Reference no: EM131768393

Question: MNF, Inc., a large multinational firm incorporated and headquartered in Country C, entered into an investment agreement with Needyland, a small less developed country. MNF agreed to set up a mine to extract copper ore, a refinery, and a plant to manufacture electrical wiring. Needyland agreed to give MNF a 20-year tax holiday (i.e., MNF would not have to pay any local taxes for 20 years). Finally, MNF agreed that "MNF, Inc. will not seek the diplomatic assistance of Country C in resolving any dispute it may have with Needyland." After MNF completed construction of the mine, refinery, and plant, and just as it began to make a profit on its investment, the government of Needyland changed. The new government enacted a statute that imposed a "nontax operating fee" of 30 percent on the annual earnings of all businesses involved in the mining, refining, or processing of copper. MNF was the only such firm. MNF complained to the new government, with no result, that this "fee" violated its investment agreement. The local courts dismissed MNF's request for an injunction as baseless. MNF then sought the diplomatic assistance of Country C. Country C and Needyland are parties to an Arbitration Treaty, and they agree to submit the dispute to arbitration. Needyland argues that MNF had no right to seek the diplomatic assistance of Country C and, therefore, Country C has no right to seek compensation from Needyland on behalf of MNF. Is Needyland correct? Discuss.