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Simon Batifort and J. Benton Heath, “The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization”
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Simon Batifort and J. Benton Heath, “The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization”
Contents
Symposium on Simon Batifort and J. Benton Heath, “The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization”
Party “intent” is not one of the tools that the Vienna Convention on the Law of Treaties (VCLT) gives to treaty interpreters. To be sure, party intent is presumably reflected in the “object and purpose” of the treaty, but it is not a separate criterion; in fact, the VCLT implicitly excludes party intent from playing an interpretive role. Yet many decision-makers, counsel, and academics persistently look to party intent for guidance when interpreting treaties. The most favored nation (MFN) debate illustrates why party intent endures as an interpretive touchstone: treaty language, even when analyzed in context and in light of the convention's object and purpose, does not always lead to clear answers. Both Simon Batifort and J. Benton Heath and Stephan Schill, in their different ways, depart from traditional VCLT analysis and hark to party intent as a reason to endorse a modified approach to treaty interpretation. Yet they also illustrate why party intent is an imperfect tool: party intent is too malleable to be a conclusive guide to treaty meaning.
On the big questions, Simon Batifort and J. Benton Heath are plainly right. Dogmatic presumptions about the necessary effect of particular clauses and woolly notions of systemic teleology may distract the interpreter from the task of finding the meaning that represents the intentions of the parties, best articulated in the specific terms chosen. Customary rules on treaty interpretation, reflected in Articles 31 and 32 of the Vienna Convention on the Law of Treaties (VCLT), are meant to be flexibly adapted to the case in hand. But in applying their insight to the small print of the interpretative question, Batifort and Heath are less persuasive. Can most favored nation (MFN) clauses be generally relied upon to, as they put it, “import” substantive standards of treatment of investment protection law? The authors are critical of the apparent consensus in favor of an affirmative answer—they call it “conventional wisdom”—and in this regard seem to me to be significantly overstating their case.
In an article published concurrently in the Journal of International Economic Law, I reach many of the same conclusions as Simon Batifort and J. Benton Heath regarding the use of most favored nation (MFN) clauses to import substantive provisions from other treaties. However, although our conclusions are similar, our reasoning differs in several important respects. In my view, the reasons why MFN clauses cannot be used to import treaty provisions have more to do with the nature of these clauses than their specific text. MFN clauses are primary rules that require performing a comparison and determining whether there is a breach of the provision, and this produces legal effects that run against any attempt at importation. In addition, it is not possible or desirable to interpret MFN clauses in isolation from general international law. Stephan Schill is also correct that Batifort and Heath cannot disclaim the normative implications of their effort to shift the debate over MFN clauses. But Schill confuses the legal effects of MFN clauses with a policy consideration (multilateralization) and misreads the interpretative background that must be considered when applying MFN clauses. Schill also mistakes multilateralization via arbitral interpretations of MFN clauses for true multilateralism, which is the product of states working together in multilateral fora. That distinction matters, too, for Schill's solution might provoke a state-led backlash that will undermine the very multilateralism he seeks to promote.
This essay underscores the importance of background understandings in general international law for interpreting brief, open-ended clauses such as most favored nation (MFN) clauses. Contrary to Simon Batifort and J. Benton Heath's claim, I suggest that often interpreters of MFN clauses cannot limit themselves to the text, context, and preparatory materials of a specific MFN clause. A common international negotiating technique, including for investment treaties, is to rely on the general background understanding of what a clause typically means in international law—its default meaning. I also argue that MFN clauses have played a surprisingly limited role in the international investment regime to date. In the main, they have functioned as a stepping stone for procedural and substantive guarantees found in third-party investment treaties. This use, and the limited role of MFN clauses in investment treaty awards, stands in sharp contrast to MFN clauses in the trade regime.