1 Student at Bilgi University Law Faculty, 114510022 National Grid PLC. V. The Argentina3 I. Sinclair, The Vienna Conventionon the law of Treaties (1984) While determiningthe common intention of the parties all relevant circumstances including thenegotiations, preparatory stages, any practices which the parties haveestablished between the parties should be taken into account.
Only this way, wecan reveal the real intention of the parties. In contrary,this way of interpretation shouldn’t be used while determining the scope of theMFN clause. Otherwise the result will always be the same because there is nosuch BIT that is not aiming to protect the investor. This way of interpretinghowever denies the parties’ intentions. Thus, it is a “risk that the placing of undue emphasis on the object and the purpose of a treaty will encourage teleologicalmethods of interpretation which, in some of its more extreme forms, will even deny the relevance of theintention of the parties”.3In this point of view, interpreting the clause according to all relevantcircumstances is the only way to come to the conclusion that the MFN clausedoes not cover the dispute resolution clause. The reasonbehind signing a BIT is to protect investors.
The whole InternationalInvestment aims to create an investor friendly habitat. Having this in mind, ifwe try to make an interpretation according to the main purpose of the BIT’s, itis almost impossible to conclude that the MFN clause does not cover the disputeresolution clause. Since the reason of having a dispute resolution clause is alsoto protect investors, an interpretation in the light of the purpose will alwaysbe in favor of the investor.
b- Interpretationof the MFN Clause According to All Relevant Circumstances To summarizethe drafting part, the scope of the MFN clause is ambiguous unless the mattersare explicitly excluded. One may always are argue that the MFN clause coversthe dispute settlement provisions unless they are clearly excluded. Since theinternational practice and the Tribunal reviews are inconsistent with eachother it is not healthy to make an interpretation just from the wording of theclause. The thirdway to draft a MFN clause is to exclude the dispute resolution clauseexplicitly without a doubt.
In this way of drafting, parties may either draft abroad clause or may list the matters to be included as long as they explicitlyexclude the dispute resolution clause. As an example of this is the article 4/3of the Spain-Argentina BIT. As the article states that “the treatment shall not extendto the privileges which either Party…” The wording of the article 4/3of the Spain-Argentina BIT clearly suggest that the matters listed are not inthe scope of the MFN clause.
However, such an article also suggest that thematters are not excluded are actually included vice versa. Accordingly, while analyzingthe Spain-Argentina BIT in the Suez-AWG case, tribunal stated that the disputeresolution clause is not counted among the excluded matters. Therefore the MFNclause covers the dispute resolution clause.
A similar view is also adopted bythe Tribunal in the National Grid case NationalGrid PLC. V. The Argentina. In the case at hand the Tribunal stated that “specific mention of an item excludes others”2.?f the dispute resolution clause is not counted in the list of the exclude matters,then it shall be included. The differencesbetween the interpretations of the scope of the MFN clauses creates anambiguity. One of the interpretation tools to interpret a clause is theinternational practice.
However, international practice is not consistent forthis issue. According tothe Tribunal, the MFN clause mentioned above does not exclude the disputeresolution clause. The Tribunal bases its argument on the fact that the word “maintenance” also covers the dispute resolutionprovisions. Since the word “maintenance”refers to the protection of the investment, it also covers the disputeresolution clause. “Neithercontracting party shall in its territory subject investors of the otherContracting Party, as regards their management,maintenance, use, enjoyment or disposal of their investments, to treatment lessfavorable than that which it accords to its own investors or to investors ofany third state”Secondly,the MFN clause may be drafted in a way where the matters covered in the clauseare explicitly listed. Thus, if the dispute resolution clause does not takeplace in the list then we may reach to a conclusion that it is excluded. As anexample of this may be found in the NAFTA, article 1103 reads as “each party shall accord to investors ofanother party treatment no less favorable than it accords, in likecircumstances, to investors of any other party or of non-party with respect tothe establishment, acquisition,expansion, management, conduct, operation, and sale or other disposition ofinvestments”.
The Plama Tribunal in the case Plama Consortium Ltd. v. Republic of Bulgaria analyzed thisarticle. In the award, the tribunal accepted that the dispute resolution clausewas intentionally left out from the list, therefore this clause does not extendto the dispute resolution clause. However, in a similar case, tribunal adopteda very different view.
In the Suez-AWG case, AWG Group Ltd. v. The ArgentinaRepublic the tribunal analyzed the UK-Argentina BIT. Article 3(2) of theUK-Argentina BIT, it states that Firstly, ageneral and a broad wording such as the BIT signed between the Spain andArgentina. This BIT had the MFN clause broadly drafted, “in all matters governed by thisAgreement, such treatment shall be no less favorable than that accorded byeach party to investment made in its territory by investors of a third country”.In Spain-Argentina BIT the word “matter” creates an ambiguity about whetherthe clause covering the substantive or procedural issues. Another example of abroadly drafted MFN clause takes place in the BIT signed between Greece andUnited Kingdom in 1886. In this BIT, the MFN clause stated “allmatters relating to commerce and navigation”.
These somewhat broadly drafted MFN clauses were subject todifferent tribunals such as Mafezzini v.Kingdom of Spain, Gas Natural SDG, SA v. The Argentina Republic, Suez,Sociedad General de Barcelona SA v. The Argentina Republic. Since thedispute resolution provisions are matters in the treaty, these tribunals accepted that the word “matter” covers the disputeresolution provisions. Additionally, the main reason behind signing a BIT is toprotect the investment, so excluding the dispute resolution clause from thescope of a broadly drafted MFN clause is going to be against purpose of thetreaty. Therefore, broadly worded MFN clauses are accepted as they also coverthe dispute resolution clause. It is also stated that if a party is willing toexclude the dispute resolution clause, then it should be written explicitlywhile drafting the treaty.
However, this interpretation also suggests that if aMFN clause is not broadly drafted, in other words, does not articulatestatements such as “all matters” then itdoes not cover the dispute resolution clause. Tribunals accept this opinion. a- Draftingof the MFN clauseThere aredifferent opinions about the scope and the interpretation of the MFN clause. Atthis point, the drafting of the clause plays an important role. Parties to atreaty may choose to draft a broad or a narrow MFN clause. There are threewording types of MFN clauses mostly seen in BIT’s.
In this article interpretationof the clause is going to be explained, firstly (a) an interpretation will be deduced from the drafting of the MFNclause. Secondly, (b) the MFN clausewill be interpreted according to all relevant circumstances. 1- Understandingthe Scope of the MFN Clause in BIT’s through relevant cases The issue iswhether the MFN clause covers the dispute resolution clause in BIT’s or not. Inother words, is it possible to incorporate dispute resolution provisions of athird party BIT’s through the MFN clause. The conflict especially exists whenthe parties does not expressly show their intentions in the wording of treaties.
If the MFN clause explicitly excludes the dispute settlement provisions orclearly lists the scope of the clause, then there shall be no need forinterpretation. However not every MFN clause contains such statements.Therefore, this kind of clauses needs interpretation in order to reveal theintention of the parties and determine to scope of the clause. Firstly,relevant cases are going to be examined. Secondly, the systematicinterpretation is going to take place.
According toGATT, the most favored nation principle mainly aims to prevent discriminationin international trade. Today, the MFN clause takes place in many differentareas such as international investment. The reason behind adopting MFN clausein BIT’s is to protect investments and prevent discrimination between foreigninvestors. However, usage of the MFN clause arises conflicts in internationalinvestment law. Since the existence of MFN clause allows the party to betreated equally as the more favored third party, the scope of the clause isproblematic.
Introduction Thecontroversial issue about the application of the Most Favored Nation clause (hereinafter “MFN clause”) to the dispute resolution provisions in BilateralInvestment Treaties (hereinafter “BIT”)is going to be discussed in this article. Is it possible to replace the disputeresolution provisions in BIT’s through the MFN clause? This article considersthe scope of the MFN clause in light of the relevant cases and scholarsopinions. Additionally, the article is concerned about the rationale of addinga MFN clause to the BIT’s. This article also suggests that the adoption of theMFN clause in the BIT’s requires parties to show their intentions clearly.Finally, the interpretation of the MFN clause is going to take place in thearticle. Abstract ?hsan Bahad?r Çelikta?1TheEffect of The MFN Clause to The Dispute Resolution Clauses in the BIT’s