Study On The Controversy Over Application Of MFN Clause To Investment Dispute Arbitration Procedures In BITs

Bilateral investment treaties(BITs)have been the main part of modern international investment law,Most-Favored-Nation Clause(MFN clause)is one of the core provisions of a bilateral investment treaty.After the Maffezini case,the issue of MFN clauses applying to the investment dispute settlement procedure caused great controversy in theoretical circle who is divided into two groups:the pros and the opposition.The support group analyzes mainly from the non-discrimination purpose of the MFN clause itself and the purpose of the treaty to promote and protect investment;while the opposition group mainly stood in the perspective of safeguarding national sovereignty.In the arbitration practice of the ICSID arbitral tribunal,there is still no definitive answer to this question.The arbitral tribunal needs to interpret it in accordance with Articles 31 and 32 of the Vienna Convention on the Law of Treaties.By sorting out the relevant cases of the ICSID arbitral tribunal,it can be concluded that the arbitral tribunal will extend the application of the MFN clause to the dispute settlement only when the MFN clause in the BIT clearly stipulates that it applies to the dispute settlement procedure;when the MFN clause is not clearly stipulated,the arbitral tribunal’s decisions are inconsistent.Although the arbitral tribunal’s attitude towards the extension of the MFN clause was not consistent,efforts were made to explore the consent of the Contracting States through the MFN text.Since the nature of the MFN clause is a treaty obligation rather than a customary international law norm,its application must rely on the consent of the contracting states,and the consent of the states is reflected in the text of the MFN clause,so the key to solving this problem lies in the the text of the MFN clause.At present,the number of BITs concluded in China is second only to Germany,and the amount of investment is among the best in the world.Although there are only three cases of ICSID being sued,there will be more and more investment disputes as China’s economy develops.Therefore,the author has sorted out the MFN clauses in the BITs signed by China.There are several problems:MFN clauses in most BITs that do not clearly stipulate that they are not applicable to the investment dispute settlement procedure,non-uniformity of application scope and vague terms.After referring to the BIT model of the Netherlands,Canada,and the United States,combined with the viewpoint of the arbitral tribunal in Ansung Company v.China,The author suggests that the general expression of the MFN clause is combined with positive enumeration,and the domestic remedies are clearly defined under the MFN clause.The negative unequivocally excludes the MFN clauses applicable to procedural matters and dispute settlement provisions.And finally it should be added that MFN clause shall not apply to treatment accorded under all bilateral or multilateral international agreements in force or signed prior to the date of entry into of this Agreement.The research object of this paper is whether the MFN clause applies to the investment dispute settlement procedure.The author mainly analyzes the ICSID related cases and divides the full text into four parts:The first part is an overview of the MFN clause,based on the provisions of the MFN clause(draft)adopted by the United Nations International Law Commission in 1978,makes a brief description of the MFN clause;does the analysis of the theoretical basis of the MFN clause and its scope of application in BIT;laies the foundation for the following discussion.The second part introduces the origin of the dispute-Maffezini case-the case and the ICSID arbitral tribunal’s point of view,the author does a statistics of the disputes of ICSID in the arbitration practice after the Maffezini case;and the analysis of the MFN clause applicable to the investment dispute arbitration procedures,The criterion for the application of the MFN clause is whether the MFN clause is clearly defined;the arbitral tribunal will apply if the MFN clause is clearly applicable(the Koza Guarantee);the ICSID arbitral tribunal has discretion on this issue when it is not explicitly stated.The third part analyzes the ICSID arbitral tribunal’s views on this issue when the MFN clause is not clearly defined.The author analyzes the issue through the interpretation and purpose interpretation of the Vienna Convention on the Law of Treaties;and demonstrates the controversy of the theoretical community on this issue;It is concluded that the arbitral tribunal will apply if the MFN clause itself clearly states that it is applicable;if it is not clearly stated,the arbitral tribunal’s views are not consistent and the author suggestes that the MFN clause clearly does not apply to dispute arbitration procedures and explains the reasons.The fourth part is based on the above analysis of the ICSID cases.The key to this problem lies in the expression of the MFN clause.Therefore,it first sort out the problems of the MFN clause in Chinese and foreign BITs,and then refers to the typical BIT models,and finally,suggestions are made on the expression pattern of MFN clauses for Chinese and foreign BITs.