International Business:MOST FAVOURED NATION (mfn) treatment MBA Study Material, Presentation

1. MOST FAVOURED NATION (mfn) treatment
PRESENTED BY
ZAHEER SAYYED
YAMINI

2. Definition
The Most Favored Nation; MFN
• A status awarded by one nation to another in int’l trade
• One’s nation will not be treated worse than anyone else’s nation
• One of the cornerstones of WTO trade law

3. Conditional & Unconditional MFN
A
3
C
B
Must grant privilege
grant privilege
MFN

4. Benefits
 A country that grants MFN on imports will have its imports
provided by the most efficient supplier.
 MFN commitment protects the value of bilateral concessions
and spread security around by making them the basis for a
multilateral system
 MFN allows smaller countries
 MFN restraints domestic special interests from obtaining
protectionist measures

5. The MFN treatment provision has the
following main legal features:
 It is a treaty-based obligation that must be contained in a specific
treaty.
 It is a relative standard and must be applied to similar objective
situations.
 It is governed by the ejusdem generis principle.

6.  The MFN treatment operates without prejudice to the freedom of
contract and thus, States have no obligation under the MFN
treatment clause to grant special privileges or incentives granted
through a contract to an individual investor to other foreign
investors.
 In order to establish a violation of MFN treatment, a less
favourable treatment must be found, based on or originating
from the nationality of the foreign investor.

7. Purpose of an MFN clause
 Ensure the right of entry and establishment for the foreign
investors and the conditions that apply to the pre-establishment
phase of the investment; or
 Ensure that the treatment will not be different for investors and
their investments established and operating in accordance with
the host State’s laws and regulations.