Introduction: The Non-Discrimination Principle in Investment Protection
The National Treatment (NT) and Most-Favoured-Nation (MFN) clauses are central pillars of Portugal’s bilateral investment treaty (BIT) practice, designed to ensure that foreign investors are not placed at a disadvantage compared with domestic or third-country investors. Although both standards pursue the objective of non-discrimination, their formulation and interpretation in Portuguese treaties reveal a deliberate evolution, balancing openness to foreign capital with the preservation of regulatory autonomy.
Early Treaty Practice: Separate Standards and Capital-Importing Context
In Portugal’s early generation of BITs, concluded throughout the 1990s, NT and MFN obligations were generally articulated in separate provisions. The National Treatment clause was often limited to the post-establishment phase, guaranteeing equal treatment only once the investment had been made, while the MFN clause extended this protection by reference to the more favourable treatment accorded to investors of third States. This drafting approach followed the OECD and European model treaties of the time, reflecting Portugal’s position primarily as a capital-importing State seeking to attract foreign investment under predictable and transparent conditions.
In more recent treaties, Portugal has adopted a more streamlined formulation that merges both standards into a single cumulative provision. A representative clause appears in Article 3(1) of the Agreement between the Portuguese Republic and the Republic of Cape Verde for the Reciprocal Promotion and Protection of Investments, signed on 26 November 1990 and entered into force on 4 October 1990:
“Each Contracting Party shall accord to investors of the other Contracting Party, as regards their investments and returns, treatment no less favourable than that which it accords, in like circumstances, to its own investors or to investors of any third State, whichever is more favourable.” (See the full text on UNCTAD’s Investment Policy Hub)
This cumulative drafting merges the two standards into one provision, reducing interpretative disputes over their sequencing and ensuring that the more favourable standard always prevails.
Modern Developments: EU-Level Precision and MFN Limitations
In line with the evolution of arbitral jurisprudence, Portugal’s more recent treaty framework—particularly within the European Union’s post-Lisbon investment policy—has refined the scope of the MFN clause. While Portugal’s standalone BITs have not, in the public record, included explicit language excluding dispute settlement from the MFN standard, Portugal, as an EU Member State, is bound by the approach reflected in modern EU investment agreements, which contain precise exclusions of investor-State dispute settlement procedures from MFN treatment.
A clear example appears in Article 8.7 of the Comprehensive Economic and Trade Agreement (CETA) between Canada, of the one part, and the European Union and its Member States, of the other part, signed on 30 October 2016 and provisionally applied since 21 September 2017. Article 8.7(4) states:
“For greater certainty, the ‘treatment’ referred to in paragraphs 1 and 2 does not include procedures for the resolution of investment disputes between investors and States provided for in other international investment treaties and other trade agreements.” — CETA, Chapter 8, Article 8.7
Similarly, the Investment Protection Agreement between the European Union and its Member States, of the one part, and the Socialist Republic of Viet Nam, of the other part (EU–Vietnam IPA), signed on 30 June 2019 (not yet in force as of October 2025), contains in Article 2.4(3) the following clarifying provision:
“For greater certainty, the term ‘treatment’ referred to in paragraph 1 does not include dispute resolution procedures or mechanisms, such as those included in Section B (Resolution of Disputes between Investors and Parties) of Chapter 3 (Dispute Resolution), provided for in any other bilateral, regional or international agreements.” — EU–Vietnam Investment Protection Agreement, Article 2.4(3)
These instruments illustrate the European Union’s—and by extension, Portugal’s—modern approach to MFN treatment: while maintaining the core commitment to substantive non-discrimination, they explicitly limit the scope of MFN to exclude procedural matters such as dispute settlement. This evolution reflects the lessons drawn from early arbitral interpretations (Maffezini v. Spain, Plama v. Bulgaria, Telenor v. Hungary), ensuring that the MFN clause cannot be used to circumvent the carefully negotiated consent to arbitration or to import procedural advantages from other treaties.
The result is a consistent and cautious treaty practice. Portugal continues to uphold the principle of non-discrimination central to the international investment regime while carefully delimiting the reach of investor protection. Its approach demonstrates a balance between openness to foreign investment and the need to maintain control over the terms under which investment disputes may arise—a reflection of its broader policy as a capital-importing economy integrating international standards without compromising its sovereign prerogatives.
Conclusion: Pragmatic Sovereignty and the Modern Treaty Balance
The evolution of Portugal’s approach to National and Most-Favoured-Nation treatment underscores a gradual but deliberate sophistication in treaty design. From the broad, investor-oriented formulations of early bilateral agreements to the refined, context-sensitive provisions found in contemporary EU treaties, the trajectory reflects a maturing balance between openness and control. Portugal remains firmly committed to the principle of non-discrimination, a cornerstone of the international investment regime, yet its practice now mirrors the European Union’s insistence on textual precision and the clear demarcation of procedural consent. In this, Portugal’s treaty policy exemplifies a modern model of pragmatic sovereignty—one that welcomes investment under the rule of law, while safeguarding the boundaries of its adjudicative and regulatory autonomy.
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