Extension of the most favoured nation clause to dispute settlement provisions in bilateral investment treaties which Turkey is a party of

Abstract

Bilateral investment treaties (BITs) pave the way for international investment arbitration for investors and play a crucial role in the settlement of investment disputes. In 63 years, 2871 BITs have been signed between States and 2231 of them have entered into force since the first BIT concluded between Germany and Pakistan in 1959. This alone reveals the importance of BITs in terms of the disputes arising from investment and their settlement through arbitration. Almost every BIT contains most favored nation (MFN) clause as a standard of treatment. However, the applicability of MFN clauses to procedural provisions of a BIT has been a controversial issue since 2000 when an ICSID tribunal's award was rendered in the Maffezini case. Following the Maffezini case, conflicting arbitral awards have have become the centre of attention as to the scope of MFN clauses in terms of whether they could be extended to dispute resolution provisions. One of the main reasons leading to this controversy is that the BIT provisions regarding MFN clauses as well as dispute resolution provisions have not been formulated in a clear and unambiguous manner. Accordingly, different arbitral tribunals have interpreted BIT provisions differently regarding the extension of MFN clauses to dispute resolution provisions. This problem has had an impact all over the world and has led a radical shift both for arbitral awards that have been rendered by investment tribunals and BIT practices of almost all countries. MFN clauses no longer cover dispute resolution provisions of BITs that have been signed by Turkey since 2010.