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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