Same but Different? The Swedish Supreme Court Holds That MFN Clauses Can Import ISDS Provisions From Other Treaties

Most-Favoured Nation clauses (“MFN clauses”) are a cornerstone of international investment law, appearing in numerous bilateral investment treaties (“BITs”) and other treaties. Somewhat simplified, they require the host state to treat investors from the treaty party at least as favourably as investors from any third country, thus allowing investors to “import” stronger protections from other treaties signed by the host state (see e.g., Dolzer, Kriebaum & Schreuer, Principles of International Investment Law, 3^rd ed., p. 264). This basic premise is generally uncontroversial.

More contested, however, is whether an MFN clause also allows investors to bypass the agreed dispute resolution mechanism in the applicable treaty (often referred to as the “basic treaty”) and import a dispute resolution forum from a different treaty (the “comparator treaty”). Some arbitral tribunals have allowed such expansive use of MFN clauses, while others have adopted a restrictive approach, holding that dispute resolution procedures form a distinct category which requires the host state’s explicit consent.

The tension is well illustrated by two ICSID decisions reaching opposite results. In Garanti Koza v. Turkmenistan (ICSID Case No. ARB/11/20), the tribunal upheld jurisdiction under the MFN clause of the UK-Turkmenistan BIT, finding “there is no reason why Turkmenistan’s consent to ICSID Arbitration [in another BIT] may not be relied upon by a U.K. investor” where that mechanism was more favourable (Decision on Jurisdiction, 3 July 2013, para. 79). In Plama v. Bulgaria (ICSID Case No. ARB/03/24), by contrast, the tribunal held that “an MFN provision in a basic treaty does not incorporate by reference dispute settlement provisions […] unless the MFN provision […] leaves no doubt that the Contracting Parties intended to incorporate them” (Decision on Jurisdiction, 8 February 2005, para. 223).

In summary, the jurisprudence remains markedly divided on the application of MFN clauses to dispute resolution provisions—see e.g., the International Law Commission’s Report from 2015.

In a judgment of 26 June 2026 (Case No. T 9380-24), the Swedish Supreme Court (the “Court”) has now entered this debate. The Court held that an MFN clause can, in principle, extend to dispute resolution and supply a host state’s consent to a forum offered only in another treaty—provided a series of conditions are met.

The Case at Hand

The dispute before the Court arose out of an arbitration before the SCC Arbitration Institute (the “SCC”) seated in Sweden, between Zaza Okuashvili, a dual citizen of the United Kingdom and Georgia, mainly concerning unpaid taxes of his company, LLC OGT (“OGT”) (SCC Case No. 2019/038).

After the Georgian authorities took enforcement measures against his company in 2018–2019, Okuashvili relied on the BIT between the United Kingdom and Georgia (the “UK-Georgia BIT”) to commence arbitration at the SCC, seeking damages for alleged treaty breaches.

But Okuashvili faced a jurisdictional hurdle: the UK-Georgia BIT namely designated ICSID as the forum for investor-state disputes—not the SCC—and Okuashvili’s Georgian nationality would bar ICSID jurisdiction (see Art. 25(2) of the ICSID Convention). To overcome this, he invoked the UK-Georgia BIT’s MFN clause to import the more favourable dispute resolution regime of the Georgia-Belgium-Luxembourg Economic Union BIT (the “BLEU-Georgia BIT”), which offers investors a choice of fora, including SCC arbitration.

In a Partial Final Award of 31 August 2022, the SCC tribunal upheld jurisdiction by a majority (Georgios Petrochilos KC and Giorgio Mandelli in the majority; Professor Rolf Knieper dissenting), treating the question as one of treaty interpretation, turning on the individual MFN clause. In short, the arbitral tribunal interpreted the treaty and MFN clause at hand as allowing for an importation of the ISDS clause of a comparator treaty, in this case, the BLEU-Georgia BIT.

Georgia challenged the arbitral tribunal’s decision, and in November 2024 the Svea Court of Appeal reversed it, reasoning that equating the SCC with ICSID would strip MFN clauses of any meaningful limit and hollow out the basic treaty’s chosen, exclusive forum.

The Court granted leave to appeal and has now issued its final judgment.

The Court’s Reasoning

The judgment delves into a number of interesting questions. In short, the Court’s position is that an MFN clause, can, in principle, carry over to dispute resolution provisions and supply a state’s consent to a different forum given in a different treaty. However, according to the Court, certain criteria must be fulfilled.

First, on consent to arbitration: the Court noted that a state cannot be subjected to arbitration without its unequivocal consent. But, according to the Court, such a consent does not need to be given in any particular form. The Court thereby found that, in principle, it is possible for a state to consent to a certain type of arbitration set out in a different treaty, by way of an MFN clause. The Court said that such an application can be a “foreseeable consequence of the state’s own actions”.

Second, on the scope of the individual MFN clause: the Court emphasised that whether the individual MFN clause reaches over to the issue of dispute resolution is a question of treaty interpretation under Articles 31–32 of the Vienna Convention, to be assessed on a case-by-case basis. An express indication that the MFN clause does (or does not) extend to dispute resolution is normally decisive, according to the Court. While the reach of an MFN clause is confined to the type of rights governed by the basic treaty (the ejusdem generis principle), the Court held that where both the basic and comparator treaties are BITs containing ISDS clauses that refer to well-established arbitral mechanisms, the ejusdem generis principle will rarely bar importation.

Third, on comparison between the two treaties: the Court stated it needs to be determined which ISDS mechanism is objectively more favourable, judged holistically rather than by isolated elements of the dispute mechanisms, and without any regard to the individual investor’s preferences. The Court also noted that one established arbitral mechanism can rarely be deemed more favourable than another; however a treaty that offers a choice of several fora will generally be more favourable than one confined to a single forum, particularly where the comparator treaty’s options also include the forum named in the basic treaty. Arguably, a basic principle can be drawn from the Court’s reasoning: if a treaty offers a certain feature as an option, without compelling its use, this can only improve the investor’s position and should therefore count as more favourable.

Fourth, on the effect: the Court underscored that where the comparator treaty is more favourable, the investor obtains that treatment automatically and immediately. Yet, the comparator’s dispute mechanism then applies in its entirety, including any conditions more burdensome than those of the basic treaty.

Applied to the facts, the Court found in favour of the claimant in every step. Key findings included:

• Article 3(3) of the UK-Georgia BIT expressly provided that the MFN clause applied to Articles 1 to 11, which included the dispute resolution provision in Article 8. The Court therefore found that the MFN clause applied to the dispute resolution provision.
• Although the ICSID system “has certain distinctive features”, SCC arbitration was considered to be “of the same nature” and thus comparable.
• When comparing the two mechanisms, two of the three points of difference—a shorter cooling-off period and an option to mediate—actually made the UK-Georgia BIT more favourable. Nevertheless, the Court gave decisive weight to the choice of fora offered by the BLEU-Georgia BIT and held that, on balance, the BLEU-Georgia BIT was more favourable, noting that for an investor in Okuashvili’s position that choice was the very precondition for any arbitration to be commenced at all.
• The Court declared that Article 3 of the UK-Georgia BIT, read together with Article 10 of the BLEU-Georgia BIT, could ground SCC jurisdiction, remitting to the Court of Appeal the question as to whether the BLEU-Georgia BIT’s own criteria for jurisdiction were satisfied.

A Landmark Case—But Each Case Turns on Its Own Facts

The Court’s judgment is unambiguous: an MFN clause can carry over to dispute resolution provisions, and the application of an MFN clause can be upheld as a valid basis for jurisdiction.

Yet, the Court’s ruling should not be overinterpreted as having completely opened the floodgates—every case still turns on its own facts. Effectively, the Court has framed the exercise as case-specific treaty interpretation. Notably, the MFN clause in the case at hand was unusually explicit: Article 3(3) enumerated the very article containing the ISDS provision, which was a determinative factor in the Court’s interpretation. One obvious question is as follows: would the outcome have been the same had the MFN clause been drafted differently, without such an express cross-reference to the dispute resolution provision? On the Court’s own logic, a more ambiguous MFN clause could well have produced a different answer.

Additionally, the juxtaposition between the basic treaty and the comparator treaty is also, to a large extent, case specific. There is a certain paradox at the heart of this exercise: importation by way of an MFN clause presupposes that the comparator treaty contains an equivalent mechanism—hence the Court’s finding that SCC and ICSID arbitration are “of the same nature” and thus comparable—yet the two mechanisms must at the same time be different enough for one to be judged objectively more favourable than the other. As the saying goes: “Same same, but different”.

But how is that to be decided? Here the Court’s guidance is somewhat limited, beyond giving weight to the availability of a choice between various arbitral institutions. In the case at hand, that alone was considered to be sufficient to tip the balance, even though other features of the UK-Georgia BIT were more favourable.

And the Future?

So, what will be the consequences of this new ruling?

At its narrowest, the decision clarifies how Swedish law defines the limits of MFN clauses. Albeit that the principle of stare decisis does not formally exist under Swedish law, in practice, Swedish courts normally follow the Court’s case law faithfully.

More broadly, the ruling carries particular weight due to Sweden’s importance in investment arbitration. The SCC Arbitration Institute is one of the world’s leading institutions for investment treaty disputes and the SCC also acts as an appointing authority under the UNCITRAL Arbitration Rules. According to the SCC, Sweden and the SCC are designated as fora for investor-state disputes in 121 bilateral investment treaties and in the Energy Charter Treaty. Of these, 61 provide for the application of the SCC Arbitration Rules, while the remaining 60 designate the SCC as appointing authority under the UNCITRAL Arbitration Rules or Sweden as the seat of arbitration.

Being one of only a few authoritative decisions on this issue, the Court’s decision is now a guiding authority in the debate at large. Of course, we can expect the long-running debate on the scope of MFN clauses to continue, but authoritative decisions such as this help to clarify the strength of the arguments.

The ruling is likely to attract wide attention.