Jurisdictional Impact of Most-Favoured-Nation Clauses

by Edoardo Stoppioni

MPILux Working Paper 3 (2017)

Introduction: The Most-Favoured-Nation Clause (‘MFN clause’) is ‘a treaty provision whereby a State undertakes the obligation towards another State to accord most-favoured-nation treatment in an agreed sphere of relations’ (Art 4 of the 1978 ILC Draft Articles on Most- Favoured-Nation Clauses). This clause, contained in a ‘basic treaty’, consists of the undertaking of a ‘granting State’ to accord to the ‘beneficiary State’ (or persons or things in a determined relation to it) a non-less favourable treatment than the one accorded to a third-party (ICJ, Anglo-Iranian Oil Co. Case, United Kingdom v Iran, 1952, 109).

The aim of the clause is to ‘establish and to maintain at all times fundamental equality without discrimination among all of the countries concerned’ (ICJ, Rights of nationals of the United States of America in Morocco, France v United States of America, 1952, 192). To this end, it disrupts the equilibrium of the treaty by granting to the beneficiary new rights, not included in the basic treaty but promised therein. This goal can be achieved provided that some conditions are met, such the similarity of the situations (ie Art 9 of the 1978 ILC Draft Articles concerning the principle eiusdem generis, only those rights that fall within the limits of the subject-matter of the clause can be claimed) and the existence of a more favoured treatment of a third-party. The Most-Favoured-Nation Clause (‘MFN clause’) is ‘a treaty provision whereby a State undertakes the obligation towards another State to accord most-favoured-nation treatment in an agreed sphere of relations’ (Art 4 of the 1978 ILC Draft Articles on Most- Favoured-Nation Clauses). This clause, contained in a ‘basic treaty’, consists of the undertaking of a ‘granting State’ to accord to the ‘beneficiary State’ (or persons or things in a determined relation to it) a non-less favourable treatment than the one accorded to a third-party (ICJ, Anglo-Iranian Oil Co. Case, United Kingdom v Iran, 1952, 109).

The aim of the clause is to ‘establish and to maintain at all times fundamental equality without discrimination among all of the countries concerned’ (ICJ, Rights of nationals of the United States of America in Morocco, France v United States of America, 1952, 192). To this end, it disrupts the equilibrium of the treaty by granting to the beneficiary new rights, not included in the basic treaty but promised therein. This goal can be achieved provided that some conditions are met, such the similarity of the situations (ie Art 9 of the 1978 ILC Draft Articles concerning the principle eiusdem generis, only those rights that fall within the limits of the subject-matter of the clause can be claimed) and the existence of a more favoured treatment of a third-party.