In Most-Favored-Nation (“MFN”) clauses, host states give investors a guarantee of treatment in line with the most-favorable standard of treatment the host state has agreed to in investment treaties with third states. The question of whether MFN clauses in bilateral investment treaties (“BITs”) can be used to access more favorable dispute resolution mechanisms under third-party treaties remains highly contested in international investment law. On 26 June 2026, the Swedish Supreme Court (“Högsta domstolen”) handed down a landmark ruling in Case T 9380-24 (Okuashvili v. Georgia), holding that an MFN clause can extend to dispute resolution provisions and thereby enable an investor to change the arbitral forum. The decision is of considerable practical significance for German companies and investors with cross-border investments.
Overview of the key findings
- MFN clause applies to dispute resolution: Where an MFN clause expressly covers the dispute resolution article of a BIT, it extends to the substantive content of that article, including the choice of arbitral forum.
- Change of arbitral forum permitted: An investor may rely on an MFN clause to invoke a more favorable dispute resolution mechanism from a comparator treaty, including access to a different arbitral institution.
- Objective and holistic comparison: An objective and holistic assessment of which dispute resolution mechanism is “more favorable” is needed; a treaty offering a choice of several fora is generally more favorable than one limited to a single forum.
- No cherry-picking (whole-mechanism approach): If the comparator treaty’s dispute-resolution mechanism is more favorable overall, it must be imported in its entirety, including conditions that may be more burdensome.
- State consent through MFN clauses: A state can validly consent to arbitration through the combined reading of an MFN clause and the dispute resolution clause of a comparator treaty, provided the consent is unambiguous.
- De novo review by national courts: The Swedish Supreme Court reviewed the jurisdictional question independently and without deference to the arbitral tribunal’s prior decision.
Background and facts
The underlying dispute relates to the forced closure and seizure of a tobacco business. Disputes related to foreclosures and seizures are frequently encountered by foreign investors in emerging markets, including German companies. The claimant, Zaza Okuashvili, is a dual Georgian-British national who owned companies in Georgia, including the tobacco company Omega Tobacco. He alleged that Georgian authorities treated his investments in violation of the bilateral investment treaty between the United Kingdom and Georgia (“UK-Georgia BIT”).
Article 8 of the UK-Georgia BIT provides exclusively for arbitration before the International Centre for Settlement of Investment Disputes (“ICSID”). However, as a Georgian national, Okuashvili was precluded from bringing an ICSID claim against his own state under Article 25(2)(a) of the ICSID Convention, which excludes (dual) nationals from raising claims against the state of which they are a national.
Article 3 of the UK-Georgia BIT contains an MFN clause. MFN clauses require the host state to afford the most-favorable treatment to investors available under investment treaties concluded with third states. Georgia is a party to another BIT with the Belgium-Luxembourg Economic Union (“BLEU-Georgia BIT”). Article 10 of the BLEU-Georgia BIT offers investors a choice between ICSID, International Chamber of Commerce (“ICC”), and Stockholm Chamber of Commerce (“SCC”) arbitration. As Okuashvili was unable to access ICSID arbitration, he initiated arbitration at the SCC, invoking the MFN clause in Article 3 of the UK-Georgia BIT to import the dispute resolution provision of the BLEU-Georgia BIT.
The SCC tribunal (chaired by Georgios Petrochilos, with Giorgio Mandelli and Rolf Knieper as co-arbitrators and the latter dissenting) upheld jurisdiction in a 2022 partial final award. The Svea Court of Appeal subsequently set aside the award, finding that the MFN clause could not extend to dispute settlement. The Swedish Supreme Court has now reversed the Court of Appeal’s decision.
Does an MFN clause extend to dispute resolution?
Article 3(3) of the UK-Georgia BIT expressly states that the MFN obligation applies to Articles 1 through 11 of the treaty. Since Article 8 governs dispute resolution, the MFN clause, by its own terms, covers the dispute resolution mechanism. The Court emphasized the phrase “[f]or the avoidance of doubt it is confirmed that the treatment provided for in [paragraphs 1 and 2] above shall apply to the provisions of Articles 1 to 11 of this Agreement,” which leaves no room for an interpretation that would exclude dispute settlement from the MFN obligation’s scope.
This formulation corresponds to the UK Model BIT, which was deliberately drafted to extend MFN treatment to procedural provisions. The same “for the avoidance of doubt” language can be found in numerous UK BITs with countries in which German companies also hold substantial investments. Where the applicability of the MFN clause to dispute resolution is thus textually settled, the analytical focus will potentially shift to the scope of its application.
Can the MFN clause lead to a change of arbitral forum?
The Swedish Supreme Court found no limitations in the MFN clause’s wording, or in the treaty’s object and purpose, that would prevent the clause from operating to change the arbitral forum. The Court applied the principle of effectiveness (effet utile): if the MFN clause expressly covers Article 8, it should apply to the main content of that article – the choice of forum – rather than being limited to subsidiary elements such as waiting periods or notice requirements.
Furthermore, the Court applied the ejusdem generis principle and held that it was satisfied: both the UK-Georgia BIT (basic treaty) and the BLEU-Georgia BIT (comparator treaty) are investment treaties containing investor-state dispute resolution provisions referring to established international arbitral institutions. ICSID and SCC are of the same “kind” or “genus” for the purposes of this analysis.
Which dispute resolution mechanism is more favorable?
The Swedish Supreme Court established that dispute resolution mechanisms must be compared objectively; that is, by reference to the class of investors generally covered by the treaty, and not by reference to the specific circumstances or preferences of the individual claimant. The decisive question is whether a hypothetical investor would consider the comparator treaty’s mechanism more favorable.
Applying this standard, the Court concluded that the BLEU-Georgia BIT is more favorable because it provides a choice between three arbitral institutions (ICSID, ICC, and SCC), whereas the UK-Georgia BIT is limited to a single forum (ICSID). A mechanism that offers multiple fora is inherently more favorable than one restricted to a single option, particularly where the single option is itself among the choices available under the comparator treaty.
The whole-mechanism approach: No cherry-picking
A critical aspect of the ruling is the Court’s adoption of the “whole-mechanism approach.” If the comparator treaty’s dispute resolution provisions are more favorable overall, the investor must accept that mechanism in its entirety, including conditions that may be more burdensome than those in the basic treaty. In the present case, this means that while the BLEU-Georgia BIT offers a choice of fora, it also imposes a longer six-month cooling-off period and requires a detailed written notification – conditions absent from the UK-Georgia BIT.
The Court reasoned that permitting investors to import only the favorable elements of a comparator treaty would grant them treatment more favorable than that provided by any single treaty – a result not contemplated by the MFN standard, which guarantees treatment no less favorable, not treatment that is a composite of the best elements from multiple treaties.
State consent to arbitration through MFN clauses
One of the most contentious doctrinal questions addressed by the Court is whether a state can be said to have “consented” to arbitration solely through the operation of an MFN clause. The Court held that it can: if the MFN clause, read together with the dispute resolution clause of the comparator treaty, yields an unambiguous basis for arbitration, no additional express consent is required in the basic treaty.
The Court characterized this as a foreseeable consequence of a state’s own treaty-making actions. By entering into the basic treaty with a broad MFN clause that covers dispute resolution, and simultaneously maintaining a comparator treaty with broader arbitral access, the state has created the conditions for the MFN clause to operate. This is not a case of “imposing” arbitration on an unwilling state but rather giving effect to the state’s own commitments under international law.
Existing jurisprudence and scholarly debate
The question of whether MFN clauses extend to dispute resolution provisions has been at the center of one of the most prominent doctrinal debates in international investment law since the ICSID tribunal’s seminal decision in Maffezini v. Spain (ICSID Case No. ARB/97/7, Decision on Jurisdiction, 25 January 2000).
The Maffezini line (pro-MFN application): In Maffezini, the tribunal held that an investor could use an MFN clause to bypass a requirement to submit disputes to local courts before commencing arbitration. However, the Maffezini tribunal itself identified important limitations, including that MFN clauses should not overcome the choice of a particular arbitration forum. Subsequent tribunals followed and expanded the Maffezini rationale. Notably, several of these cases involved German companies relying on the Germany-Argentina BIT: the tribunals in Siemens v. Argentina (ICSID Case No. ARB/02/8) and Hochtief v. Argentina (ICSID Case No. ARB/07/31) endorsed the application of MFN clauses to dispute settlement provisions. Other decisions in this line include Gas Natural v. Argentina, Suez v. Argentina, Impregilo v. Argentina, National Grid v. Argentina, and RosInvestCo v. Russia.
The Plama line (restrictive approach): In contrast, the tribunal in Plama v. Bulgaria (ICSID Case No. ARB/03/24) adopted a highly restrictive position, requiring that dispute resolution provisions be explicitly included in the MFN clause’s scope and emphasizing concerns about undermining carefully negotiated dispute resolution compromises. This approach was followed in Salini v. Jordan and Telenor v. Hungary. Cases involving German companies illustrate the divide: the tribunals in Wintershall v. Argentina (ICSID Case No. ARB/04/14) and Daimler Financial Services v. Argentina (ICSID Case No. ARB/05/1) – both interpreting the same Germany-Argentina BIT – rejected the application of MFN clauses to dispute settlement, reaching the opposite conclusion from Siemens and Hochtief on essentially the same treaty provision.
The Swedish Supreme Court’s contribution: The Okuashvili ruling marks the first time a national supreme court has squarely addressed the question of whether an MFN clause can effect a change of arbitral forum. Notably, the Court goes beyond the Maffezini tribunal’s own limitation: whereas Maffezini listed the “choice of a particular arbitration forum” as an aspect of dispute resolution that could not be overcome through an MFN clause, the Swedish Supreme Court holds that – where the clause expressly covers dispute resolution – such a limitation does not follow from the treaty text in question or its object and purpose.
Scholarly context. The decision engages with a rich body of scholarly commentary. The doctrinal approach distinguishes between matters of admissibility (e.g. waiting periods, prior litigation requirements) – which may be overcome through MFN clauses – and matters of jurisdiction (ratione personae, ratione materiae, ratione temporis, ratione voluntatis) – which generally may not (see also Ebert, Forum Shopping in International Investment Law, Tübingen 2017, pp. 443-471). The question of whether an arbitral forum may be changed touches on ratione voluntatis (the scope of the state’s consent to arbitrate). The Swedish Supreme Court’s ruling resolves this tension pragmatically: where the MFN clause unambiguously covers dispute resolution and the state’s consent can be constructed from the combined reading of the basic treaty’s MFN clause and the comparator treaty’s arbitration provision, a change of forum is permissible. This aligns with commentators like Schill, who advocates broad MFN application to jurisdictional matters (Schill, 10 (2) The Journal of World Investment & Trade 189 (2009)), and stands in contrast to Douglas, who has argued that MFN-based jurisdiction undermines the validity of the arbitration agreement (Douglas, 2 (1) Journal of International Dispute Settlement 97 (2011)). The Siemens case – decided by a tribunal that included the late Professor Domingo Bello Janeiro, who had previously sat on the Daimler Financial Services v. Argentina tribunal and notably changed his position – illustrates the depth of disagreement even among experienced arbitrators.
Practical implications and takeaways
The Swedish Supreme Court’s ruling has significant practical implications for both investors and states:
- Broader access to arbitration: Investors covered by BITs with broad MFN clauses may now have access to a wider range of arbitral fora than those expressly provided in their basic treaty. This is particularly relevant for German investors who may face limitations under certain German BITs – such as the former 18-month prior-litigation requirement in the Germany-Argentina BIT – or who hold dual nationality. The ruling opens the door to invoking more favorable dispute resolution mechanisms available under other BITs concluded by the host state.
- Impact on SCC arbitration: Given that the SCC is one of the leading institutions for investor-state arbitration, this ruling – rendered by the Swedish Supreme Court – will carry particular weight in cases seated in Sweden and may encourage claimants to bring MFN-based forum challenges before the SCC.
- Whole-mechanism approach as safeguard: The no-cherry-picking rule ensures that forum shopping through MFN clauses remains bounded. Investors cannot combine the most favorable procedural elements from multiple treaties but must accept the comparator treaty’s mechanism wholesale, including any more burdensome conditions.
- Treaty drafting implications: States wishing to prevent the application of MFN clauses to dispute resolution must draft explicit exclusions. Broad MFN clauses that cover all treaty articles — particularly those following the UK Model BIT — are now likely to be interpreted as extending to forum selection.
- De novo judicial review: The Court’s willingness to review the jurisdictional question independently and without deference to the arbitral tribunal confirms that Swedish courts exercise a full standard of review in set-aside proceedings concerning legal questions of jurisdiction.
Conclusion
The Swedish Supreme Court’s ruling in Okuashvili v. Georgia is a milestone in the long-standing debate on the application of MFN clauses to dispute resolution provisions in investment treaties. By affirming that an MFN clause can effect a change of the arbitral forum – while simultaneously requiring that the comparator treaty’s mechanism be imported in its entirety – the Court strikes a balance between investor protection and the integrity of state consent.
The decision provides a high degree of clarity and legal certainty for practitioners. It establishes that the critical factors are (i) whether the MFN clause textually covers dispute resolution, (ii) whether the ejusdem generis requirement is met, (iii) whether the comparison is conducted objectively and holistically, and (iv) whether consent can be constructed unambiguously from the combined treaty provisions. For German companies with international investments, a thorough review of existing BIT coverage is recommended, particularly in jurisdictions where the host state has entered into multiple BITs with varying dispute resolution mechanisms. Companies should assess whether MFN clauses in their applicable BITs may provide access to more favorable arbitration options, and conversely, whether their exposure as respondents (e.g. in inbound investment scenarios or state-owned enterprise disputes) requires attention. States that wish to limit MFN-based forum shopping should consider renegotiating or amending their treaties to include explicit carve-outs for dispute resolution mechanisms. We are happy to assist with the review of BIT coverage and the strategic assessment of dispute resolution options.
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