The Most Favoured Nation Treatment and Promotion of Foreign Investment in Renewable Energy

Today, the development of renewable energy is generally admitted as a solution to tackle global warming and climate change. However, without attracting substantial foreign investments, it will be nearly impossible to develop renewable energies, particularly in developing countries that do not have the required financial resources and technologies. Unsurprisingly, the promotion of foreign investments in all economic sectors is influenced by International Investment Agreements (IIAs). These instruments contain various substantive and procedural regulations that are individually and collectively responsible for protecting and promoting foreign investments. Among them is the Most Favoured Nation Treatment (MFN), a fundamental principle of international trade law. However, the exact status and efficacy of MFN in IIAs have been a controversial issue so far. Therefore, it is essential to analyse this standard and its possible contribution to promoting foreign investments in renewables. Drawing on qualitative research, this article attempts to answer the question, ‘What is the importance of MFN clauses for the promotion of foreign investments in the renewable energy sector, and how can their efficacy be enhanced?’. Since MFN has a multilateralising effect on the obligations provided in other IIAs signed by the host State, in the absence of provisions to the contrary, it may equip the foreign investors in the renewable energy sector with a broader set of protections and perhaps incentive provisions. However, many IIAs and investor-state tribunals have intermittently overlooked the significance of this standard.