The MFN clause in investment law and arbitration: a developing countries perspective

Application of the most-favored-nation (MFN) clauses by investor-state arbitral tribunals has given rise to various controversies. This chapter discusses the experience of developing countries in this regard. While application of MFN to the substantive and procedural standards in International Investment Agreements (IIAs) has overly benefited investors from the developed countries, such application has not been favorable to the developing host-states. Accordingly, some developing countries have undertaken significant MFN reforms in their recent IIAs. This chapter illustrates such reforms with reference to the specific reforms undertaken by Argentina, India, and the Southern African Development Community. The chapter argues that while restraining the scope of MFN clauses may help the developing countries to preserve greater regulatory power in their hands, complete omission of MFN from IIAs may be discouraging for the foreign investors. Therefore, the developing countries should aim to maintain a balance in reforming MFN in the future.