Most-favoured-nation’s false promises

Abstract Most-favoured-nation (MFN) protection seems decidedly straightforward both in meaning and operation, certainly as compared to other investment protections, such as fair and equitable treatment, which are plagued with indeterminacy. But the clarity of meaning and ease of application of MFN clauses are largely illusory. An examination of arbitral case law reveals seriously underestimated uncertainties surrounding the doctrine’s scope and workings. But the problems with MFN run far deeper. MFN may have the virtue of enhancing the level of protection of foreign investments. But States do not only extend benefits; they also withhold them. MFN disrespects the balance that States sought to achieve in the agreements they conclude. Particularly deceptive is MFN’s reputed capacity to reduce discrimination among foreign investors. MFN does not meaningfully reduce discrimination; indeed it exacerbates the problem. Especially illusory is the notion that MFN necessarily conduces to a multilateralization of investment protection. MFN even falls short in light of investment treaties’ core purposes. There may or not be convincing evidence that the availability of investment arbitration significantly induces foreign investment. But it cannot seriously be maintained that the level of foreign investment in a given State turns on MFN’s presence in, or absence from, an investment treaty.