An Explanation of the Most Favoured Nation (MFN) treatment principle of the GATT in Investment Law
What is the Most- Favoured- Nation(MFN) treatment principle of the GATT 1994?
The MFN principle of the GATT 1994 in essence means that when one contracting Party benefits from certain trade advantages granted by another contracting Party, these advantages must then be granted to all other contracting parties (Herdegen, 2013). This principle is referred to in Article I:1 of the GATT, which also refers to Article III:2 and III:4, extending the MFN principle to internal charges, regulations and taxes. Article I:1 provides that this MFN treatment must be ‘accorded immediately and unconditionally’, not depending on any other benefits or advantages required in return. De jure and de facto discriminations are prohibited by the MFN principle (Canada-Autos, 2000).
There are exceptions to the MFN principle, however, and some discrimination is allowed under Article XIX for declining industries and Article XXIV for trading arrangements that are preferential such as free trade areas and customs unions (Bhandari et al, 1997). There are also exceptions in Article XX that can be relied on by WTO Members and include protection of human, animal and plant life; conserve exhaustible natural resources and so on. There is also the ‘necessity test’ for these exceptions as illustrated by Brazil-Retreaded Tyres (2007).
Canada: Certain Measures Affecting the Automotive Industry- Report of the Appellate Body (2000) WT/DS139/AB/R
Herdegen M,. (2013). Principles of International Economic Law. Oxford: OUP
Bhandari J, Sykes A,. (1997) Economic Dimensions in International Law: Comparative and Empirical Perspectives. Cambridge: CUP
Brazil – Measures Affecting Imports Of Retreaded Tyres WT/DS332/AB/R 3 December 2007