The application of the most-favoured-nation clause to the dispute settlement provisions of bilateral investment treaties: Domesticating the 'Trojan Horse'

European Journal of International Law

Volumn 18, Issue 4, 2007, Pages 757-774

  Radi, Yannick ^a  

^a EUROPEAN UNIVERSITY INSTITUTE   (Italy)

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EID: 36649020516     PISSN: 09385428     EISSN: 14643596     Source Type: Journal    
DOI: 10.1093/ejil/chm031     Document Type: Article

References (88)

1. International Law Commission, Draft Arts. on Most-Favoured-Nation Clauses (hereinafter ILC Draft Arts.), text adopted by the International Law Commission at its 30th session (1978), available at http://untreaty.un.org/ilc/texts/instruments/english/draft%20articles/ 1_3_1978.pdf. For commentaries on the ILC's Draft Arts., see Report of the International Law Commission on the Work of its Thirtieth session 8 May-28 July 1978, Official Records of the General Assembly, Thirty-third session, Supplement No. 10, Doc. A/33/10 (hereinafter ILC Report), 2 Yearbook of the International Law Commission (1978) 8, available at: http://untreaty.un.org/ilc/documentation/english/ A_33_10.pdf.
2. Ibid.
3. Ibid.
4. Art. 8 states: '[t]he source and scope of most-favoured-nation treatment: 1. The right of the beneficiary State to most-favoured-nation treatment arises only from the most-favoured-nation clause referred to in article 4, or from the clause on most-favoured-nation treatment referred to in article 6, in force between the granting State and the beneficiary State. 2. The most-favoured-nation treatment to which the beneficiary State, for itself or for the benefit of persons or things in a determined relationship with it, is entitled under a clause referred to in paragraph 1 is determined by the treatment extended by the granting State to a third State or to persons or things in the same relationship with that third State.':
5. ibid.
6. Art. 9 states: '[s]cope of rights under a most-favoured-nation clause: 1. Under a most-favoured-nation clause the beneficiary States acquires, for itself or for the benefit of persons or things in a determined relationship with it, only those rights which fall within the limits of the subject matter of the clause. 2. The beneficiary State acquires the rights under paragraph 1 only in respect of persons or things which are specified in the clause or implied from its subject-matter.':
7. ibid.
8. Anglo-Iranian Oil Co. Case (United Kingdom v. Iran) (Preliminary objection) [1952] ICJ Rep 93, at 110
9. The Ambatielos claim (United Kingdom v. Greece) (1956), Reports of International Arbitral Awards (vol. XII) 83, at 106.
10. Art. 36 states: '[t]reaties providing for rights for third States: 1. A right arises for a third State from a provision of a treaty if the parties to the treaty intend the provision to accord that right either to the third State, or to a group of States to which it belongs, or to all States, and the third State assents thereto. Its assents shall be presumed so long as the contrary is not indicated, unless the treaty otherwise provides. 2. A State exercising a right in accordance with paragraph I shall comply with the conditions for its exercise provided for in the treaty or established in conformity with the treaty': Vienna Convention on the Law of Treaties (1969) (VCLT), 1155 UNTS (1980) 331, at 341, available at: http://untreaty.un.org/ilc/texts/instruments/ english/conventions/1_1_1969.pdf.
11. ILC Report, supra note 1, at 26.
12. Anglo-Iranian Oil Co. Case, supra note 6, at 109.
13. It can be noted that in the context of international investment law, the beneficiary of the most-favoured-nation clause is the investor. Indeed BITs provide for rights in favour of investors.
14. Emilio Agustin Maffezini v. Kingdom of Spain, decision of the tribunal on objections to jurisdiction, 25 Jan. 2000, ICSID Case No. ARB/97/7, available at: http://ita.law.uvic.ca/chronological_list.htm.
15. Suez, Sociedad General de Aguas de Barcelona SA and InterAguas Servicios Integrales del Agua SA v. The Argentine Republic, decision on jurisdiction, 16 May 2006, ICSID Case No. ARB/03/17
16. National Grid PLC v. The Argentine Republic, decision on jurisdiction, 20 June 2006, UNCITRAL Arbitration; Suez, Sociedad General de Aguas de Barcelona SA and Vivendi Universal SA v. The Argentine Republic, ICSID Case No. ARB/03/19 and AWG Group Ltd. v. The Argentine Republic, UNCITRAL Arbitration, decision on jurisdiction, 3 Aug. 2006
17. Telenor Mobile Conununications AS v. The Republic of Hungary, award, 2 Oct. 2006, ICSID Case No. ARB/04/15. The decisions and award are available at: http://ita.law.uvic.ca/chronological_list.htm. This article is up to date with arbitration practice until 6 Dec. 2006.
18. An example of an explicit clause is given by the UK model investment treaty. Art. 3 (3) of which, providing for most favoured-nation treatment, mentions that 'for avoidance of doubts it is confirmed that the treatment provided for in paragraphs (1) and (2) above shall apply to the provisions of articles 1 to 11 of this agreement'. Arts. 8 and 9 provide for dispute settlement. For an example see the Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Armenia for the promotion and protection of investments (1997), 1967 UNTS (1997) 86, at 85.
19. Art. 31 states: 'General rule of interpretation: 1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. 2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: (a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty; (b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty. 3. There shall be taken into account, together with the context: (a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions; (b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation; (c) any relevant rules of international law applicable in the relations between the parties. 4. A special meaning shall be given to a term if it is established that the parties so intended.'Art. 32 states: 'Supplementary means of interpretation: Recourse may be had to supplementary means of interpretation, including the preparatory work and the Circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31: (a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd or unreasonable': Vienna Convention on the Law of Treaty, supra note 7, at 340.
20. Plama Consortium Ltd v. Republic of Bulgaria, decision on jurisdiction, 8 Feb. 2005, ICSID Case No. ARB/03/24, available at: http://ita.law.uvic.ca/chronologica_list.htm.
21. Ibid., at para. 212.
22. Schwebel, 'The Severability of the Arbitration Agreement', in S. M. Schwebel, International Arbitration: Three Salient Problems (1987), at 5.
23. Mayer, 'Les limites de la séparabilité de la clause compromissoire', 2 Revue de l'arbitrage (1998) 359.
24. Ibid., at 362 (my translation).
25. For a discussion concerning the 'Kompetenz-Kompetenz' doctrine, see Sanders, 'L'autonomie de la clause compromissoire', in F. Eisemann and Y. Derains, Hommage à Frédéric Eisemann, Liber Amicorum (1978), at 32.
26. As examples of national case law, see for France, Cass. 1ère civ. 7 May 1963; for the USA, Prima Paint v. Flood & Conklin Mfg. Co, 388 US 395, 402 (1967).
27. As an example of international case law see Fisheries Jurisdiction Case (United Kingdom v. Iceland) (Jurisdiction of the Court) (1973) [1973] ICJ Rep 3.
28. Emphasis added.
29. ICSID Additional Facility Rules, Sched. C - Arbitration (Additional Facility) Rules, available at: http://www.worldbank.org/icsid/facility/ facility.htm.
30. Similarly, Art. 16, para. 1 of the UNCITRAL Model Law on International Commercial Arbitration provides: '[t]he arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause' (emphasis added): UN Commission on International Trade Law Model Law on International Commercial Arbitration, available at: http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/ 06-54671_Ebook.pdf.
31. Plama Consortium Ltd v. Republic of Bulgaria, supra note 15, at para. 212.
32. Compagnie universelle du Canal de Suez v. Vice-Roi d'Egypte, judgment of 21 Apr. 1864
33. see Leben, 'La théorie du contrat d'Etat et l'évolution du droit international des investissements', 302 Recueil des Cours de l'Académie de Droit International (2003) 197, at 219.
34. See Mavrommatis Concessions in Palestine, 1924 PCIJ, Series A, No. 2.
35. M. Sornarajah, The International Law on Foreign Investment (2004), at 250.
36. Plama Consortium Limited v. Republic of Bulgaria, supra note 15, at para. 193.
37. Maffezini v. Kingdom of Spain, supra note 11, at para. 54.
38. The Ambatielos claim, supra note 6, at, 107.
39. Maffezini v. Kingdom of Spain, supra note 11, at para. 56.
40. Plama Consortium Ltd v. Republic of Bulgaria, supra note 15, at para. 223.
41. VCLT, supra note 14, Arts. 31 and 32.
42. Acuerdo para la promocion y la proteccion reciproca de inversiones entre il Reino de Espana y la Republica Argentina (1991) (Agreement between the Kingdom of Spain and the Republic of Argentina for the promotion and the reciprocal protection of investments), available at: http://www.unctad.org/sections/dite/iia/docs/bits/argentina_spain_sp.pdf, English translation in 1699 UNTS (1992) 202, at 204.
43. Maffezini v. Kingdom of Spain, supra note 11, at paras. 38-64.
44. Gas Natural SDG, SA v. The Argentine Republic, decision of the tribunal on a preliminary question on jurisdiction, 7 June 2005, ICSID Case No. ARB/03/10, available at: http://ita.law.uvic.ca/ chronological_list.htm, at paras. 41-49.
45. Suez, Sociedad General de Aguas de Barcelona SA v. The Argentine Republic, supra note 12, at paras. 52-66.
46. Suez, Sociedad General de Aguas de Barcelona SA and Vivendi Universal SA v. The Argentine Republic, and AWG Group Ltd. v. The Argentine Republic, supra note 12, at paras. 52-66.
47. Suez, Sociedad General de Aguas de Barcelona SA and Vivendi Universal SA v. The Argentine Republic, and AWG Group Ltd. v. The Argentine Republic, supra note 12, at paras. 52-68.
48. Suez, Sociedad General de Aguas de Barcelona SA v. The Argentine Republic, supra note 12, at para 55.
49. Salini Costruttori SpA and Italstrade SpA v. The Hashemite Kingdom of Jordan, decision on jurisdiction, 9 Nov. 2004, ICSID Case No. ARB/02/ 13, available at: http://ita.law.uvic.ca/chronological_list.htm, at paras. 117-118.
50. The Ambatielos Claim, supra note 6, at 107.
51. Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Argentina for the promotion and the protection of investments (hereinafter UK-Argentina BIT) (1990), available at: http://www.unctad.org/sections/ dite/iia/docs/bits/uk_argentina.pdf.
52. Siemens AG v. The Argentine Republic, decision on jurisdiction, 3 Aug. 2004, ICSID Case No. ARB/02/8, available at: http://ita.law.uvic.ca/ chronological_list.htm, at para. 85.
53. Suez, Sociedad General de Aguas de Barcelona SA v. The Argentine Republic, supra note 12, at para. 55.
54. Suez, Sociedad General de Aguas de Barcelona SA and Vivendi Universal SA v. The Argentine Republic and AWG Group Ltd. v. The Argentine Republic, supra note 12, at para 55.
55. Plama Consortium Ltd v. Republic of Bulgaria, supra note 15, at para. 189.
56. In the Telenor case, the arbitration tribunal considered that the MFN clause of the BIT concluded between Norway and Hungary referring to 'treatment' cannot be interpreted as allowing the importation of dispute settlement provisions: Telenor Mobile Communications AS v. The Republic of Hungary, supra note 12, at para. 92.
57. North American Free Trade Agreement (1994) (NAFTA), available at: http://www.nafta-sec-alena.org/DefaultSite/index_e.aspx?DetailID=78.
58. Plama Consortiurn Ltd v. Republic of Bulgaria, supra note 15, at para. 203.
59. UK-Argentina BIT, supra note 48.
60. Suez, Sociedad General de Aguas de Barcelona SA and Vivendi Universal SA v. The Argentine Republic, and AWG Group Ltd. v. The Argentine Republic, supra note 12, at para. 57.
61. Spain-Argentina BIT, supra note 34.
62. Suez, Sociedad General de Aguas de Barcelona SA and Vivendi Universal SA v. The Argentine Republic, and AWG Group Ltd. v. The Argentine Republic, supra note 12, at para. 58.
63. National Grid PLC v. The Argentine Republic, supra note 12, at para. 82.
64. See supra at 2.B.
65. I. Sinclair, The Vienna Convention on the Law of Treaties (1984), at 130,
66. quoted in Plama Consortium Ltd v. Republic of Bulgaria, supra note 15, para 193.
67. R. Bernhardt (ed.), Encyclopedia of Public International Law (1995), at 1420.
68. Although decisive in the context of this article, it should be recalled that travaux préparatoires remain a 'supplementary mean of interpretation' under Art. 32 of the VCLT, supra note 14.
69. See http://www.ftaa-alca.org/alca_f.asp.
70. National Grid PLC v. The Argentine Republic, supra note 12, at para. 85.
71. This is not one of the means of interpretation listed in the VCLT and it should not be inferred from the present analysis.
72. National Grid PLC v. The Argentine Republic, supra note 12, at para. 85.
73. See supra note 59.
74. Legal consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwith-standing Security Council Resolution 276 (1970) [1971] ICJ Rep 31.
75. Tyrer v The United Kingdom, ECHR (1978), Series A No. 26, 1 EHRR (1978) 1, at 15.
76. Case concerning the Gabcikovo-Nagymaros project, ICJ Rep (1997) 118.
77. Maffezini v. Kingdom of Spain, supra note 11, at para. 56.
78. Ibid., at para. 63.
79. Ibid., at para. 62.
80. Tecnicas Medioambientales Tecmed SA v. The United Mexican States, Award, 19 May 2003, ICSID Case No. ARB (AF)/00/2, available at: http://ita.law.uvic.ca/chronological_list.htm.
81. '[I]t deems that matters relating to the application over time of the Agreement, which involve more the time dimension of application of its substantive provisions rather than matters of procedure or jurisdiction, due to their significance and importance, go to the core of matters that must be deemed to be specifically negotiated by the Contracting parties. These are determining factors for their acceptance of the Agreement, as they are directly linked to the identification of the substantive protection regime applicable to the foreign investor and, particularly, to the general (national or international) legal context within which such regime operates, as well as to the access of the foreign investor to the substantive provisions of such regime. Their application cannot therefore be impaired by the principle contained in the most favoured nation clause': ibid. (emphasis added), at para. 69.
82. See supra note 68.
83. The exhaustion of local remedies, the 'fork in the road' (the choice between submission to domestic courts or to international arbitration, where the choice, once made, becomes final and irreversible), the provision of a particular arbitration forum and an agreement on a highly institutionalized system of arbitration: See Maffezini v. Kingdom of Spain, supra note 11, at para. 63.
84. Ibid., at para. 63.
85. See supra note 70.
86. Suez, Sociedad General de Aguas de Barcelona SA v. The Argentine Republic, supra note 12, at para. 59.
87. In the silence of the MFN clause, it has indeed to be presumed that the clause is unconditional, which means that the most-favoured-nation treatment is accorded without a condition awarding compensation: See International Law Commission, Draft Articles on Most-Favoured-Nation Clauses, supra note 1, at 37.
88. Ibid., at 33.