4.

BROADENING NARROW CLASUES USING MFN CLAUSE

Although investment tribunals have largely depended on the broad interpretations of

settlement clauses, another possibility exists. This possibility is about relying on the MFN
clauses to broaden the limited provisions. These MFNs are usually found in BITS. This
reliance is possible because of two reasons.
- BITs have usually contained MFN clauses.
- And, The Maffazeni decision of the 2000 has enabled the application of MFN into
procedural and jurisdictional issue.

A. MFN clauses in Arbitration practice

It has been admitted by investors that a MFN clause help them rely on a treaty between the
host state and a third party, if the latter treaty is better than the treaty between the investor
and the host state. They use the latter treaty to interpret a broader interpretation to their
own treaty, via the MFN clause.
The leading case is Maffazeni vs spain. Where a argentine national was allowed to rely on
the MFN clause to find redressal, By relying on a favourable treaty the host country had with
another country. The Judgement int eh Maffazeni judgement was used as precedent in many
cases, inclusing a major cause by ICSID in the seimens decision.
However one case, Plama vs Bulgaria spoke the contrary, according to this case, this scope of
using thr MFN clause to broaden the interpretation is only possible if the MFN clause
intends for this kind of incorporation. The Plama case was used as a precedent in another
case, Salma vs Telenor. The issue was tried to be solved by stating that Maffazeni and
seimens case was procedural issue where as Plama and Salma case were about jurisdictional
issue.

A(i) MFN clasues to prevent procedural obstacle

The procedural obstacle mainly resorts to waiting period before going for arbitration or
institution of suits in domestic courts or any other related issue. In the Maffezeni case, a
german nation used the MFN clause to avoid the time period of 18 months within which he
must resort to spain’s domestic tribunal before approaching arbitration. The dispute was
regarding a certain Article 10 of the BIT. It did not require that local remedy must be
resorted forst before approaching for arbitration. The main question was whether the
claimant can avoid this procedural requirement of 18 month period and directly go for
arbitration. The tribunal rejected spain’s argument that the MFN clause can be interpreted
only for material issues and not procedural issues. It must be noted that the Maffezeni case
didn’t call for unlimited interpretation of the MFN clasue. It explained that sometimes
“public policy” might limit the interpretation of the MFN clause.
This reasoning of “public policy” was explained in another case Techmed vs Mexico. But this
claim of avoiding the waiting period, as decided in the Maffezeni case was used as a
precedent in Siemens vs Argentina. The siemens case was slightly different in the regard
that, the BIT did not specify a waiting period. But rather a “fork in the road” provision,
according to which the invester must choose in between domestic solution or international
Arbitration, with the understanding that once an option is chosen, the other option becomes
unavailable. The ICSID rejected argenitina’s argument that siemens should be stopped as
they have already instituted administrative proceedings in argentina’s tribunal. This decision
was given by ICSID be relying on a different BIT via MFN clause. This decision was again
followed in another case of Gas Natural vs argenitina.
The 18 month waiting period was the dispute in another case, Suez vs argenitina, the
respondents claimed that the 19th month waiting period must be fulfilled before going for
the international arbitration. The ICSID panel rejected the argument by relying on the
Maffezeni judgement. It found that the MFN clause in the case was broad enough to include
procedural and substantive issues. The respondant claimed that in the above case, the
wordings of the MFN clause are different. The tribunal rejected by sating that even if the
wordings were limited, it will include the procedural aspects. The suez tribunal rejected
Argenitina’s argument who were aguing that the MFN clasue did not intend to include
dispute settlement.
The avoidance of the 18 month waiting period in the argenitna/Spain BIT was subsequently
followed in the ICSID tribunal in Telefonica vs Argentina.