Sweden's Supreme Court on MFN clauses: a second treaty can open the door to arbitration, but only if the wording allows it

Why the forum matters

When a government acts against a foreign investment, the investor first needs to know whether it can bring a claim at all. That comes before any question of the merits. Investment treaty protection is only worth something if the investor has a working way to enforce it. If the treaty's dispute settlement route is closed to a particular investor, its substantive protections may be of little practical use.

The case before the Supreme Court showed this clearly. The investor held both Georgian and British nationality and owned several companies in Georgia. The UK–Georgia investment treaty refers disputes only to the International Centre for Settlement of Investment Disputes (ICSID). Under the ICSID Convention, however, an individual cannot bring a claim against a state of which he or she is a national, whatever other nationalities that person holds. 

Investment treaties and MFN clauses: the basics

A bilateral investment treaty is an agreement between two states. Each state promises to protect investments made by investors from the other state. Many such treaties also include a standing offer to arbitrate, which allows an investor to bring a claim directly against the host state. These are not commercial contracts between companies. They are instruments of international law, and their meaning is determined under the Vienna Convention on the Law of Treaties. 

A most-favoured-nation (MFN) clause is a promise by a state not to treat investors from the other treaty state less favourably than investors from third countries. Where the host state gives better terms in a treaty with another country, an investor may be able to rely on those terms. The investor's own treaty is the "basic treaty" and the other treaty is the "comparator treaty". 

What the Supreme Court decided

The investor started arbitration in Stockholm. He relied on the MFN clause in Article 3 of the UK–Georgia treaty together with Article 10 of Georgia's treaty with the Belgium-Luxembourg Economic Union (BLEU). Article 10 lets investors choose between ICSID, the ICC International Court of Arbitration in Paris and the SCC. The tribunal found that it had jurisdiction. The Svea Court of Appeal disagreed and held on 12 November 2024 that the tribunal lacked jurisdiction. 

Under the Swedish Arbitration Act, Swedish courts may review an arbitral tribunal's decision on its own jurisdiction. Swedish law therefore provided the procedural framework for the review. The treaties themselves were interpreted under public international law. Because the question was purely legal, the Supreme Court decided it afresh without deferring to the tribunal. 

The deciding factor was the wording of the treaty. Article 3(3) states that MFN treatment applies to Articles 1 to 11 of the treaty, and therefore also to Article 8 on dispute settlement. The Court found nothing in the clause that limited its effect. This meant it could also change the institution before which a dispute is heard. The Court also held that this reading respects the requirement of state consent. Through the MFN clause read with the BLEU treaty, Georgia had given unequivocal consent. 

The Court then compared the two dispute settlement mechanisms as a whole, using an objective test. The BLEU treaty is less favourable on time limits, and it does not offer conciliation. On balance, however, the choice between several arbitral forums was worth considerably more. For this investor, it was a precondition for any arbitration at all. 
The ruling concerns jurisdiction only. It says nothing about whether Georgia actually breached its treaty obligations.

The limits of the ruling

The Court stressed that whether an MFN clause covers dispute settlement must be decided by interpreting each treaty in each case. An express reference in the treaty to dispute settlement will normally be decisive. The Court also noted that established arbitral mechanisms usually cannot be ranked objectively. In most cases, therefore, an MFN clause will not allow an investor to swap one forum for another. The Court added, however, that where the basic treaty names a single forum and the comparator treaty offers a choice between several, that choice will as a rule be more favourable, particularly where the basic treaty’s forum is among the options.

If the investor relies on the comparator treaty, its dispute settlement mechanism applies in full, including any conditions that are more burdensome. Article 10 of the BLEU treaty requires a detailed written memorandum and a six-month waiting period. The Court gave the tribunal jurisdiction only on condition that these requirements do not exclude it. It set aside the Court of Appeal's judgment and sent the case back to that court for further proceedings. The tribunal had found that the investor submitted the required memorandum and need not observe the six-month period because settlement was futile. The Court of Appeal had not examined those findings or Georgia's other objections, so it is not yet settled whether the tribunal will ultimately have jurisdiction.

The judgment carries significant weight for arbitrations seated in Sweden. It does not bind courts or tribunals in other countries. In our view, it is likely to be noted in the international debate on MFN clauses and dispute settlement. Nor does the ruling mean that Swedish investors, or anyone else, can automatically use the same approach. Everything depends on the treaties that apply and their exact wording.

Practical recommendations

The following are recommendations, not legal requirements:

1. Map your treaty protection. Identify which treaties may cover each investment, taking into account the holding structure and the nationality of the investing entity.
2. Check how far the MFN clause reaches and which comparator treaties exist. Find out whether the clause expressly covers dispute settlement, and which of the host state's other treaties offer more favourable mechanisms.
3. Check procedural conditions before starting proceedings. Notice requirements, negotiation periods and choice of forum must be complied with in full, including those in a comparator treaty. 

Conclusion

The value of investment protection depends partly on whether a dispute can actually be heard. This judgment shows that the answer may lie in how several treaties interact. Whether a business can enforce its treaty protection should therefore be part of its risk analysis before a dispute arises, not after.

Primary sources: Supreme Court of Sweden, judgment of 26 June 2026, case T 9380-24 (Swedish); Svea Court of Appeal, judgment of 12 November 2024, case T 11278-22 (Swedish).