The Swedish Supreme Court takes a stance on the procedural application of an MFN clause

On 26 June 2026, the Swedish Supreme Court delivered a judgment in case T 9380-24 concerning the procedural application of a most-favoured-nation (“MFN”) clause in an international investment dispute between an investor and a state. The Supreme Court held that, depending on the wording of the investment treaty, an MFN clause may extend to dispute resolution and be used to change dispute resolution mechanism, thereby forming part of the basis for an arbitral tribunal’s jurisdiction.

Background to the case

Pursuant to a bilateral investment treaty between the United Kingdom (the “UK”) and Georgia (the “Investment Treaty”), each state has undertaken to protect investors from the other state in respect of investments made within its territory. The Investment Treaty includes a so-called MFN clause in its Article 3, which in general terms prohibits either state from treating investors from the other state less favourably, in respect of their investments, than domestic investors or investors from any third state (the “MFN clause”). The MFN clause states in Article 3(3) “For the avoidance of doubt, it is confirmed that the treatment provided for in paragraph (1) and (2) above shall apply to the provisions of Articles 1 to 11 of this Agreement”.

Article 8 of the Investment Treaty states that each contracting state consents to submit legal disputes with investors of the other contracting state concerning investments made in its territory to arbitration under the Convention on the Settlement of Investment Disputes (the “ICSID Convention”), as an exclusive forum. Under Article 25(2)(a) of the ICSID Convention, a national cannot bring ICSID proceedings against a state of which the individual is also a national.

An individual who held dual citizenship in the UK and Georgia at the time of the alleged infringements of the protections under the Investment Treaty (the “Investor”) wished to initiate legal proceedings against Georgia in relation to investments in Georgia. After first seeking interim measures through an emergency arbitration under the SCC Arbitration Rules, the Investor initiated arbitration proceedings before the SCC Arbitration Institute (the “SCC”). Arbitration before the SCC was not referenced in the Investment Treaty’s dispute resolution clause. The Investor therefore invoked the Investment Treaty’s MFN clause together with the dispute resolution clause in Article 10 in another investment treaty that Georgia had entered into, the bilateral investment treaty between Georgia and the Belgium-Luxembourg Economic Union (the “Georgia–BLEU BIT”), the reference treaty. Under the Georgia-BLEU BIT an investor had the possibility to choose between different fora, including ICSID (the International Centre for the Settlement of Investment Disputes) and arbitration before the SCC.

Georgia objected to the arbitral tribunal’s jurisdiction, arguing, among other things, that it had not consented to arbitration before the SCC. However, in a “Partial Final Award on Jurisdiction and Admissibility” dated 31 August 2022, the arbitral tribunal held that it had jurisdiction to adjudicate the dispute and accordingly rejected Georgia’s objection. Georgia subsequently requested that the Svea Court of Appeal review the arbitral tribunal’s decision on jurisdiction under section 2 of the Swedish Arbitration Act (1999:116) (the “SAA”).

In its judgment of 12 November 2024 in case T 11278-22, the Svea Court of Appeal held that the MFN clause in the Investment Treaty did not apply to dispute resolution and that the arbitral tribunal therefore lacked jurisdiction. In reaching that conclusion, the Court of Appeal focused in particular on the wording of the MFN clause noting that the sub-section of the MFN clause regarding the scope of the favourable treatment, Article 3(2), did not refer to dispute resolution. The Court of Appeal further relied on the distinction between relaxing procedural time limits and changing arbitral forum, the special characteristics of ICSID arbitration and the Investment Treaty’s use of an exclusive ICSID forum based on the “preferred” version of the UK’s model bilateral investment treaty.

The Svea Court of Appeal’s judgment was appealed to the Swedish Supreme Court, which granted partial leave to appeal on the issue of the arbitral tribunal’s jurisdiction based on the MFN clause.

Determination by the Swedish Supreme Court

The Swedish Supreme Court began by referring to Articles 31 and 32 of the Vienna Convention on the Law of Treaties 1969 (the “VCLT”) for treaty interpretation, which also reflect customary international law. Consequently, a treaty is to be interpreted in good faith in accordance with the ordinary meaning in their context and in the light of the treaty’s object and purpose. First and foremost, this concerns the text of a treaty, meaning that the wording is assumed to be a correct expression of the parties’ intent.

The Supreme Court’s reasoning proceeded in three main steps. First, it considered whether the MFN clause in the Investment Treaty applied to dispute resolution. The Supreme Court stated that the purpose of an MFN clause is to prevent discrimination among investors, and that its scope is determined by interpreting the clause in the specific case. Based on the wording, an explicit reference will normally be decisive. The treaty containing the MFN clause is called the principal treaty and the treaty that is alleged to contain more favourable treatment is called the reference treaty. However, an MFN clause is only applicable to rights within the subject matter of the principal treaty, the so-called principle of ejusdem generis. Looking at the wording of Article 3(3) in the present case, the Supreme Court noted that Article 3(3) expressly applied to Articles 1 to 11, thus including Article 8 containing the dispute resolution mechanism. This strongly supported the procedural application of the MFN clause, further reinforced by Article 3(3)’s wording “For the avoidance of doubt it is confirmed…”. Since MFN clauses are often broadly formulated, a more specific dispute resolution clause cannot be considered lex specialis in relation thereto. According to the Supreme Court, the fact that several of the other Articles referenced by Article 3(3) could not be relevant for MFN treatment was not decisive in the context. The relevant factor was whether the MFN clause can be applied to the Article in question, and not what effect references to other provisions might have. The Supreme Court also noted that similarly worded MFN clauses had been found to cover dispute resolution in other cases. Consequently, the Supreme Court concluded that the MFN clause was applicable to dispute resolution.

Second, the Supreme Court turned to the question whether the MFN clause could form the basis of the arbitral tribunal’s jurisdiction. According to the Supreme Court, an investor-state dispute resolution (“ISDS”) mechanism was often included in investment treaties, providing that an investor may initiate arbitration proceedings against a host state and that it constitutes a state’s standing offer of arbitration. By requesting arbitration, an investor accepts that offer. A state’s unequivocal consent is necessary for an arbitral tribunal’s jurisdiction, but that consent does not have to take any specific form. According to the Supreme Court, if an MFN clause expressly applies to dispute resolution and both the principal treaty and the reference treaty are investment treaties with ISDS mechanisms, the principle of ejusdem generis will seldom be an obstacle, even if the mechanisms otherwise differ in significant respects. The Supreme Court held that it must, in principle, be possible for a state to consent to a certain type of arbitration through an MFN clause in connection with a dispute resolution clause in a reference treaty. If such a construction is considered unequivocal, it should, according to the Supreme Court, not even be necessary that the principal treaty includes a general consent to arbitration. In such a case, the application of the MFN clause would be a foreseeable consequence of the state’s own actions and not an exception to the requirement of state consent to arbitration.

Based on the wording of Article 3(3), the Supreme Court found no limitations on the applicability of the provision, nor could such limitations be derived from the object and purpose of the Investment Treaty. Since both the principal treaty and reference treaty referred to established arbitral dispute resolution mechanisms, the Supreme Court found that the principle of ejusdem generis did not preclude the application of the MFN clause to dispute resolution. While noting that the ICSID system has certain characteristics, the Supreme Court did not consider it so fundamentally different from other established arbitral fora as to exclude application of the MFN clause. This was further supported by the fact that both ICSID and the SCC were among the choices provided by the reference treaty. The fact that Article 8 of the Investment Treaty was based on the “preferred” version of the British model treaty from 1991 instead of the “alternative” version, which did not have ICSID as the exclusive forum, was not a decisive factor in the interpretation. Thus, the Supreme Court concluded that, through the MFN clause together with Article 10 of the Georgia-BLEU BIT, Georgia had unequivocally consented to arbitration before an arbitral tribunal administered by the SCC.

Third, the Supreme Court went on to determine whether the reference treaty provided more favourable treatment for investors. The Supreme Court held that the comparison must be made objectively and on the basis of the dispute resolution mechanisms in their entirety. Although it is generally not possible to determine which of several established arbitral dispute resolution mechanisms is objectively the most favourable, the option to choose between different fora is more favourable than being limited to one forum, particularly where the mechanism in the principal treaty is also one of the options provided in the reference treaty.

The Supreme Court thus reached the conclusion that Article 3 of the Investment Treaty in connection with Article 10 of the Georgia-BLEU BIT affords the arbitral tribunal jurisdiction to adjudicate the dispute. Thus, the Investor gained automatic and immediate access to the more favourable treatment in the reference treaty, and its Article 10 thereby became applicable in its entirety, including certain requirements that in isolation could be considered more burdensome for the Investor. However, Article 10 of the Georgia-BLEU BIT provided certain conditions for its applicability. Since these requirements had not been tried by the Svea Court of Appeal, the case was remanded to the Court of Appeal.

Concluding remarks

The Supreme Court’s conclusion is largely consistent with the approach taken by the arbitral tribunals in Garanti Koza v. Turkmenistan (ICSID Case No. ARB/11/20, Decision on the Objection to Jurisdiction for Lack of Consent, 3 July 2013) and Krederi v. Ukraine (ICSID Case No. ARB/14/17, Award, 2 July 2018), which concerned investment treaties with similar wording. The judgment does not, however, establish a general rule that all MFN clauses apply to dispute resolution. Rather, the Supreme Court focused on the wording of the specific treaty, under which the ordinary meaning of the clause, the treaty context as well as an objective and holistic comparison between the principal treaty and the reference treaty remain decisive. Where the MFN clause so provides, the Supreme Court nevertheless appears to have taken an expansive approach, meaning that an MFN clause may be used to change dispute resolution mechanism. Also in line with Garanti Koza v. Turkmenistan, the Supreme Court did not consider any particular arbitral forum to be preferable, but found that the possibility to choose between fora is more favourable than being limited to one option.

The Supreme Court’s judgment may have practical significance going forward in relation to the SCC, since 34 active international investment agreements are referring to arbitration before the SCC as an alternative forum (SCC, Arbitrating for Peace: Stockholm, SCC Arbitration Institute, and ISDS, 2025, p. 13). This could be particularly relevant where parties wish to utilise certain features of the SCC Arbitration Rules that are not available under for example ICSID, such as access to emergency arbitration for interim relief and an investor definition limited to the one contained in the investment treaty rather than the definition in the ICSID Convention. This was practically relevant in the case at hand, since the Investor could not have accessed the dispute resolution mechanism provided by Article 8 of the Investment Treaty itself, as arbitration under the ICSID Convention is not possible where the investor is also a national of the host state. Because the Supreme Court applied an objective interpretation, this fact was not decisive in the case, although it was practically significant. The outcome will, however, depend on the wording of the applicable MFN clause in the specific treaty.

Since many investment treaties do not provide for an arbitral seat, the SCC Board will, pursuant to Article 25(1) of the SCC Arbitration Rules, decide on the seat if arbitration proceedings before the SCC are initiated, unless otherwise agreed by the parties. Based on the practice of the SCC Board, it is likely to select Stockholm, Sweden as the seat, unless otherwise indicated. One such circumstance is where the dispute concerns intra-EU investment disputes, meaning that the underlying investment treaty has been concluded between EU states. In that situation, the SCC Board will decide on a seat outside the EU to promote enforceability of the subsequent arbitral award, since the Court of Justice of the European Union has held in its judgments in C-284/16 Achmea and C-741/19 Komstroy that intra-EU investment arbitration is incompatible with EU law. Otherwise, where the seat is in Sweden, the SAA would be the applicable lex arbitri, meaning that any review under Section 2 of the SAA, or proceedings to declare an arbitral award null and void or to set it aside pursuant to Sections 33 and 34 of the SAA, would be brought before Swedish national courts, where the Supreme Court’s judgment could carry significant weight.

At the same time, the Supreme Court’s judgment is subject to important limitations. An investor relying on an MFN clause must still show that the relevant treaty wording supports procedural application, that the reference treaty offers more favourable treatment when assessed in its entirety, and that the requirements of the imported dispute resolution clause are satisfied. The Supreme Court’s judgment nevertheless remains a notable addition to the fragmented jurisprudence on the procedural application of MFN clauses.