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2 Schill, Stephan W., The Multilateralization of International Investment Law (New York: Cambridge University Press, 2009)CrossRefGoogle Scholar.

3 Ibid.

4 See DiMascio, Nicholas and Pauwelyn, Joost, ‘Nondiscrimination in Trade and Investment Treaties: Worlds Apart or Two Sides of the Same Coin?’, 102 (2008), American Journal of International Law, 48 at 53–8Google Scholar.

5 Trebilcock, Michael J., Understanding Trade Law (Northampton, MA: Edward Elgar, 2011) at 11Google Scholar.

6 Vandevelde, Kenneth J., ‘A Brief History of International Investment Agreements’, 12 (2005), UC Davis Journal of International Law, 157 at 162, 191Google Scholar.

7 Ibid. at 159.

8 See Dolzer, Rudolph and Schreuer, Christoph, Principles of International Investment Law (Oxford: Oxford University Press, 2008)CrossRefGoogle Scholar; Sornarajah, M., The International Law on Foreign Investment (Cambridge: Cambridge University Press, 2010)CrossRefGoogle Scholar.

9 Trebilcock, Understanding Trade Law, supra note 5 at 113.

10 Lowenfeld, Andreas F., ‘Investment Agreements and International Law’, 42 (2003), Columbia Journal of Transnational Law, 123Google Scholar at 125.

11 Vandevelde, ‘A Brief History of International Investment Agreements’, supra note 6 at 158.

12 Ibid. at 170–2.

13 UNCTAD, World Investment Report 2012: Toward a New Generation of Investment Policies (Geneva: United Nations Publications, 2012)Google Scholar at 84.

14 DiMascio and Pauwelyn, ‘Nondiscrimination in Trade and Investment Treaties’, supra note 4 at 51.

15 WTO, World Trade Report 2011: The WTO and Preferential Trade Agreements: From Co-Existence to Coherence (Geneva: World Trade Organization, 2011)Google Scholar at 54.

16 Ibid. at 42, 57.

17 See Fiorentino, Roberto V., Crawford, Jo-Ann, and Toqueboeuf, Christelle, ‘The Landscape of Regional Trade Agreements and WTO Surveillance’, in Baldwin, Richard and Low, Patrick (eds.), Multilateralizing Regionalism (New York: Cambridge University Press, 2009), 28CrossRefGoogle Scholar.

18 WTO, World Trade Report 2011, supra note 15 at 56.

19 Fiorentino et al., ‘The Landscape of Regional Trade Agreements and WTO Surveillance’, supra note 17, define cross-regional as involving countries from different geographical groupings used in the WTO International Trade Statistics Report.

20 WTO, World Trade Report 2011, supra note 15 at 59.

21 Ibid. at 110.

22 For recent reviews of institutional challenges facing the WTO, see Report of the Consultative Board to the Director-General of the WTO, The Future of the WTO: Addressing Institutional Challenges in the New Millennium (Geneva: World Trade Organisation, 2004); Steger, Debra P., ‘The Future of the WTO: The Case for Institutional Reform’, 12 (2009), Journal of International Economic Law, 803CrossRefGoogle Scholar; see generally, Steger, Debra P. (ed.), Redesigning the World Trade Organization for the Twenty-First Century (Waterloo, ON: Wilfred Laurier University Press, 2010)Google Scholar; Broude, Tomer, International Governance in the WTO: Judicial Boundaries and Political Capitulation (London: Cameron May, 2004)Google Scholar.

23 The theoretical and empirical literature on the economic effects of PTAs is extensive, though largely inconclusive. See Bagwell, Kyle W. and Mavroidis, Petros C. (eds.), Preferential Trade Agreements: A Law and Economics Analysis (New York: Cambridge University Press, 2011)CrossRefGoogle Scholar; Panagariya, Arvind, ‘Preferential Trade Liberalization: The Traditional Theory and New Developments’, 38 (2000), Journal of Economic Literature, 287CrossRefGoogle Scholar.

24 See Kwak, Kyung and Marceau, Gabrielle, ‘Overlaps and Conflicts of Jurisdiction between the World Trade Organization and Regional Trade Agreements’, in Bartels, Lorand and Ortino, Federico (eds.), Regional Trade Agreements and the WTO Legal System (New York: Oxford University Press, 2006), 465CrossRefGoogle Scholar; Hsu, Locknie, ‘Applicability of WTO Law in Regional Trade Agreements: Identifying the Links’, in Bartels, Lorand and Ortino, Federico (eds.), Regional Trade Agreements and the WTO Legal System (New York: Oxford University Press, 2006)Google Scholar; Marceau, Gabrielle and Wyatt, Julian, ‘Dispute Settlement Regimes Intermingled: Regional Trade Agreements and the WTO’, 1(1) (2010), Journal of International Dispute Settlement, 67CrossRefGoogle Scholar; Pauwelyn, Joost and Salles, Luiz Eduardo, ‘Forum Shopping Before International Tribunals: (Real) Concerns (Im)Possible Solutions’, 42 (2009), Cornell International Law Journal, 77Google Scholar; Hillman, Jennifer, ‘Conflicts Between Dispute Settlement Mechanisms in Regional Trade Agreements and the WTO – What Should the WTO Do?’, 42 (2009), Cornell International Law Journal, 193Google Scholar; Davey, William J. and Sapir, André, ‘The Soft Drinks Case: The WTO and Regional Agreements’, 8(1) (2009), World Trade Review, 5CrossRefGoogle Scholar.

25 Schill, Stephan W., ‘The Multilateralization of International Investment Law: Emergence of a Multilateral System of Investment Protection on Bilateral Grounds’, 2(1) (2010) Trade, Law and Development, 59 at 63Google Scholar [Schill, ‘Emergence of a Multilateral System’].

26 For a comparison of on the political economy of PTAs and BITs, see DiMascio and Pauwelyn, ‘Nondiscrimination in Trade and Investment Treaties’, supra note 4 at 53–8.

27 Franck, Susan D., ‘The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law through Inconsistent Decisions’, 73 (2005), Fordham Law Review, 1521Google Scholar at 1546.

28 Schill, The Multilateralization of International Investment Law, supra note 2 at 293.

29 Ibid. at 221.

30 Ibid. at 237.

31 Schill, ‘Emergence of a Multilateral System’, supra note 25 at 81.

32 Ibid. at 81.

33 Schill, The Multilateralization of International Investment Law, supra note 2 at 305.

34 Ibid. at 312.

35 Commission, Jeffery P., ‘Precedent in Investment Treaty Arbitration’, 24(2) (2007), Journal of International Arbitration, 129 at 150–151Google Scholar. In 2006, ICSID awards on the merits of a dispute cited an average of 9.3 prior ICSID awards and decisions. Non-ICSID arbitral tribunals cited an average of 18.43 treaty awards and decisions per award.

36 Schill, The Multilateralization of International Investment Law, supra note 2 at 358.

37 Ibid. at 323.

38 Ibid. at 295.

39 Ibid. at 358.

40 Paparinskis, Martins, ‘Sources of Law and Arbitral Interpretations of Pari Materia Investment Protection Rules’, in Fauchald, Ole Kristian and Nollkaemper, André (eds.), The Practice of International and National Courts and the (De-)Fragmentation of International Law (Portland, OR: Hart Publishing, 2012), 87Google Scholar.

41 Ibid. at 97.

42 McLachlan, Campbell, ‘The Principle of Systemic Integration and Article 31(3)(c) of the Vienna Convention’, 54 (2005), International and Comparative Law Quarterly, 279 at 287CrossRefGoogle Scholar.

43 Paparinskis, ‘Sources of Law and Arbitral Interpretations of Pari Materia Investment Protection Rules’, supra note 40 at 90. Paparinskis notes the case of Siag v. Egypt, where the tribunal interpreted the meaning of ‘fair and equitable treatment’ in a 1989 BIT with reference to several post-2000 arbitral tribunal awards interpreting similar terms in BITs that were concluded from 1991 through 1996. Waguij Elie George Siag and Vecchi v. Arab Republic of Egypt, ICSID Case No. ARB/05/15, Award, 1 June 2009.

44 McLachlan persuasively argues that ‘parties’ in VCLT Article 31(3)(c) should be understood to encompass all parties to the governing treaty, rather than merely the parties to the dispute at hand. This is consistent with the definition of ‘party’ in VCLT Article 2 and because VCLT Article 31 ‘is concerned with the promulgation of a general rule, which would apply to the interpretation of a treaty irrespective of whether any particular parties to it may happen to be in dispute’. McLachlan, ‘The Principle of Systemic Integration and Article 31(3)(c) of the Vienna Convention’, supra note 42 at 315.

45 Another interpretive approach enabling dialogue between arbitral tribunals and promoting harmonization in the jurisprudence across BITs is recourse to general principles of law. Schill, Stephan, ‘General Principles of Law and International Investment Law’ in Gazzini, Tarcisio and Brabandere, Eric De, International Investment Law: The Sources of Rights and Obligations (Leiden: Martinis Nijhoff, 2012), 133–181CrossRefGoogle Scholar. Article 31(3)(c) of the VCLT requires that a treaty be interpreted in light of all relevant rules of international law applicable between the parties. One source of the rules of international law set out in Article 38(1)(c) of the Statute of the International Court of Justice is ‘general principles of law’. An arbitral tribunal can properly consider general principles of law that are relevant to the treaty obligations under interpretation. In doing so, it may look to earlier arbitral decisions, including decisions arising under different BITs, to help determine the existence of a general principle of law or to draw upon an articulation of a recognized general principle of law. See Duke Energy International Peru Investment No. 1, Ltd v. Republic of Peru, ICSID Case No. ARB/03/28, Annulment Proceeding, Decision of the Ad Hoc Committee, 1 March 2012 at paras. 87–88. This interpretive strategy creates a harmonizing dialogue between arbitral tribunals, but does not strictly constitute cross-treaty interpretation. By considering past arbitral jurisprudence on general principles of law, a tribunal would not be relying upon the interpretation of another BIT, but on a past tribunal's articulation of general principles of law, a source of law that is not confined to a particular treaty relationship. It must also be noted that tribunals seldom make recourse to general principles of law as an interpretive strategy. In a study of over 100 ICSID decisions, Fauchald found that tribunals invoked general principles of law as an interpretive argument in only four cases. Fauchald, Ole Kristian, ‘The Legal Reasoning of ICSID Tribunals – An Empirical Analysis’, 19(2) (2008), European Journal of International Law, 301CrossRefGoogle Scholar at 326. The harmonizing force of this interpretive approach may therefore be attenuated.

46 Paparinskis, ‘Sources of Law and Arbitral Interpretations of Pari Materia Investment Protection Rules’, supra note 40 at 110.

47 Saipem SpA v. People's Republic of Bangladesh, ICSID Case No. ARB/05/07, Decision on Jurisdiction and Recommendation on Provisional Measures, 21 March 2007 at para. 67.

48 Schill, The Multilateralization of International Investment Law, supra note 2 at 359.

49 Christoph H. Shreuer, ‘Diversity and Harmonization of Treaty Interpretation in Investment Arbitration’ (2006) Transnational Dispute Management at 7, online: www.univie.ac.at/intlaw/pdf/cspubl_85.pdf.

50 Schill, The Multilateralization of International Investment Law, supra note 2 at 332.

51 Because there is no rule of stare decisis at international law, or in the ICSID convention, there is also no legal basis to expect an ICSID tribunal to follow the decisions of a prior ICSID tribunal interpreting the same BIT.

52 Commission, ‘Precedent in Investment Treaty Arbitration’, supra note 35 at 137–139; see also Cheng, Tai-Heng, ‘Precedent and Control in Investment Treaty Arbitration’, 30 (4) (2006), Fordham International Law Journal, 1014 at 1047Google Scholar (arguing that as the diversity of arbitrators increases, the system of precedent in investment arbitration may come under pressure). But see Schill, The Multilateralization of International Investment Law, supra note 2 at 287 (disagreeing with the weight that Commission attaches to the esprit de corps among ICSID arbitrators).

53 Commission, ‘Precedent in Investment Treaty Arbitration’, supra note 35 at 137.

54 Ibid. at 150–151.

55 Interstate dispute settlement, where the complainant and responding party are both states, is distinct from dispute settlement involving a state and a private actor, such as investor–state dispute settlement that is a standard feature of BITs. Under some PTAs, private actors may have standing to bring a claim against a state party to the PTA. For example, private actors may challenge a state party's antidumping and countervailing duty determinations under Chapter 19 of NAFTA. However, the primary mode of dispute settlement provided for under PTAs is interstate in nature; similarly at the WTO, dispute settlement is strictly interstate. This paper therefore focuses on the likelihood of cross-treaty interpretation emerging through interstate dispute settlement in the trade regime.

56 Davey, William J., ‘Dispute Settlement in the WTO and RTAs’, in Bartels, Lorand and Ortino, Federico (eds.), Regional Trade Agreements and the WTO Legal System (New York: Oxford University Press, 2006), 343 at 349CrossRefGoogle Scholar.

57 Porges, Amelia, ‘Dispute Settlement’, in Maur, Jean-Christophe and Chauffor, Jean-Pierre (eds.), Preferential Trade Agreement Policies for Development: A Handbook (Washington, DC: World Bank, 2011), 467CrossRefGoogle Scholar at 473.

58 Ibid. at 492.

59 Dispute settlement before the ATJ is overwhelmingly concentrated in the area of intellectual property and therefore makes only a narrow contribution to international trade law jurisprudence. Porges, ‘Dispute Settlement’, supra note 57 at 492.

60 It should be noted that much of the dispute settlement activity before the ECJ and ATJ is not interstate in nature. The relatively high level of activity before these institutions is due to mechanisms enabling private litigants to pursue complaints and national courts to submit reference questions on regional treaty obligations. See Mattli, Walter and Slaughter, Anne-Marie, ‘Revisiting the European Court of Justice’, 51(1) (1998), International Organization, 186Google Scholar; Helfer, Laurence R. and Alter, Karen J., ‘The Andean Tribunal and Its Interlocutors: Understanding Preliminary Reference Patterns in the Andean Community’, 41 (2009), NYU Journal of International Law and Politics, 871Google Scholar at 873–877.

61 Porges, ‘Dispute Settlement’, supra note 57 at 492.

62 For statistical analyses of GATT/WTO dispute settlement, see Busch, Marc L. and Reinhardt, Eric, ‘The Evolution of GATT/WTO Dispute Settlement’, in Curtis, John M. and Ciuriak, Dan (eds.), Trade Policy Research 2003 (Ottawa: Minister of Public Works and Government Services, 2003), 143–183Google Scholar; Leitner, Kara and Lester, Simon, ‘WTO Dispute Settlement 1995–2011 – A Statistical Analysis’, 15(1) (2012), Journal of International Economic Law, 315CrossRefGoogle Scholar.

63 Porges, ‘Dispute Settlement’, supra note 57 at 471. PTAs such as ASEAN, SACU, and the European Economic Partnership Agreements (EPAs) have all moved to rule-based dispute settlement modeled on the WTO DSU.

64 Ibid. at 492.

65 See text accompanying note 21.

66 WTO, World Trade Report, supra note 15 at 131.

67 Pauwelyn, Joost, ‘How to Win a World Trade Organization Dispute Based on Non-World Trade Organization Law: Questions of Jurisdiction and Merits’, 37(6) (2003), Journal of World Trade, 997Google Scholar [Pauwelyn, ‘Non-WTO Law’]; Van Damme, Isabelle, ‘What Role is there for Regional International Law in the Interpretation of the WTO Agreements?’, in Bartels, Lorand and Ortino, Federico (eds.), Regional Trade Agreements and the WTO Legal System (New York: Oxford University Press, 2006), 553 at 575CrossRefGoogle Scholar.

68 United States – Tax Treatment for ‘Foreign Sales Corporations’ (Article 21.5 – EC) (2005), WTO Doc. WT/DS108/AB/RW2, at para. 143 n. 123 (Appellate Body Report) [US–Foreign Sourced Income].

69 Mexico – Tax Measures on Soft Drinks and Other Beverages (2006) WT/DS308/AB/R (Appellate Body Report), at para. 54 [Mexico–Taxes on Soft Drinks]. This case involved a US challenge of Mexican taxes on soft drinks, which were imposed following a longstanding and unresolved dispute over US obligations under NAFTA. Mexico unsuccessfully argued that the WTO panel should have declined to exercise jurisdiction over the dispute in favour of a NAFTA panel.

70 Busch, Marc L., ‘Overlapping Institutions, Forum Shopping, and Dispute Settlement in International Trade’, 61 (2007), International Organization, 735 at 742CrossRefGoogle Scholar.

71 See text accompanying notes 55 through 62.

72 European Communities – Regime for the Importation, Sale and Distribution of Bananas (1997), WTO Doc. WT/DS27/AB/R at para. 170 n. 91 (Appellate Body Report) [EC–Bananas III]. The Appellate Body supported its interpretation of two provisions of the Lomé Convention dealing with the importation of bananas from ACP (African, Caribbean, and Pacific) states with reference to a decision of the European Court of Justice (ECJ) also interpreting the Lomé Convention.

73 United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services (2004), WTO Doc. WT/DS285/R at para. 6.473 n. 914 (Panel Report) [US–Gambling].

74 It must be noted that WTO panels and the Appellate Body have declined to consider the burgeoning jurisprudence arising from BIT or PTA-based investor–state dispute settlement proceedings. This may be because of the differing subject matter of trade and investment treaties, the non-interstate character of investor–state disputes, and the divergent professional backgrounds of investment arbitrators and trade dispute settlement panelists. See DiMascio and Pauwelyn, ‘Nondiscrimination in Trade and Investment Treaties’, supra note 4 at 59.

75 Busch, ‘Overlapping Institutions’, supra note 70 at 742.

76 Ibid.

77 While the potential for cross-treaty interpretation in interstate trade disputes is the focus of this paper, it should be noted that NAFTA investor–state panels regularly rely upon WTO jurisprudence. Voeten observes that about ‘25 percent of NAFTA panel review decisions make at least a passing reference to WTO decisions’. Voeten, Erik, ‘Borrowing and Nonborrowing among International Courts’, 39(2) (2010), The Journal of Legal Studies, 547 at 571CrossRefGoogle Scholar.

78 Interstate disputes involving the interpretation and application of NAFTA are governed by NAFTA Chapter 20. This chapter must be distinguished from the dispute settlement procedures available under NAFTA Chapters 11 and 19, which are not interstate in character and therefore not part of the body of interstate PTA jurisprudence with which this paper is concerned.

79 In re Cross-Border Trucking Services (Mexico v. United States) (2001), USA-MEX-98-2008-01 at paras. 262–270 (Chapter 20 Panel) [Cross Border Trucking Services].

80 Ibid. at para. 262.

81 In re US Safeguard Action Taken on Broom Corn Brooms from Mexico (Mexico v. United States) (1998), USA-97-2008-01 at paras. 53, 66–67, 69–72, 78 (Chapter 20 Panel) [Broom Corn Brooms].

82 Korea – Anti-Dumping Duties on Imports of Polyacetal Resins from the United States, ADP/92 (1993).

83 Broom Corn Brooms, supra note 81 at paras. 69–71.

84 Ibid. at para. 66.

85 Ibid. at para. 53.

86 In re Tariffs Applied by Canada to Certain US-Origin Agricultural Products (United States v Canada) (1996), CDA-95-2008-01 (Chapter 20 Panel) [US-Origin Agricultural Products].

87 Ibid. at para. 122 n. 109.

88 A further interpretive approach under the VCLT equally applicable in the trade and investment regimes is interpretation in light of general principles of law. See discussion at note 45.

89 See note 44 and accompanying text.

90 Mitchell, Andrew D. and Voon, Tania, ‘PTAs and Public International Law’, in Lester, Simon Nicholas and Mercurio, Bryan (eds.), Bilateral and Regional Trade Agreements: Commentary and Analysis (Cambridge: Cambridge University Press, 2009), 114 at 139CrossRefGoogle Scholar.

91 See European Communities – Measures Affecting the Approval and Marketing of Biotech Products (2006), WTO Doc. WT/DS291/R, WT/DS292/R, WT/DS293/R at para. 7.70 (Panel Report) [EC–Biotech] (holding that Article 31(3)(c) requires ‘consideration of those rules of international law which are applicable in the relations between all parties to the treaty which is being interpreted’). See also International Law Commission, ‘Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law’ (2006), UN Doc. A/CN.4/L.682 at para. 450 (commenting that the approach of the panel in EC–Biotech ‘makes it practically impossible ever to find a multilateral context where reference to other multilateral treaties as aids to interpretation under Article 31(3)(c) would be allowed’).

92 Davey, ‘Dispute Settlement in the WTO and RTAs’, supra note 56 at 355. Voeten views the relationship between the WTO and PTAs as creating an implicit ‘chain of delegation’, with the WTO at the top of the chain. Voeten, ‘Borrowing and Nonborrowing among International Courts’, supra note 77 at 566.

93 De facto hierarchies among formally equal international tribunals are a well-recognized phenomenon. In a study of cross-tribunal citation in international law, Miller found that over half of all references were to ICJ jurisprudence. Miller, Nathan, ‘An International Jurisprudence? The Operation of “Precedent” Across International Tribunals’, 15 (2002), Leiden Journal of International Law, 483 at 488CrossRefGoogle Scholar. See also Linton, Suzannah and Tiba, Firew Kebede, ‘The International Judge in an Age of Multiple International Courts and Tribunals’, 9 (2009), Chicago Journal of International Law, 407 at 418Google Scholar.

94 Commission, ‘Precedent in Investment Treaty Arbitration’, supra note 35 at 137–139.

95 See the text accompanying notes 52 and 53.

96 See text accompanying note 21.

97 Along similar lines, Weiler has argued that ‘it would not seem too much to ask that NAFTA awards be considered by WTO panels in the adoption of an inductive approach to as-of-yet “untested” GATS obligations’. Weiler, Todd, ‘NAFTA Article 1005 and the Principles of International Economic Law’, 42 (2003), Columbia Journal of Transnational Law, 35 at 73Google Scholar.

98 Franck notes that it is common practice in investment disputes ‘for private investors and governments to refer to prior investment tribunal decisions that appear to favour them, and it is inevitable that arbitral tribunals interpreting similar provisions of investment treaties will consider and follow those previous decisions’. Franck, ‘The Legitimacy Crisis in Investment Treaty Arbitration’, supra note 27 at 1612.

99 El Paso Energy International Company v. Argentina, ICSID Case No. ARB/03/15, Decision on Jurisdiction, 27 April 2006 [El Paso v. Argentina].

100 Ibid. at para. 39.

101 One exception to this is created by NAFTA Chapter 19, which enables industry groups to challenge anti-dumping and countervailing duty determinations of national authorities. However, these challenges do not involve the interpretation and application of NAFTA, but rather provide for review of national authority decisions according to domestic law.

102 See for example Baldwin, Richard, Evenett, Simon, and Low, Patrick, ‘Beyond Tariffs: Multilateralizating Non-Tariff RTA Commitments’, in Baldwin, Richard and Low, Patrick (eds.), Multilateralizing Regionalism: Challenges for the Global Trading System (Cambridge: Cambridge University Press, 2009), 79 at 81CrossRefGoogle Scholar; Pauwelyn, Joost, ‘Legal Avenues to “Multilateralizing Regionalism”: Beyond Article XXIV’, in Baldwin, Richard and Low, Patrick (eds.), Multilateralizing Regionalism: Challenges for the Global Trading System (Cambridge: Cambridge University Press, 2009), 368 at 394CrossRefGoogle Scholar [Pauwelyn, ‘Legal Avenues’].

103 Schill, The Multilateralization of International Investment Law, supra note 2 at 20.

104 Doctrine and state practice establish that there is a presumption in favour of the unconditional form where the treaty under interpretation does not specify whether the MFN clause is conditional or unconditional. International Law Commission, ‘Draft Articles on Most Favoured Nation Clauses with Commentaries’, Yearbook of the International Law Commission, 1978, Vol. II, Part Two at 37.

105 Schill, Stephan W., ‘Multilateralizing Investment Treaties through Most-Favoured-Nation Clauses’, 27(2) (2009), Berkeley Journal of International Law, 496 at 507Google Scholar [Schill, ‘Multilateralizing through MFN’].

106 Pauwelyn, Joost, ‘Multilateralizing Regionalism: What About an MFN Clause in Preferential Trade Agreements?’, 103 (2009), American Society for International Law Proceedings, 122Google Scholar at 122 [Pauwelyn, ‘MFN’].

107 MFN clauses are also prevalent in PTA investment chapters, which are functionally similar to BITs.

108 Alvarez and Sauvant observe that the model US BIT has evolved considerably over the past decades, but no effort has been made to revisit prior treaties to harmonize texts. Sauvant, Karl P. and Alvarez, José E, ‘Introduction’, in Sauvant, Karl P. and Alvarez, José E. (eds.), The Evolving International Investment Regime (New York: Oxford University Press, 2011), xxxiCrossRefGoogle Scholar at xl.

109 Schill, The Multilateralization of International Investment Law, supra note 2 at 20.

110 Expected investment returns must be discounted based on risk, which is impacted in part by the available level of investment protection in the host state. Because MFN clauses harmonize protection standards across bilateral relationships, potential market distortions based on the degree of investment protection afforded to investors under different BITs are avoided. See Schill, ‘Multilateralizing through MFN’, supra note 105 at 508.

111 Schill, ‘Multilateralizing through MFN’, supra note 105 at 504. The application of MFN clauses is limited by the scope of the treaty in which they are found. If a BIT does not address a particular issue area at all, then the MFN clause in that treaty cannot incorporate terms from other BITs dealing with that issue.

112 In contrast, tribunals have been sharply divided on whether MFN clauses entitle investors to the most favourable procedural protections available under other BITs signed by the host state. Muchlinski, Peter, ‘The Framework of Investment Protection: The Content of BITs’, in Sauvant, Karl P. and Sachs, Lisa E. (eds.), The Effect of Treaties on Foreign Direct Investment (Oxford: Oxford University Press, 2009), 37CrossRefGoogle Scholar at 53.

113 MTD Equity Sdn Bhd and MTD Chile SA v. Chile, ICSID Case No. ARB/01/7, Award, 25 May 2004 at paras. 104, 197, 206 [MTD v. Chile] (holding that the MFN clause under the Chilean–Malaysian BIT entitled the investor to rely upon Article 3(2) of the Chilean–Croatian BIT, which provided that when a party admitted an investment, it was required to grant the necessary permits in accordance with its laws and regulations).

114 Pope & Talbot Inc v. Canada (2001), Award on the Merits of Phase 2, 7 ICSID Rep 102 at paras. 108–09 (UNCITRAL) [Pope & Talbot v. Canada] (observing that if the minimum standard of treatment under NAFTA Article 1105(1) was interpreted more narrowly than in Canada's other BITs, investors would be entitled under NAFTA's Article 1103 MFN guarantee to invoke the most expansive articulation of the minimum standard of treatment accorded by Canada in any of its BITs).

115 Rumeli Telekom AS and Telsim Mobil Telekomikasyon Hizmetleri AS v. Kazakhstan (2008), ICSID Case No. ARM/05/16, Award, 29 July 2008 at para. 575 [Rumeli v. Kazakhstan] (noting, in a dispute arising under the Turkey–Kazakhstan BIT, that the ‘parties agree that in view of the MFN clause contained in the BIT, Respondent's international obligations assumed in other bilateral treaties, and in particular the United Kingdom–Kazakhstan BIT, are applicable to this case’).

116 ATA Construction, Industrial and Trading Company v. The Hashemite Kingdom of Jordan, ICSID Case No. ARB/08/2), Award, 18 May 2010 at para. 125 n. 16 [ATA v. Jordan] (observing, in a dispute under the Turkey–Jordan BIT, that by virtue of the MFN clause in the BIT, Jordan assumed the obligation to accord the Turkish investor's investment fair and equitable treatment, guaranteed in the UK–Jordan BIT, and treatment no less favourable than that required by international law, guaranteed in the Spain–Jordan BIT).

117 White Industries Australia Limited v. India, UNCITRAL (India–Australia BIT), Award, 30 Nov 30 2011 at paras. 11.2.1–11.2.9 [White Industries v. India]. In White Industries v. India, the tribunal held that pursuant to the MFN clause in the Australia–India BIT, India was obliged to provide to the Australian investor ‘effective means of asserting claims and enforcing rights’, as guaranteed under the India–Kuwait BIT. The tribunal rejected India's argument that this subverted the negotiated balance of the governing BIT, finding instead that ‘it achieves exactly the result which the parties intended by the incorporation in the BIT of an MFN clause’. The tribunal explained that there is no class of provisions of the treaty that are per se immune from an MFN obligation, unless they can be read within the treaty as constituting an exception to MFN treatment.

118 See Annex III(1) of Canada's Model Foreign Investment Promotion and Protection Agreement, online: www.international.gc.ca/trade-agreements-accords-commerciaux/assets/pdfs/2004-FIPA-model-en.pdf.

119 For example, a 1778 trade treaty between the US and France included a conditional MFN clause, providing that ‘if the United States made new concessions to any third party, France could receive these concessions only when it provided the United States compensation which would be equivalent to that offered to the United States by the third party’. Akiko Yanai, ‘The Function of the MFN clause in the Global Trading System’ (2002), Working Paper Series 01/02 – No. 3, Institute for Development Economies APEC Study Center at 8, online: www.ide.go.jp/English/Publish/Download/Apec/pdf/2001_15.pdf.

120 Schill, ‘Multilateralizing through MFN’, supra note 105 at 511.

121 Yanai, ‘The Function of the MFN clause in the Global Trading System’, supra note 119 at 11.

122 Ibid.

123 International Law Commission, ‘Draft Articles on Most Favoured Nation Clauses with Commentaries’, Yearbook of the International Law Commission, 1978, Vol. II, Part Two at 33.

124 Schill, ‘Multilateralizing through MFN’, supra note 105 at 512 n. 54

125 Yanai, ‘The Function of the MFN clause in the Global Trading System’, supra note 119 at 12.

126 Ibid. at 13.

127 Ibid.

128 Article 19(1) of the EC–CARIFORUM EPA is illustrative. This provision imposes a simple unconditional MFN obligation on the EC, which ‘shall accord to the CARIFORUM States any more favourable treatment applicable as a result of the EC Party becoming party to a free trade agreement with third parties after the signature of this Agreement’. Economic Partnership Agreement, CARIFORUM states and the European Community and its Member States, 15 October 2008, Official Journal of the European Union, No. L 289/I/3, 30.10.2008, online: http://trade.ec.europa.eu/doclib/docs/2008/february/tradoc_137971.pdf [EC–CAIRFORUM EPA].

129 EC–CARIFORUM EPA, supra note 128, Article 19(2).

130 A major trading economy is defined in the EPAs as a country having a greater than 1% share in world exports or a group of countries collectively having over a 1.5% share of world exports. EC–CARIFORUM EPA, supra note 128, Article 19(4).

131 Pauwelyn, ‘MFN’, supra note 106 at 123.

132 See Hovius, Christopher and Oettli, Jean-René, ‘Measuring the Challenge: The Most-Favoured Treatment Clause in the Economic Partnership Agreements between the European Community and Africa, Caribbean and Pacific Countries’, 45(3) (2012), Journal of World Trade, 553Google Scholar; Pauwelyn, ‘MFN’, supra note 106 at 123.

133 Inter Press Service, ‘We Are Generous but Not Naïve: Interview with Louis Michel, EU Development Commissioner’, 11 January 2008, online: http://ipsnews.net/news.asp?idnews=40762.

134 Pauwelyn, ‘MFN’, supra note 106 at 123. But note that this similarity across BITs may itself be driven by the prevalence of MFN clauses, since these clauses would in any case undo substantive variations in investment protection, elevating all MFN beneficiary states to the highest level of protection accorded to any state.

135 Tobin, Jennifer L. and Busch, Marc L., ‘A BIT is Better than a Lot: Bilateral Investment Treaties and Preferential Trade Agreements’, 62(1) (2010), World Politics, 1CrossRefGoogle Scholar.

136 Pauwelyn, ‘MFN’, supra note 106 at 123.

137 Pauwelyn, ‘Legal Avenues’, supra note 102 at 394.

138 Fink, Carsten and Jansen, Marion, ‘Services Provisions in Regional Trade Agreements: Stumbling Blocks or Building Blocks for Multilateral Liberalization?’, in Baldwin, Richard and Low, Patrick (eds.), Multilateralizing Regionalism: Challenges for the Global Trading System (Cambridge: Cambridge University Press, 2009), 221CrossRefGoogle Scholar at 247.

139 Pauwelyn, ‘MFN’, supra note 106 at 122.

140 Baldwin, Evenett, and Low, ‘Beyond Tariffs: Multilateralizating Non-Tariff RTA Commitments’, supra note 102 at 96.

141 Given that the EC is liberalizing essentially all trade with the ACP states and not demanding full-reciprocity from EPA partners, it is unclear what trade-based concessions the EC could subsequently offer EPA partners to secure additional liberalization in future.

142 For example, a report published by the Overseas Development Institute (ODI) and European Centre for Development Policy Management (ECPDM) concludes that the MFN clauses in the recent EPAs negotiated between the EC and ACP states would apply to rules of origin for trade in goods. These MFN provisions state that they apply to the subject matter of the chapter in which they are found, and this chapter includes rules of origin. Consequently, if the EU offers less constraining rules of origin to a third party in a future agreement, it would also have to extend these favourable rules to its EPA partners. ODI and ECPDM, ‘The New EPAs: Comparative Analysis of Their Content and the Challenges for 2008’ (31 March 2008) at 59, online:www.odi.org.uk/resources/details.asp?id=1139&title=epas-comparativeanalysis-tasks-2008.

143 Trachtman, Joel P., ‘International trade: regionalism’, in Guzman, Andrew T. and Sykes, Alan O. (eds.), Research Handbook in International Economic Law (Northampton, MA: Edward Elgar, 2007), 151Google Scholar at 160.

144 One way to preserve the potential for innovative small country PTAs is to include a market size requirement for an unconditional MFN clause to be triggered, as has been done by the EC in the recent EPAs. See text accompanying notes 128 through 130.

145 Pauwelyn, ‘MFN’, supra note 106 at 123.

146 Schill, The Multilateralization of International Investment Law, supra note 2.