State X has a BIT in force with State A that provides for investor-State arbitration of disputes concerning only the amount of compensation due in the event of an expropriation. It also provides for most-favoured-nation ("MFN") treatment "in all matters governed by this treaty". State X has a BIT in force with State N that provides for investor-State arbitration of any dispute arising under the treaty (and also provides for full compensation for direct or indirect expropriation). May an investor from State A initiate investor-State arbitration against State X for a claim of indirect expropriation relying on the MFN clause?
Obviously, much will depend on the wording of the particular MFN clause. The rules of interpretation laid down in the Vienna Convention will apply to the MFN clause as well. Thus, the primary task is to identify the ordinary meaning of the clause in good faith in its context and in the light of the object and purpose of the treaty.
Two types of wording can be distinguished: a broad one and a narrower one. An example of the broad formulation is given in the BIT concluded between Spain and Argentina: ‘[i]n all matters governed by this Agreement...’. This provision was analysed by various tribunals in the Maffezini v Spain, Gas Natural v Argentina, Suez v Argentina. The formulation in the Spain-Argentina BIT coincides with the formulation in the BIT between State X and State A - "in all matters governed by this treaty". The reference in the MFN clause to "all matters" can be inderstood to cover any kind of matters falling within the scope of the given BIT, including, inter alia, expropriation.
The MFN clause is usually contained in a ‘basic treaty’ which regulates the rights of the beneficiary of the clause and entitles him to a more favourable treatment that is accorded by the host state to nationals of a third state under what is called a ‘third-party treaty’. The object of the ‘third-party treaty’ must be capable of an ejusdem generic reading for the MFN standard to apply. If the MFN provision in the basic treaty does not extend to the subject-matter of the more favourable treatment accorded to investors of a third State, then that is the end of the matter.
If the MFN clause of the basic treaty constitutes the source of the right to most-favoured-nation treatment as well as determining its scope, the concrete treatment that the beneﬁciary state can demand depends, on a factual basis, on the more favourable treatment accorded to a third state. The MFN clause in the BIT between State A and State X provides for the treatment in "in all matters governed by this treaty", which expand to the disputes concerning the amount of compensation due in the event of an expropriation. A ‘third-party treaty’ between the State X and State N provides for full compensation for direct or indirect expropriation, i.e. the provision literally develops the idea of expropriation, setting forth certain types thereof.
On the other hand, the interpretation has to demonstrate the intention of the contracting states to exclude the claim of indirect expropriation from the scope of the MFN clause. ICSID jurisprudence tilts towards interpreting the intention of the parties in accordance with the general rule in the Vienna Convention. The wording of the MFN clause in the State X-State A BIT does not allow one to conclude that the term ‘treatment’ clearly expresses the intention of the parties to exclude the claim of indirect expropriation from the scope of the MFN clause.
In light of the above considerations, it can be concluded that notwithstanding the fact that the basic treaty containing the clause does not refer expressly to indirect expropriation, there are good reasons to conclude that the MFN clause does provide for the claims of indirect expropriation under the State X-State A BIT.