Jurisdiction(s):
United Kingdom

Key definition

Most favoured nation definition

What does Most favoured nation mean? In loan documentation, a most favoured nation (MFN) clause protects existing lenders by ensuring that any later‑incurred additional debt is not priced materially higher than the existing facilities unless the existing pricing steps up to preserve an agreed differential. It typically applies to incremental/accordion facilities or similar additional pari passu term debt. If the new debt would exceed the agreed margin or all‑in yield cap, the existing term debt margin (or yield) increases to maintain the cap. MFN is a market expression rather than a statutory or case‑law definition and is used consistently in leveraged finance documentation governed...

MFN clauses in investor-state arbitration: importing dispute settlement provisions, the split in case law, and practical limits

Published by a LexisNexis Arbitration expert

Practice notes

What is a most favoured nation clause?

A ‘most favoured nation’ (MFN) clause typically appears in investment treaties and sets a baseline of treatment: the host state must not accord foreign investors treatment less favourable than that offered to investors protected under any other treaty. Absent an MFN clause, each party to a bilateral investment treaty (BIT) may lawfully apply differing economic treatment to investors from separate jurisdictions. The function of an MFN clause is to align and harmonise the protections available to overseas investors across all BITs concluded by the host state. Where the substantive safeguards granted in one BIT fall short of those the host has promised in a BIT with a different state, an investor may invoke the MFN clause to import the superior standard of protection from the more beneficial BIT, thereby supplanting the weaker wording in the BIT on which the claim rests. By way of illustration, an investor could attempt to bring in the more advantageous drafting of an expropriation provision contained in the BIT between the host state and a third country...

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Ben Sanderson

Ben Sanderson has worked as a partner in the international arbitration group in the London office of Kirkland & Ellis and now works at DLA Piper. He has represented clients across a range of industries, including the energy, mining and technology sectors. His practice focuses, in particular, on high-value international commercial arbitrations - both institutional and ad hoc - and bilateral investment treaty claims....

Web page updated on 21/05/2026

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