Oecd glossary of statistical terms most favoured nation. Business jargon for the concept that the first party will be entitled to at least as favorable terms as a second party in specified circumstances. The mostfavoured nation clause in investment treaties. The unconditional most favoured nation mfn principle requires a nation to treat all its trading partners alike. During the term, the financial terms of this agreement will be at least as favorable or more favorable than the financial terms of any other current or prospective orbitz customer that engages orbitz for a project that is substantially similar to the engagement contemplated herein. Moreover, these latter two limitations can sometimes combine in a. The basic principles of the world trade organisation wto. The mfn principle is one of the most important principles in international law. Concept of most favoured nation treatment under general. From mostfavoured to least favoured nations how rtas. Legal framework for evaluating mfns under the antitrust laws september 2012. Mfn is one component of the principle of nondiscrimination under international law. Culbertson, most favored nation treatment, 31 proc.
What exactly is the most favoured nation mfn status. Part ii chapter 1 mostfavourednation treatment principle. Preferential trade agreements and the most favoured nation. Mostfavorednation mfn status is an economic position in which a country enjoys the best trade terms given by its trading partner. Thus, the host state can combine predictability and flexibility by modifying its. Mertens, a defense of the most favored nation clause, 156 annals am. According to oecd, ejusdem generis principle is the rule according to which the mfnc can only attract matters belonging to the same subject matter or the same category of subject matter as to which the clause relates. Mostfavorednation treatment and the multilateral trade. Investment law treatment in international mostfavoured. The scope of mfn clauses the ejusdem generis principle 18. It has been the object of differing and unexpected interpretations by treatybased arbitral tribunals.
Draft articles on mostfavourednation clauses with commentaries. Most favoured nation treatment substantive protection. Information procedures for notifying and sharing information. This report reflects the work of a study group established by the commission to consider contemporary issues relating to the most favoured nation mfn clause.
If a country chooses to grant someone a special favour such as a lower customs duty rate for one of their products it is bound to do the same for all other wto members. By allowing the borrower to incur additional pari passu debt under the same loan agreement, the lenders run the risk that the terms of that additional debt are richer. An mfn clause is governed by the ejusdem generis principle, in that it may only. That means it receives the lowest tariffs, the fewest trade barriers, and the highest import quotas or none at all. Backward stealing and forward manipulation in the wto motivated by the structure of wto negotiations, we analyze a bargaining environment in which negotiations proceed bilaterally and sequentially under the most favored nation mfn principle. Wto understanding the wto principles of the trading system. Chapter 1 mostfavourednation treatment principle 337 state trading enterprises gatt article xvii defines state trading enterprises as those. The cook islands specifies below a list of most favoured nation exemptions from the obligations of article 3, paragraph 2 most.
It is found in all 3 of the main wto agreements gatt, gats and trips. The mostfavoured nation principle, equal protection, and. For example, an incremental loan provision may have an mfn clause that says that the interest rate on the existing term loanwill. Lets first take a look at what mfn is and then analyze the pros and cons of its revocation. Rather, the drafters of the gatt likely wished to convey an important message to us. Mfn most favoured nation is a principle of the wtos general agreement on tarrif and trades gatt to which india is signatory. I ntroduction this short article discusses the theoretical interaction between the economically grounded most favoured nation mfn treatment principle1 and the humanrights based concept of equal protection of migrants. The determination of what is and is not substantially similar will be based on relevant. The most favored nation rule in principle and practice. Most favored nation treatment also became a key element of the trading system that emerged after world war ii. In other words, the issue is whether states are obliged to afford most favoured nation treatment as regards tax treaty benefits. The term means the country which is the recipient of this treatment must nominally receive equal trade advantages as.
The function of the mfn clause in the global trading system. It requires member states to accord the most favourable tariff and regulatory treatment given to the product of any one member andor non member at the time of export or. After the pulwama attack, the most tragedic massacre in indian history, there are certain steps which had been initiated by india upon pakistan. Nevertheless, it clarified that their jurisdictional impact depends on the will of the negotiating states. This formal reciprocity is a normal feature of the unconditional mostfavourednation clauseone 8 m. The most favored nation principle requires da, an economy international trade, barring wtoapproved specifie e merge xceptions, must. Part ii chapter 1 mostfavourednation treatment principle mostfavourednation treatment principle overview of rules most favoured. Mostfavourednation treatment mfn, also called normal trade relations, guarantee of trading opportunity equal to that accorded to the mostfavoured nation. The trips agreement allows wto members exceptions to the nondiscrimination principle known as most favoured nation treatment mfn, ie, where a country normally does not discriminate between rights holders from different trading partners.
A treatise on the general agreement on tariffs and trade, 20, 252303. A mostfavorednation mfn clause requires a country to provide any concessions, privileges, or immunities granted to one nation in a trade agreement to all other world trade organization member countries. Most favoured nation if an incremental facility provision is included in a loan agreement, in most cases so will a most favoured nation clause be. Most favoured nation an overview sciencedirect topics.
Application of the mostfavourednation clause to the. One must therefore consider each of the three main elements in treaty interpretation the text, its context and the object and purpose of the treaty aust 2000. Although its name implies favoritism toward another nation, it denotes the equal treatment of all countries. During the period from the date of this agreement through the closing date, neither the company nor its subsidiaries shall enter into any additional, or modify any existing, agreements with any existing or future investors in the company or any of its subsidiaries that have the effect of establishing rights or otherwise benefiting such investor in a manner more favorable. Nondiscrimination is the fundamental principle used to achieve these free trade objectives under the gattwto framework, and this principle is embodied in the unconditional most favored nation mfn clause under article i of the gatt agreement. When an fta is formed, the most liberal policy will become a zero tariff, or free trade. Most favoured nation treatment is the overall guideline and the fundamental principle of multilateralism. Unctad series on international investment agreement ii. Pdf pthe aim of this study is to provide an academic framing of the philosophical. However, the original gatt carved out an exception to this rule by including article 24. Provide to all of its trading partners theme termsprovides to e. Most favoured nation mfn principle is a principle of non discrimination embodied in article 1 of the general agreement on tariffs and trade gatt, whereby any concession or privilege granted by one contracting party to gatt to a product of another contracting party will be unconditionally granted to the like product of all other contracting parties.
The treatment each party shall accord under this paragraph is most favoured nation treatment. Doc mostfavourednations mfn and national treatment. University of warsaw faculty of law and administration preliminary version introduction most favoured nation mfn clause as it was designed in the gatts article i was a. Together with the most favoured nation principle, national treatment is one of the cornerstones of wto trade law. Most favoured nation principle is one of the most fundamental principles of the wto. National treatment is an integral part of many world trade organization agreements. A quiet revolution seymour rubin introduction the general agreement on tariffs and trade gatt, negotiated in 1947, has long been considered the cornerstone of the world trading system, at least as between socalled market economies. The meaning of most favoured nation principle, under the wto agreements, is that countries cannot normally discriminate between their trading partners. The most favourednation clause in investment treaties 1. Can states claim mostfavourednation treatment from each other as a right. Under its terms, a most favoured nation clause is a treaty provision whereby a state undertakes an obligation towards another state to accord most favoured nation treatment in an agreed sphere of relations.
The boundaries of mostfavoured nation treatment in. Legal framework for evaluating mfns under the antitrust laws. This paper discusses whether an obligation to grant most favoured nation treatment may be based on international. The mostfavoured nation clause in investment treaties iisd. In international economic relations and international politics, most favoured nation mfn is a status or level of treatment accorded by one state to another in international trade. The rule is to perform one single combined operation. Grant someone a special favour such as a lower customs duty rate for one of their products and you. Mostfavourednation mfn treatment requires members to accord the most favourable tariff and regulatory treatment given to the pro duct of any one member at the time of import or export of like products to all other members. Most favored nation mfn, national treatment, wto principles a 1. Most investment treaties contain most favoured nation mfn clauses. From most favoured to least favoured nations how rtas influenced the wto mfnbased trade.
An fta violates the gattwto principle of most favored nation because mfn requires countries to offer their most liberal trade policy to all gattwto members. A key principle of the multilateral trade rounds taking place in the framework of the gattwto is that any concessions offered by a country to. India france dtaa protocol if under any convention, agreement or protocol signed after september 1, 1989, between india and a third state which is a member of the oecd, india limits its taxation at source on dividends, interests, royalties, fees for technical services or payments for. The tariff rate levied on a given commodity must be the same for all supply nations and tariff concessions exchanged between any two countries must be extended to all member nations of the wto.
Glossarymost favored nations provision mfnrelated contentthis term has several meanings. Grant someone a special favour such as a lower customs duty rate for one of their products and you have to do the same for all other wto members. Jurisdictional impact of mostfavourednation clauses. If india takes mfn status from pak who will be in loss. The wto has continued to maintain this nondiscrimination principle, and. These clauses vary in their precise wording but in general state that the treatment or rights enjoyed by investors covered by a particular investment treaty shall not be less than that accorded to investments made by investors of. In wto law, the purpose of these obligations is to prevent states from discriminating against and between foreign products, services and serviceproviders and intellectual property rights. National treatment and most favoured nation treatment in. The mostfavourednation mfn treatment standard is a core element of modern. National treatment and most favoured nation mfn treatment are the two main substantive obligations common to international trade and investment law.