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22 J. Int'l Arb. 225 (2005)
Who's Afraid of Maffezini - Recent Developments in the Interpretation of Most Favored Nation Clauses

handle is hein.kluwer/jia0022 and id is 237 raw text is: Journal of International Arbitration 22(3): 225-238, 2005. 0 2005 Kluwer Law International. Printed in The Netherlands. Who's Afraid of Maffezini? Recent Developments in the Interpretation of Most Favored Nation Clauses Ruth TEITELBAUM* Maffezini v. Kingdom of Spain (Decision onJurisdiaion),' has been labeled controversial for expanding the scope of Most Favored Nation (MFN) treatment to encompass dispute settlement procedures.2 The drafters of some recent Free Trade Agreements (FTAs) have even made specific references to the Maffezini case in the negotiating history in an effort to prevent future Maffezini scenarios. As will be discussed below, the most feared scenario following Maffezini, namely, the ability to bypass entire dispute settlement systems or invoke those that do not appear in the relevant treaty, has been attempted and rejected by an ICSID tribunal. This article proposes that the focus on Maffezini and the fear that dispute settlement may be part of the treatment afforded to investors under certain MFN clauses may distract from other significant problems related to MFN treatment which remain unresolved. Among these are (1) the ability to avoid substantive obligations by invoking MFN clauses and (2) the ability to invoke disparities in MFN clauses themselves as violations of fair and equitable treatment, both of which may further expand the consent of host states to resolve investment disputes through arbitration. This article does not purport to provide all of the answers to the complex issues surrounding MFN treatment. However, given that carving out exceptions to MFN treatment may only exacerbate complexities related to treaty shopping, the aim of this article is to highlight some of the complexities and to propose some alternative solutions. * Ruth Teitelbaum is the Managing Editor of International Legal Materials at the American Society of Inter- national Law (ASIL).The views expressed are in the author's personal capacity alone and do not reflect the views of her employer.The author wishes to thank Francisco OrregoVicufia and Jan Paulsson for their helpful comments. ' Maffezini v. Kingdom of Spain 16 ICSID REV. - FILJ 212 (2001); 5 ICSID Rep. 396 (2002); 40 I.L.M. 1129 (2001). For an important discussion of the Maffezini case and MFN treatment, see Francisco Orrego Vicufia, Bilateral Investment Treaties and the Most-Favored-Nation Clause: Implications for Arbitration in the Light of a Recent ICSID Case, a paper delivered at the Swiss Arbitration Association Conference on Investment Treaties and Arbitration, Jan- uary 25, 2002, Zurich, in IN ESrMENr TREATIES AND ARBITRATION, ASA SPECIAL SERIES No. 19, 133-44 (Gabrielle Kaufinann Kohler & Blaise Stucki eds., 2002). 2 See Salini Costruttori S.p.A. and Italstrade S.p.A. v. Hashmetie Kingdom of Jordan, ICSID Case No. ARB/ 02/13, Decision on Jurisdiction, November 29, 2004, 115: The current Tribunal shares the concerns that have been expressed in numerous quarters with regard to the solution adopted in the Maffezini case. Its fear is that the pre- cautions taken by the authors of the award may in practice prove difficult to apply, thereby adding more uncertainties to the risk of treaty shopping' See also, as will be discussed further infra, the draft text of CAFTA, containing a footnote referring to the Maffezini decision:The Parties note the recent decision of the arbitral tribunal in Maffezini (Arg.) v. Kingdom of Spain, which found an unusually broad most-favored-nation clause in an Argentina-Spain agreement to encom- pass international dispute resolution procedures.... By contrast, the Most-Favored-Nation Treatment Article of this Agreement is expressly limited in its scope to matters 'with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments The Parties share the understanding and intent that this clause does not encompass international dispute resolution mechanisms such as those contained in Section C of this Chapter, and therefore could not reasonably lead to a conclusion similar to that of the Maffezini case. Copyright ' 2007 by Kluwer Law International. All rights reserved. No claims asserted to original government works.

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