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MFN Clauses and Substantive Treatment: A Law of Treaties Perspective of the “Conventional Wisdom”

Extract

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.

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References
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2 Maritime Delimitation in the Indian Ocean (Som. v. Kenya), Preliminary Objections, para. 63 (ICJ, Feb. 2, 2017).

3 Franklin Berman, Why Do We Need a Law of Treaties?, 385 Recueil des Courses 17, 29 (2017).

4 T.S. Eliot, Choruses from the “Rock”, in The Poems of T. S. Eliot 165 (Christopher Rick & Jim McCue eds., 2015).

5 James Crawford, Chance, Order, Change: The Course of International Law, 365 Recueil des Courses 13, 21–22 (2013).

6 To borrow from the still unsurpassed explanation of MFN clauses in Paul Reuter, Introduction to the Law of Treaties 106 (José Mico & Peter Haggenmacher trans., 1995).

7 I am unfamiliar with the “top-down” and “bottom-up” language that structures the argument, and therefore have translated it into the technical VCLT parlance (without misrepresenting it, hopefully).

8 It is worth noting, as an example of earlier perceptions, that the finest law of treaties lawyer of the last century argued the greatest MFN clause case in the same terms challenged by the authors. See Ambatielos Case (Greece v. UK), 1953 ICJ Pleadings 406 (Mar. 26, 1953) (Fitzmaurice on behalf of the UK) (“[O]ur adversaries have at various times reproached us for objecting to their invocation of other treaties … on the ground that we did the same thing in the Anglo-Iranian Oil Company case. But of course, the truth is, we have no objection of principle to the invocation of other treaties, provided they are relevant. We have no objection to the process as such.”).

9 Int'l Law Comm'n, Report on the Work of the Sixty-Seventh Session, UN Doc. A/70/10, at para. 42 (2015) [hereinafter 2015 Summary Conclusions]. The ILC also welcomed with appreciation the Final Report of the Study Group on the Most-Favoured-Nation clause, id. at para. 41, Annex. Note that the ILC did not endorse the Final Report. See Int'l Law Comm'n, Provisional Summary Record of the 3264th Meeting, UN Doc. A/CN.4/SR.3264, at 4–5 (July 6, 2015) (McRae, Nolte, Kittichaisaree), Int'l Law Comm'n, Provisional Summary Record of the 3277th Meeting, UN Doc. A/CN.4/SR.3277, at 11 (July 23, 2015).

10 Sixth Committee, Summary Record of the 19th Meeting, UN Doc. A/C.6/70/SR.19, at para. 49 (Nov. 4, 2015); see also id. at para. 37 (Jamaica).

11 Sixth Committee, Summary Record of the 25th Meeting, UN Doc. A/C.6/68/SR.25, at para. 74 (Nov. 5, 2013).

12 Sixth Committee, Summary Record of the 20th Meeting, UN Doc. A/C.6/67/SR.20, at para. 117 (Nov. 2, 2012).

13 Sixth Committee, Summary Record of the 24th Meeting, UN Doc. A/C.6/68/SR.24, at para. 54 (Nov. 4, 2013); see also id. at para. 55.

14 Sixth Committee, Summary Record of the 17th Meeting, UN Doc. A/C.6/70/SR.17, at para. 56 (Nov. 2, 2015).

15 Id. at para. 77.

16 Sixth Committee, Summary Record of the 18th Meeting, UN Doc. A/C.6/70/SR.18, at para. 27 (Nov. 3, 2015).

17 Id. at para. 66.

18 Sixth Committee, Summary Record of the 19th Meeting, UN Doc. A/C.6/70/SR.19, at para. 9 (Nov. 4, 2015).

19 Id. at para. 14.

20 Cf. Draft Conclusions on Identification of Customary International Law, Int'l Law Comm'n, Report on the Work of the Sixty-Eighth Session, UN Doc. A/71/10, at 100 (2016) (Draft Conclusion 10, Commentary 7); Draft Conclusions on Subsequent Agreement and Subsequent Practice in Relation to the Interpretation of Treaties, id. at 122 (Draft Conclusion 10(2)).

21 Rumeli Telekom A.S. v. Kaz., ICSID Case No. ARB/05/16, Award, paras. 572, 574, (July 29, 2008). Kazakhstan did not raise the issue in annulment proceedings. See Rumeli Telekom A.S. v. Kaz., ICSID Case No. ARB/05/16, Decision of the Ad Hoc Committee (Mar. 25, 2010).

22 MTD Equity Sdn. Bhd. v. Chile, ICSID Case No. ARB/01/7, Award, para. 100 (May 25, 2004). In annulment, Chile challenged confusion between MFN and fair and equitable treatment but not the principle. See MTD Equity Sdn. Bhd. v. Chile, ICSID Case No. ARB/01/7, Decision on Annulment, paras. 63–64 (Mar. 21, 2007).

23 ATA Construction, Industrial & Trading Co. v. Jordan, ICSID Case No. ARB/08/2, Award, sec. V.2 (May 18, 2010) (investor relied on an MFN clause and Jordan did not address the argument).

24 OAO Tatneft v. Ukr., Award on the Merits, para. 365 (UNCITRAL, July 29, 2014).

25 L.E.S.I. S.p.A. v. Alg., ICSID Case No. ARB/05/3, Award (Nov. 12, 2008).

26 Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Pak., ICSID Case No. ARB/03/29, Award, paras. 146, 151–52, 162 (Aug. 27, 2009).

27 Paushok v. Mong., Award on Jurisdiction and Liability, para. 246 (UNCITRAL, Apr. 28, 2011).

28 White Industries Australia Limited v. India, Final Award, para 5.4.2 (UNCITRAL, Nov. 30, 2011) (emphasis added).

29 EDF International S.A v. Arg., ICSID Case No. ARB/03/23, Decision, para. 234 (Feb. 5, 2016); Arif v. Mold., ICSID Case No. ARB/11/23, Award, para. 143 (Apr. 8, 2013).

30 İçkale İnşaat Limited Şirketi v. Turk., ICSID Case No. ARB/10/24, Award, paras. 320–21 (Mar. 8, 2016).

31 Mesa Power Group LLC v. Can., PCA Case No. 2012–17, Submission of the U.S., para. 10 (July 25, 2014). Another example of skilful avoidance of this (as well as another contested) issue is Apotex Holdings Inc. v. U.S., ICSID AF Case No. ARB(AF)/12/1, Counter-Memorial on Merits and Objections to Jurisdiction of the U.S., para 384 (Dec. 14, 2012).

32 Press Release, EU-Canada Trade Agreement Enters into Force, European Commission (Sept. 20, 2017).

34 Cf. Ickale, supra note 30, at para. 329.

36 Int'l Law Comm'n, 2015 Summary Conclusions, supra note 9, at para. 42 [d].

37 Sixth Committee, Summary Record of the 18th Meeting, UN Doc. A/C.6/70/SR.18, at para. 62 (Nov. 3, 2015) (Spain).

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