25.
National Grid plc v The Argentine Republic, Decision on Jurisdiction dated June 2006, uncitral Arbitration; ics v Argentina (n 50); awg Group Ltd v The Argentine Republic, Decision on Jurisdiction dated 3 August 2006, uncitral Arbitration.
Argentina – UK bit (1990) (n 37).
awg v Argentina (n 72) [58].
Albania – UK bit (1994), a copy of which is available at: <
awg v Argentina (n 72) [58].
National Grid v Argentina (n 72) [93].
Impregilo v Argentina (n 11), Concurring and Dissenting Opinion of Professor Brigitte Stern [34].
Salini Costruttori S.p.A. and Italstrade S.p.A. v Hashemite Kingdom of Jordan, Decision on Jurisdiction dated 9 November 2004, icsid Case No. arb/02/13 [112].
Z Douglas, ‘The mfn Clause in Investment Arbitration: Treaty Interpretation Off the Rails’ (2011) 2 Journal of International Dispute Settlement 97, 98.
Daimler v Argentina (n 58) [215].
Douglas (n 80) 102–103.
Douglas (n 80) 102–103.
Maffezini v Spain (n 6) [54].
Maffezini v Spain (n 6) [63].
Jürgen Kurtz, ‘The Delicate Extension of Most-Favoured-Nation Treatment to Foreign Investors: Maffezini v. Kingdom of Spain’ in Todd Weiler (ed), International investment law and arbitration: leading cases from the icsid, nafta, bilateral treaties and customary international law 546.
Salini v Jordan (n 79) [115].
Gabriel Egli, ‘Don’t Get Bit: Addressing icsid’s Inconsistent Application of Most-Favored-Nation Clauses to Dispute Resolution Provisions Comment’ (2006) 34 Pepperdine Law Review 1045, 1084.
Siemens v Argentina (n 33) [105].
Daimler v Argentina (n 58) [262].
Daimler v Argentina (n 58) [263].
Egli (n 88) 1083.
Egli (n 88) 1084.
Joachim Delaney, ‘The Use of mfn Clauses in icsid Arbitrations’ (2009) 21 National Law School of India Review 125, 134.
See for example Southern Pacific Properties (Middle East) Limited v Arab Republic of Egypt, Decision on Jurisdiction ii, 27th April 1895 icsid No. arb/84/3 [74]. Where the tribunal stated that ‘the starting point in statutory interpretation, as in the interpretation of treaties and unilateral declarations, is the ordinary or grammatical meaning of the terms used.’ In this respect, the tribunal focused on the ‘shall be settled’ term in Article 8 of the Egyptian Investment Law and concluded that such language mandated the submission of disputes to the various methods required therein. See also: Michele Potestà, ‘The Interpretation of Consent to icsid Arbitration Contained in Domestic Investment Laws’ (2011) 27 Arbitration International 149, 163.
The letter from Prof. Schreuer addressed to the tribunal of Wintershall, see: Wintershall v Argentina (n 58) [133–53].
ics v Argentina (n 50) [248].
Daimler v Argentina (n 58) [231].
Daimler v Argentina (n 58) [226].
ics v Argentina (n 50) [306].
ics v Argentina (n 50) [308].
ics v Argentina (n 50) [309]. By contrast, the tribunal in up and c.d. (Le Cheque Dejeuner) v Hungary disagreed with Hungary’s argument that mfn clause was inapplicable to international arbitration mechanisms due to the term “in its territory”. The tribunal opined that, such interpretation would give the word an ‘individual meaning […] that would be at odds with the object and purpose of the clause as a whole.’ The tribunal was of the view that “territory” should be considered as a condition for treaty protection, instead of a limitation on “delocalized” arbitration. See: up and c.d Holding Internationale v Hungary, Decision on Jurisdiction dated 3 March 2016, icsid Case No.arb/13/35.
ics v Argentina (n 50).
Germany Model bit (2018), a copy of which is available at: <
Valenti (n 38) 463. Emphasis added.
Valenti (n 38).
Hochtief v Argentina, Separate and Dissenting Opinion of J. Christopher Thomas, Q.C. (n 49) [27].
Hochtief v Argentina, Separate and Dissenting Opinion of J. Christopher Thomas, Q.C. (n 49) [17–22].
Hochtief v Argentina, Separate and Dissenting Opinion of J. Christopher Thomas, Q.C. (n 49) [27].
Wintershall v Argentina (n 58) [160(2)].
Wintershall v Argentina (n 58) [172].
Maffezini v Spain (n 6) [63].
Wintershall v Argentina (n 58) [173–76].
Daimler v Argentina (n 58) [193].
Daimler v Argentina (n 58) [200].
Daimler v Argentina (n 58) [204].
Daimler v Argentina (n 58) [204].
ics v Argentina (n 50) [275].
ics v Argentina (n 50) [278].
Impregilo v Argentina, Concurring and Dissenting Opinion of Professor Brigitte Stern (n 11).
Impregilo v Argentina, Concurring and Dissenting Opinion of Professor Brigitte Stern (n 11).
Impregilo v Argentina, Concurring and Dissenting Opinion of Professor Brigitte Stern (n 11) [80].
Impregilo v Argentina, Concurring and Dissenting Opinion of Professor Brigitte Stern (n 11) [12].
Stern (n 32) 259.
See supra Chapter 3.
Maffezini v Spain (n 6) [12].
Telefónica v Argentina (n 52) [103].
Gas Natural sdg, S.A. v Argentine Republic, Decision of the Tribunal on Preliminary Questions on Jurisdiction dated 17 June 2005, icsid Case No. arb/03/10 [31].
Gas Natural v Argentina (n 128) [29].
Gas Natural v Argentina (n 128) [49].
Teinver v Argentina (n 56) [184].
Kurtz (n 86) 546; Valenti (n 38) 461.
Orrego Vicuna (n 43) 308; Abaclat and others v Argentina, Decision on Jurisdiction and Admissibility dated 4 August 2011, icsid Case No. arb/07/5 [576–91].
W Michael Reisman, ‘The Breakdown of the Control Mechanism in icsid Arbitration’ (1989) 1989 Duke Law Journal 739, 739,743.
Hochtief v Argentina, Separate and Dissenting Opinion of J. Christopher Thomas, Q.C. (n 49), footnote 7.
Sharmin (n 5) 194.
Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (Second edition, Oxford University Press 2012) 267.
Siemens v Argentina (n 33) [120].
Hochtief v Argentina (n 1) [100].
Hochtief v Argentina (n 1) [98].
Hochtief v Argentina (n 1) [98].
Daimler v Argentina (n 58) [242].
The Ambatielos Claim (n 20) 107–110.
Daimler v Argentina (n 58) [242].
Daimler v Argentina (n 58) [250].
ics v Argentina (n 50) [319].
ics v Argentina (n 50) [320].
ics v Argentina (n 50) [325].
Argentina – Italy bit (1990). A copy of which is available at: <
Argentina – U.S. bit (1991), a copy of which is available at: <
Impregilo v Argentina (n 11) [90].
Impregilo v Argentina (n 11) [108].
Impregilo v Argentina (n 11) [101].
Valasek and Menard (n 71) 25.
Siemens v (n 33) [119].
Siemens v (n 33) [120].
Stephen Fietta, ‘Most Favoured Nation Treatment and Dispute Resolution under Bilateral Investment Treaties: A Turning Point?’ (2005) 8 International Arbitration Law Review 131, 135.
Fietta (n 157).
Plama v Bulgaria (n 36) [219].
Vesel (n 34) 179.
Vesel (n 34)169.
Vesel (n 34) 169.
Fietta (n 157) 135.
Orrego Vicuna (n 43) 325.
Maffezini v Spain (n 6) [63]; Vesel (n 34) 168.
Hochtief v Argentina (n 1) [98].
Hochtief v Argentina (n 1) [98].
National Grid v Argentina (n 72) [85].
Daimler v Argentina (n 58) [273–75].
W Shen, ‘The Good, the Bad or the Ugly? A Critique of the Decision on Jurisdiction and Competence in Tza Yap Shum v. The Republic of Peru’ (2011) 10 Chinese Journal of International Law 55, 87.
Orrego Vicuna (n 43) 303, citing Shen (n 170) 86–87.
Impregilo v Argentina (n 11), Concurring and Dissenting Opinion of Professor Brigitte Stern.