Domestic Jurisprudence

The application of MFN clauses to dispute settlement provisions has been rejected by a number of domestic tribunals, for example in the Braunkohlen Brikett Verkaufsverein Ge-sellschaft v. Goffart, ès qual Case, the Lloyds Bank v. De Ricqlès and De Gaillard Case and the National Provincial Bank v. Dollfus Case. However, the reasoning barring the application of the relevant MFN clauses in these three cases does not argue against its ap-plication to procedural and jurisdictional questions in investment disputes.

In the Braunkohlen Brikett Verkaufsverein Gesellschaft v. Goffart, ès qual case, the Cour de Cassation offered an interpretation of the MFN clause of the Peace Treaty of Frankfurt of 1871, stipulating that the basis of the commercial relations between France and Ger-many should be most-favoured-nation treatment, which should comprise the entry and exit, customary formalities, the admission and the treatment of the subjects of the two na-tions.⁵⁰¹ It was questionable whether German nationals could, on the basis of this clause, invoke concessions granted to Switzerland in matters of procedure and judicial compe-tence in a Treaty concluded by France and Switzerland in 1869. The Claimants sought to

500 For a detailed overview, see Decisions of national courts relating to the most-favoured-nation clause, digest prepared by the Secretariat, Yearbook of the International Law Commission (1973), vol. II, UN Document A/CN.4/269.

501 Article 11 of the Treaty of Frankfurt provided:

(1) […] le gouvernement français et le gouvernement allemand prendront pour base de leurs relations com-merciales le régime du traitement réciproque sur le pied de la nation la plus favorisée.

(2) Sont compris dans cette règle les droits d’entrée et de sortie, le transit, les formalités douanières, l’admission et le traitement des sujets des deux nations ainsi que de leurs agents.

avoid the procurement of a cautio judicatum solvi⁵⁰² and evade the jurisdiction of French courts by invoking the MFN clause in the Treaty of Frankfurt in connection with a provi-sion in a French-Swiss Treaty according to which certain matters between French and Swiss subjects had to be tried before tribunals in the home State of the defendant. The Court held that while the Treaty of Frankfurt concerned the commercial relations between France and Germany, it did not in any way touch upon questions of competence and of procedure that may be applicable in case of commercial disputes.⁵⁰³ In contrast, the Con-vention between Switzerland and France had the specific purpose of regulating the com-petence of the judiciary.⁵⁰⁴ Since the subject-matters of the treaties were different, the Claimant could not invoke jurisdictional provisions from the French-Swiss Treaty.⁵⁰⁵ The court held that

“The most favoured nation clause may be invoked only if the subject of the treaty stipulation is identical to that of the particularly favourable treaty the benefit of which is claimed.”⁵⁰⁶

In the Lloyds Bank v. De Ricqlès and De Gaillard case, the plaintiff, in order to avoid the payment of security for costs (cautio iudicatum solvi), invoked the MFN clause of an An-glo-French Convention of 1882 which, according to the Preamble, regulated the “com-mercial and maritime relations of the two countries, as well as the status of their sub-jects”, and contained a most-favoured-nation clause applying to “matters of commerce or industry”. On the basis of this clause, Lloyds Bank claimed the benefit of the provisions of a Franco-Swiss Treaty, which waived the requirement of giving security for costs for Swiss nationals intending to bring suit in France. The court rejected this claim, holding that a party to a convention of a general character such as the Anglo-French Convention

502 The cautio judicatum solvi was a security that a foreign Claimant who sued against a French de-fendant had to furnish under French law in order to provide security for the costs of the dede-fendant in case they lost their case, see Beale, Harvard Law Review 26 (1913), 196.

503 Braunkohlen Briket Verkaufsverein Gesellschaft v. Goffart, ès qual., Recueil Dalloz 1915, p. 4.

504 Braunkohlen Briket Verkaufsverein Gesellschaft v. Goffart, ès qual., Recueil Dalloz 1915, p. 4.

505 Braunkohlen Briket Verkaufsverein Gesellschaft v. Goffart, ès qual., Recueil Dalloz 1915, p. 4.

506 Braunkohlen Briket Verkaufsverein Gesellschaft v. Goffart, ès qual., Recueil Dalloz 1915, p. 1 (author’s translation).

131 regulating the commercial and maritime relations of the two countries could not claim under the MFN clause of that convention the benefits of a special convention such as the Franco-Swiss Convention, which dealt with one particular subject, namely freedom from the obligation to give security for costs.

The National Provincial Bank v. Dollfus case involved the attempt of the Claimant to evade the jurisdiction of French Courts by operation of the MFN clause contained in the Anglo-French Convention of 1882 which had already been at issue in the Lloyds Bank case. The court held that

“[…] a most-favoured-nation clause can only be invoked if the subject matter of the treaty containing it is identical with that of the particularly favourable treaty the benefit of which is claimed. In the Franco-British Convention of 1882 the most-favoured-nation clause is not made applicable in any general manner, but only in regard to the special matters enumerated therein. […] As the Franco-British Con-vention of 1882 did not deal with questions of jurisdiction and procedure, it cannot permit a British subject, by the application of a most-favoured-nation clause, to claim the benefit of a Treaty between France and a third country relating to these matters.”⁵⁰⁷

The reasoning barring the application of the relevant MFN clauses in these three cases cannot be transferred to those at issue in the investment disputes examined below. In all three cases, the invocation of the MFN clause was rejected due to the different nature and content of the basic treaty and the third-party treaty. While those treaties containing the most-favoured-nation clause regulated general commercial questions without referring to dispute settlement questions, the relevant third-party treaties dealt with the competence of the judiciary and the execution of judgments in civil and commercial matters or with the waiver of the procedural requirement of security for costs respectively. Thus, the cases exemplify the rule that the scope of most-favoured-nation clauses is limited ratione

507 Case decided by the Court of Appeal of Paris on July 9, 1947, see H. Lauterpacht (ed.), Annual Digest of Public International Law Cases, Year 1947, vol 14 (1951), Case No. 79, 166.

riae to the subject-matter of the relevant treaty. In contrast, the subject-matters of invest-ment treaties are comparable as long as the basic treaty and the third-party treaty both deal with dispute settlement. What the cases illustrate is that if the basic treaty does not at all make reference to a certain treatment standard, the application of the clause to such treaty standard is not implied from the subject-matter of the clause. The only comparable situation in which the domestic cases could offer guidance would therefore be in case of invocation of dispute settlement provisions in a third-party BIT where the basic treaty containing the MFN clause would contain no dispute settlement provisions at all.