Until recent years, the most favored nation clause (“MFNC”) in international investment agreements appeared to be a harmless rule, and for some time it had not been the subject of any serious discussion. We have now a number of awards which have raised difficult questions concerning the right application of the standard. It seems there is doubt and a lack of consensus. This article goes back to the very basic nature of the MFNC and reviews the relevant jurisprudence arising from investment treaty arbitration, as a requisite step before arriving at the proposed conclusion: the MFNC was designed and should function as a means to reduce distortions in a host country that adversely affect investors, but solely with respect to competitive conditions, and not as a treaty shopping tool that, in the context of particular claims, overrides or modifies the scope of specific negotiated arrangements related to non-competitive conditions.
Journal of International Arbitration