The most-favored-nation (MFN) clause in international investment law obliges a host state to extend to investors of one treaty partner any more favorable treatment it grants to investors of a third state. It is a standard feature of bilateral investment treaties (BITs), investment chapters of free trade agreements, and the Energy Charter Treaty. The clause is designed to prevent discrimination among foreign investors and to generalize concessions across a state's treaty network.
MFN typically applies to the substantive protections of the treaty — such as fair and equitable treatment, expropriation standards, and transfer of funds — but its reach to procedural matters, especially investor-state dispute settlement (ISDS), has been heavily contested. The debate traces to Maffezini v. Spain (ICSID, 2000), where the tribunal allowed an Argentine investor to import a more favorable dispute-resolution provision from Spain's BIT with Chile, bypassing an 18-month domestic-courts waiting period. Subsequent tribunals split: Plama v. Bulgaria (2005) and Daimler v. Argentina (2012) refused to extend MFN to jurisdictional consent, while Siemens v. Argentina (2004) and RosInvest v. Russia (2007) embraced a broader reading.
States have responded by drafting more precise clauses. The 2012 US Model BIT, the 2016 EU-Canada CETA, and the 2020 Dutch Model BIT explicitly exclude ISDS provisions and procedural rights from MFN's scope. Many treaties also carve out regional economic integration agreements, taxation measures, and government procurement.
Key limitations include the ejusdem generis principle (MFN only imports treatment of the same category) and the requirement that the comparator investor be in "like circumstances." MFN does not work in reverse — it cannot be used to import obligations imposed on third-state investors — and generally cannot override express treaty exceptions.
For practitioners, MFN analysis requires mapping the host state's entire BIT network to identify the most favorable comparator treaty in force at the relevant time.
Example
In Maffezini v. Spain (ICSID Case No. ARB/97/7, award 2000), the tribunal used the MFN clause in the Argentina-Spain BIT to import the more favorable dispute-settlement provisions of the Chile-Spain BIT.
Frequently asked questions
It depends on the treaty's wording and the tribunal. Maffezini (2000) said yes; Plama (2005) and Daimler (2012) said no. Modern treaties like CETA expressly exclude ISDS from MFN.
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