Part IV Guide to Key Substantive Issues, 23 The MFN Clause and Its Evolving Boundaries

Abstract

This chapter discusses most-favoured-nation (MFN) clauses from early references in trade agreements to contemporary references in investor-state arbitrations. MFN clauses originated in early international trade practice and have continued to be incorporated in modern trade and investment treaties, both bilateral and multilateral. Their intended purpose is to lessen discrimination and encourage the growth of trade and foreign investment by ensuring that certain defined benefits accorded to one set of States (or their nationals, investments, goods, etc.) are extended to other States (or their nationals, investments, goods, etc.). In the investment treaty context, some commentators have observed that the right to a favourable dispute settlement mechanism is the primary concern of foreign investors, and investors often invoke MFN clauses to secure procedural rights that might otherwise be unavailable to them.