The most favoured nation clause in bilateral investment treaties: Its scope, application and limitations

This thesis examines the most favoured nation (MFN) clause, one of the fundamental principles of international investment law, and offers a systematic analysis of its scope and limitations within Bilateral Investment Treaties (BITs) in light of divergent arbitral awards. The primary objective of this study is to identify the normative structure, legal function, and boundaries of the MFN clause, with particular emphasis on the controversial issue of whether it extends to procedural provisions. The analysis draws upon scholarly debates and practical examples in the field. The thesis is structured into five main chapters. The first chapter outlines the conceptual framework of foreign direct investment, addressing its definition, historical development, and the legal regime to which it is subject. The second chapter discusses the standard of treatment provisions found in BITs, specifically, fair and equitable treatment, national treatment, and full protection and security, through both doctrinal perspectives and state practice. The third chapter explores the historical evolution, definition, and core characteristics of the MFN clause, as well as its legal function and role within the investment law framework. The fourth chapter provides a detailed analysis of the scope and limitations of the MFN clause, considering theoretical perspectives, state practice, exception regimes, and limitation clauses through comparative evaluation. The fifth and final chapter focuses on the applicability of the MFN clause to dispute settlement mechanisms, elaborating on arbitral practice, scholarly opinions, and treaty interpretation. In this context, landmark arbitral decisions such as Maffezini, Plama, Siemens, RosInvestCo and Tza Yap Shum are examined in depth. The study primarily employs a comparative legal methodology, integrating normative and practice-oriented analysis through a comprehensive review of arbitral awards, state conduct, and model BITs. Furthermore, interpretive principles laid out in the Vienna Convention on the Law of Treaties are used as the basis for analytical evaluations. In conclusion, the extent of protection afforded to investors through the MFN clause must be assessed in accordance with the wording, context, and intent of the contracting states in each specific treaty. States should clearly articulate their intent regarding the application of MFN clauses, particularly with respect to procedural matters. It is also recommended that existing BITs be reviewed and, where necessary, revised to reflect this clarity. Finally, the adoption of a multilateral framework agreement governing MFN clauses would contribute significantly to resolving interpretive inconsistencies and promoting uniformity in international law.