The Interpretation and Application of the Most-Favored-Nation Clause in Investment Arbitration

Front matter

World Trade Institute Advanced Studies — 12

The Interpretation and Application of the Most-Favored-Nation Clause in Investment Arbitration

BRILL | NIJHOFF

Contents

Acknowledgements 1x Abbreviations XI

Introduction 1

1 History of the MEN Clause in International Law 4

Introduction

Since its inclusion in the first bilateral investment treaty (Germany-Pakistan BIT), the Most-Favored-Nation (MFN) clause has become a frequently included provision in international investment agreements (I1As). MFN clause interpretation and application is a controversial topic in international investment law. Debates are mainly concerned with the appropriate scope of the MFN clause in I1As, especially the extent to which a given clause incorporates substantive and procedural treatment in other 114s. It has been argued that the MEN clause should be applied as a treaty tool to multilateralize more favorable treatment. If this argument is accepted, an expansive interpretation of a given MEN clause — which extends its application to procedural and/or substantive provisions not contained in the basic treaty — should be preferred.! Meanwhile, some scholars insist on a case-by-case examination of MFN clauses without presumptions.” This debate has led to inconsistent decisions in Investor-State Dispute Settlement (1sDs). IsDs tribunals have adopted different — and, at times, directly opposing — interpretations of MFN clauses, this despite relying on similar interpretation methods.

This book critically engages with the above discussion in order to propose a more balanced method for interpreting MFN clauses in IIAs. Its arguments are developed over the course of six chapters in total. Chapter 1 traces the use of the MEN clause from a historical perspective: from its beginnings in the uth century to its inclusion in modern 114s. It is noted that the prevalence of the MEN clause in international agreements reflects the contemporary status observed in the global economy of given time. It thrives in liberal economic atmospheres and recedes in times of war or times of economic conservatism. The current I1A system is witnessing a paradigm shift whereby treaties are pursuing a more balanced relationship between state interests and investor protection, and the MEN clause plays a key role in the type of 11As pursued by states.

1 Stephan W Schill, The Multilateralization of International Investment Law (Cambridge University Press 2009); Stephan W Schill, MFN Clauses as Bilateral Commitments to Multilateralism: A Reply to Simon Batifort and J. Benton Heath’ (2017) 11 American Journal of International Law 914.

2 Simon Batifort and J Benton Heath, ‘The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization’ (2018) 11 American Journal of International Law 873.

© ANQI WANG, 2022 | DOI:10.1163/9789004517899_002 This is an open access chapter distributed under the terms of the cc By-NC-ND 4.0 License.

2 INTRODUCTION

Chapter 2 discusses the main methods of interpretation applicable to MFN clauses, looking mainly at customary international law and Articles 31 and 32 of the Vienna Convention on the Law of Treaties (VcLT). This chapter shows that tribunals have reached diverging conclusions based on their assumptions about the relationship between the regulatory power of host states and the protection of foreign investments and investors, even when relying on the same interpretive methods.

Chapter 3 continues examining the MFN clause in case law. It focuses on cases in which claimants invoke the MEN clause to obtain a higher standard of substantive treatment. Specifically, two groups of cases are analyzed. The first of these includes cases in which the MEN clause has been used to provide de facto more favorable treatment to claimants. The second group includes cases in which the MEN clause has been used to accord higher standards of treaty protection, including the fair and equitable treatment (FET) standard, full protection and security, the protection afforded by umbrella clauses, and stronger protections in relation to expropriation.

The case law concerning the procedural application of MFN clauses will be examined in Chapters 4 and 5. Chapter 4 examines the case law on the application of MFN clauses to avoid procedural preconditions, such as the one contained in Article x(2) of the Spain-Argentina BIT, which requires that disputes be brought before a domestic court of the host state within a certain period of time before any claim can be brought in front of the international tribunal. Chapter 5 deals with cases in which MEN clauses have been invoked to extend the jurisdiction of tribunals. Specific analysis is provided for each case, including in relation to the position adopted by each tribunal and its application of interpretive methods. After examining the case law, Chapter 6 concludes with observations on the changing nature of the formulation of MEN clauses in modern I1As and considers the manner in which states, as potential disputing parties, may respond to expansive invocations of MFN clauses in ISDs practice.

Throughout the above chapters, it is suggested that the MFN clause plays an essential role in the current trend of 114 renegotiation, and that MFN clauses in 11As should not as a general proposition be employed as a tool which multilateralizes international obligations. The interpretation and application of MEN clauses should be based on a case-by-case assessment, not on tribunal assumptions. Specifically, interpretation should be guided by the interpretive methods of international law, including Articles 31 and 32 of the VCLT and the ejusdem generis principle. In addition, tribunals should consider other seminal parameters to adopt responsible MFN interpretations. These parameters include, for example, the fundamental role of state consent to international

INTRODUCTION 3 arbitration, a proper balance between investment protection and countries’ regulatory space, as well as the ongoing 114 reform to strengthen countries’ right to regulate on urgent issues such as sustainable development, public health and climate change, among others.

Chapter 1

The most-favored-nation (MFN) clause has been used in international law for a long time, and its content and modalities have undergone many changes throughout history. Its first appearance can be found in the uth century in a Charter of Mantua, where the Holy Roman Emperor guaranteed an Italian city all the privileges granted to “any other city.”! Since then, MFN treatment has been a central pillar of international commercial policy over the centuries.”

This chapter focuses on the history of the MFN clause in international law and will be divided into three parts: The first of these introduces the development of the MEN clause in the international trade law milieu; the second part focuses on its inclusion in I1As; and the third part deals with MEN clause codification efforts. As such, this chapter will mainly examine the development of MEN clause in international trade law through to its development in the more specific field of international investment law at a later stage in time. Based on this examination, it provides a historical perspective of MFN clause interpretation and application.

1 The Evolution of the MEN Clause in International Trade Law

The first part of this chapter begins with the emergence of MFN treatment, which can be traced back to the Middle Ages, or, as Georg Schwarzenberger puts it, “to the dawn of international law.” To this end, the following study is conducted in chronological order, including with reference to early appearances of the MFN clause between the uth and 16th centuries, the conditional MEN clause during the 17th and 19th centuries, and its incorporation into more recent treaty practice in the 20th century.

1 See, for example, Stephen Fietta, ‘Most Favoured Nation Treatment and Dispute Resolution under Bilateral Investment Treaties: A Turning Point?’ (2005) 8 International Arbitration Law Review 131.

2 OECD, ‘Most-Favoured-Nation Treatment in International Investment Law’ (OECD 2004) OECD Working Papers on International Investment wP 2004/02 <https://www.oecd .org/daf/inv/investment-policy/WP-2004_2.pdf > accessed 20 April 2022.

3 Georg Schwarzenberger, ‘The Most-Favoured-Nation Standard in British State Practice’ (1945) 22 British Yearbook on International Law 96, 97.

© ANQI WANG, 2022 | DOI:10.1163/9789004517899_003 This is an open access chapter distributed under the terms of the cc By-NC-ND 4.0 License.

11 The Genesis of the mFN Clause in the Middle Ages: From the nth to the 16th Century

The emergence of MFN treatment can be attributed to the liberal attitude of contemporary governments towards trade and competition between European merchants during the Middle Ages.* Ongoing trade activities between European countries during medieval times strengthened relations between nations. They readily concluded treaties with each other to guarantee traders freedom and rights in one another’s territories.” After failed attempts by powerful commercial countries like Italy, France and Spain to monopolize certain markets, merchants from those countries eventually had to be satisfied with being placed on an equal footing with their competitors in the territory of other states. Thus MEN treatment was guaranteed to beneficiaries for specific benefits received by specific third states.” An appropriate example of this is the promises given by the Byzantine Emperor to the Genoans that the latter would be afforded a particular standard of treatment, which was subsequently demanded by the Venetians as well.8 Moreover, MEN treatment served as an efficient treaty tool in the sense that there was no need to overhaul the original treaty.’

From the 12th century onwards, MFN guarantees could more often be seen in commercial treaties concluded between states.!° MFN treatment during the medieval period largely took the form of unilateral preferences granted by Oriental rulers to European municipalities, with the latter intending to establish a trading monopoly abroad." Also, medieval MFN wording explicitly

4 Sophus Reinert and Robert Fredona, ‘Merchants and the Origins of Capitalism’ [2017] Harvard Business School BG1E Unit Working Paper No. 18-021 <http://dx.doi.org/10.2139/ ssmm.3037173>.

5 See for example, the Magna Carta of 1215 which gave all merchants the right to sojourn safely and trade in England “quit from all evil tolls”. See further: Nussbaum Arthur, A Concise History of the Law of Nations (1st edn, Macmillan 1947).

In this regard, see Schwarzenberger (n 3).

Tony Cole, ‘The Boundaries of Most Favored Nation Treatment in International Investment Law’ (2012) 33 Michigan Journal of International Law 537, 543.

8 Endre Ustor, ‘First Report on the Most-Favoured-Nation Clause, Special Rapporteur’ Vol 11 Yearbook of the International Law Commission (1969), available at <https://legal.un.org/ ilc/publications/yearbooks/english/ilc_1969_v2.pdf> accessed 20 April 2022.

9 Richard Carlton Synder, The Most-Favored-Nation Clause: An Analysis with Particular Reference to Recent Treaty Practice and Tariffs (King’s Crown Press 1948). In this regard, see also: David D Caron and Esme Shirlow, ‘Most Favoured Nation Treatment — Substantive Protection in Investment Law’ [2015] SSRN Electronic Journal.

10 See generally Nussbaum Arthur, A Concise History of the Law of Nations (ist edn, Macmillan 1947).

11 Ustor (n 8) 159. Regarding the unilateral nature of medieval MFN treatment, Nussbaum analyzes this issue from a medieval Islamic perspective, noting that: “... the Muslim rulers referred to favors already granted to a small, specific group of trading cities in Europe, the names of which appear repeatedly in discourses discussing the development of international law: Venice, Genoa, Pisa, and Barcelona, amongst others. This is because commercial competition in medieval times existed mainly between this specific group of European cities. Through particularly plain treaty provisions, these cities sought to obtain treatment at least as favorable vis-a-vis their potential competitors.!* Moreover, in contrast to MFN clauses in modern international economic agreements that offer mainly trade and investment protection, MFN treatment in the Middle Ages was granted mainly regarding a merchant’s personal rights such as their lodgings, property, and lives while in foreign countries.

A reciprocal MEN clause later appeared in the treaty between England and the Duke of Burgundy and Count of Flanders concluded in 1417, according to which vessels from all contracting parties were entitled to use harbors in the same manner as third countries.'* By the end of the 15th century, restrictions on MEN clauses, which applied to a limited number of countries, were lifted, and more favorable treatment began to be granted to “any foreign countries.”!5

The end of the Thirty Years’ War in 1648 and the Peace of Westphalia advanced the commercial expansion of European countries, in particular France, England, the Netherlands, and Spain.!® Countries started seeking more liberal trade and closer trade relations with each other and began distinguishing between commercial treaties and political agreements. These developments were foundational to MFN clauses commonly being included in treaties to ensure equal treatment among competitors from different countries.”

were little interested in obtaining for their subjects reciprocal treatment in the respective European countries” and that “[t]he explanation seems to be that the Mohammedan law forbade the believers to sojourn for any length of time in the lands of the infidels”; thus, “the Oriental rulers helped in building up the unilaterality of the capitulations ... .” See Nussbaum (n 10) 30.

12 Schwarzenberger writes “... how much the achievement of this object means to the chancelleries concerned may be gauged from the language of older treaties which, more openly than modern treaties in this sphere, reveal the particular jealousies and the actual competitors whom the contracting parties had very consciously in mind.” See Schwarzenberger (n 3) 97. This treaty practice was also described by some writers as having occurred out of “jealousy”. See Schwarzenberger (n 3) gg. See also Ustor (n 8) 159.

15 See, for example, the 1490 England-Denmark Treaty, cited by Schwarzenberger (n 3) 97.

16 Nussbaum (n 10) 87.

17 For example, the 1679 Nijmegen Treaty between the Netherlands and Sweden. In this regard see Jacob Viner, ‘The Most-Favored-Nation Clause in American Commercial Treaties’ (1924) 32 Journal of Political Economy 101.

In conclusion, the MFN clause in its early form was developed and formalized in early trade treaties due in large part to the expansion of foreign trade. Although the evolution of early MFN treatment underwent a major shift from restricted and unilateral to unrestricted and bilateral,!8 the standard was nevertheless clearly rooted in the idea of equality ever since its origin.!° In other words, its early development shows that it was the medieval merchants’ desire for equal treatment that gave rise to the idea of MFN treatment. This guaranteed that foreigners would not receive different treatment in the host country purely on the basis of their nationality.

1.2 The Appearance of Conditional and Unconditional MFN Clauses: The 18th and 19th Centuries

Europe in the 18th century was characterized by relative stability, civilization

and wealth.”° This implied more open national policies towards trade liberal-

ization. Commercial treaties became more clearly distinct from political con-

ventions and began to be concluded between a greater number of European

countries; as did MFN treatment.?!

In 1778, a conditional form of the MFN clause was introduced by a treaty concluded between France and the U.S. (the 1778 Treaty). This treaty extended MEN treatment to the contracting parties but conditioned on similar concessions being granted by third parties.2? Although the conditional MFN clause

18 Fora classification of early MFN clauses see Synder (n g) 19.

21 Nussbaum (n 10) 127-8. The 18th century has also been described by some writers as first having witnessed the “appearance of commercial treaties”. See Ustor (n 8) 160. See also: Guiguo Wang, International Investment Law: A Chinese Perspective (1st edn, Routledge 2014).

22 Article 11 of this treaty read as follows: “the Most Christian King and the United States engage mutually not to grant any particular favour to other nations, in respect of commerce and navigation, which shall not immediately become common to the other party, who shall enjoy the same favour, freely, if the concession was freely made, or on allowing the same compensation, if the concession was conditional.” See DP Myers, G Charles and WM Malloy, ‘Treaties, Conventions, International Acts, Protocols and Agreements between the United States of America and Other Powers, 1776-1909.’ United States Government Printing Office 1910. In fact, the wording “freely, if the concession was freely made, or on allowing the same compensation/equivalent, if the concession was conditional” served as a model for nearly all U.S. commercial treaties until 1923. See Ustor (n 8) 161. For more discussions about conditional MFN clause, see Stephan W Schill, The Multilateralization of International Investment Law (Cambridge University Press 2009). See also Surya P Subedi, International Investment Law: Reconciling Policy and Principle (Fourth edition, Hart Publishing 2020).

was originally inserted at the insistence of France, it nonetheless suited with U.S. trade policy at the time and was extensively applied thereafter by the U.S. government in its treaty relations with other countries for over a century.?3

Critics of the conditional MFN clause believe that the concession required by the conditional MFN clause is a de facto “purchase” rather than an equal basis for international trade as provided for by the unconditional MFN clause. Under the conditional MFN clause, beneficiary states were obligated to lower tariffs in exchange for better privileges than those originally granted by the basic treaty. In this way, “the conditional clause [did] not grant equality, but the opportunity to purchase equality.”?4 Apart from this, the difficulty of identifying the specific concessions granted in each agreement made it impossible to determine the equivalent a country should provide to purchase the equality required by the conditional MFN clause.”° The constant negotiation of concessions for each country turned into a heavy burden in practice. It explicitly contravened the purpose of the MEN clause, the aim of which was to reduce the negotiation costs associated with concluding new treaties and to facilitate more favorable trading conditions.?6 Even if concessions could be identified and determined, another question was how “equivalent” other countries’ concessions would be for the purpose of the conditional MEN clause. Ultimately, conditional MEN will inevitably lead to inequality, as countries would be placed in either a more or a less favorable position.?’ Since the underlying principle of the MEN clause is to treat countries equally, conditional MFN treatment only leads to the very discrimination against which it was supposed to compensate.78 In this sense, the concept of conditional MFN clause was deployed as a protectionist tool masquerading as a liberalizing device.?9

23 Vernon G Setser, ‘Did Americans Originate the Conditional Most-Favored-Nation Clause?’ (1933) 5 The Journal of Modern History 319, 319-313. It was said that the conditional MFN was in line with the interest of the U.S. as long as it was a net importer and prioritized industry protection. Under the conditional MEN clause, a country has to grant lower tariffs to imported U.S. products in order to enjoy more favorable tariffs imposed on its products exported to the U.S. See Schill (n 22) 131, footnote 31; Synder (n 9) 243.

25 Because it was impossible for identical trade relations to exist between two countries, the equivalent concessions under conditional MFN may lead to constant negotiations and substantive discrimination. See Synder (n 9) 213.

26 See Caron and Shirlow (n 9).

28 In this regard, Synder’s comments are apposite. He provides as follows: [E]quality of treatment ... involves more than two nations. Its premise is that any third nation shall not be discriminated against. Equality of treatment is not the exchange of satisfactory concession between two nations. See Synder (n 9) 215.

Despite the above drawbacks, conditional MFN clauses were nonetheless widespread during the early 19th century and maintained their dominance between 1825 and 1860, with nearly ninety percent of MFN clauses included in treaties during this period using the conditional form.°

After a long period of fluctuation between conditional and unconditional MEN treatment, Europe experienced a decline in mercantilism and a revival of liberal trade policies at the beginning of the second half of the 19th century.! The 1860 Cobden-Chevalier Treaty between Great Britain and France included promises regarding substantial tariff reductions and the lifting of import bans, coupled with fully-fledged unconditional MFN treatment.32 The Cobden- Chevalier Treaty indicated a move away from the conditional MFN clause in European treaty practice. On the other hand, the U.S. retained conditional MEN treatment for trade facilitation until 1923.

The practice of including conditional MFN clauses in treaties waned as the US. shifted to pushing unconditional MEN clauses in its treaty practice in the wake of World War 1. According to a statistical study by Synder with respect to the MEN clauses negotiated between 1920 and 1940, only nine out of over six hundred MEN clauses included in treaties were conditional in form.*? In fact, the unconditional form of the MFN clause remained dominant from 1860 until World War I, after which the conditional variant never regained prominence.

1.3 The Status of the MEN Clause during an Unstable Period for World Trade: The 20th Century Onward

The development of MFN clause during the 20th century can be categorized

into four phases, with the two World Wars acting as helpful signposts: from the

beginning of the century until the end of World War 1 (1900-1919), the ‘inter-

war’ period (1919-1929), the period leading up to World War 11 until the War

30 Ustor (n 8) 162, footnote 28. See also Bryan Coutain, ‘The Unconditional Most-Favored- Nation Clause and the Maintenance of the Liberal Trade Regime in the Postwar 1870s’ (2009) 63 International Organization 139.

32 Article x1x of the Treaty reads as follows: Each of the two High Contracting Powers engages to confer on the other any favour, privilege, or reduction in the tariff of duties of importation on the articles mentioned in the present Treaty, which the said power may concede to any third Power. They further engage not to enforce one against the other any prohibition of importation or exportation which shall not at the same time be applicable to all other nations. See Foreign Office, British and Foreign State Papers, vol 50 (William Ridgway 1860) 24-5.

came to an end (1931-1945), and the postwar period, which led to the development of modern variants of the MEN clause (from 1945 on).

The build up to and eventual outbreak of World War 1 dealt a severe blow to international trade in general and the MEN principle in particular, with the application of the latter suffering a temporary setback. The reason for this was predominantly the fact that extending MFN treatment, especially to maritime adversaries, was disapproved of by states against the backdrop of geopolitical tensions and looming aggression.** Thus, at the Allied Economic Conference in 1916, it was agreed that “systematic discrimination in economic matters” should be imposed on the adversaries of the Allied Powers.°

In the wake of World War 1, MEN clauses were largely formulated unilaterally and served primarily to consolidate unbalanced trade relations. The type of unilateral MFN clause contained in these treaties differed from earlier variants such as those from the Middle Ages and, in practice, served as instruments of trade discrimination — the intent behind deploying ‘MEN’ clauses of this kind was thus the polar opposite of equal treatment.

World War I ushered in a number of years of worldwide economic decline and trade restrictions. Nationalist and protectionist ideologies tempered the inclusion of MFN clauses.?® Over the years, however, unconditional MFN clauses again began to find prominence in treaty practice, as countries such as Italy, the United Kingdom and Germany advocated for it.3”

In May 1927, the International Economic Conference was held in Geneva under the auspices of the League of Nations. In an effort to curb increasing trade barriers, the Conference was attended by the major trading countries, amongst others. The Conference stressed the importance of equal treatment as a general principle and urged that “the widest and most unconditional interpretation should be given to the most-favored-nation clause.”38 The conference ended with a trade agreement seen as a precursor to the 1947 General Agreement on Tariffs and Trade (GATT). Although the agreement was not binding, it did underpin the consensus of free trade between nations and, importantly, promoted unfettered application of the MFN principle. During

36 Ustor (n 8) 163, footnote 42. France has undergone several changes pertaining to its MFN policy, and has on several occasions taken a conservative position towards the MFN clause. For more on this score see Synder (n 9) 243.

38 League of Nations, Report and Proceedings of the World Economic Conference, Vol 1 (League of Nations 1927), Document C.356.M.129.1927.11 (C.E.1.46) 43.

this time, liberal trade had apparently succeeded, and unconditional MFN treatment resumed. This all changed, however, with the onset of the Great Depression in 1929.

The onset of the depression brought renewed international trade tensions, with countries beginning to raise customs duties, employing import quotas and even imposing import prohibitions and implementing exchange controls, amongst other measures. As a result, MFN treatment came under attack and suffered from a resurgence of protectionist measures. According to a survey by Synder, out of approximately five hundred bilateral treaties concluded between 1931 and 1939, only about 40 percent of them included an MEN clause, while the same survey showed that ninety percent of treaties contained an MEN clause before 1931.29

The end of World War 11 brought the free trade ideology back to the center of the international stage.?° In 1944, the Bretton Woods Conference recognized that the need to rebuild political relations and the economy in the postwar world require MFN treatment as a bridge to bring states together in a more unified and stable legal framework.*! Following this, the U.S. proposed negotiations on a multilateral trade agreement to its wartime allies. On this basis, a preparatory committee was formed, which met for the first time in 1946 to negotiate a charter for an international trade organization (ITO). The negotiations ended in 1948 with the Havana Charter. Via the Havana Charter, countries attempted to build a multilateral legal framework pertaining to both trade and investment issues. However, the Havana Charter lacked adequate protection to foreign investors from capital-exporting countries and never came into force.*”

In the meantime, ongoing negotiations on the General Agreement on Tariffs and Trade (GATT) made good progress. This agreement was aimed at substantially reducing tariffs and other barriers to trade, including through eliminating

4o Larry Neal, Rondo E Cameron and Rondo E Cameron, A Concise Economic History of the World: From Paleolithic Times to the Present (5th edn, Oxford University Press 2016); Bernard M Hoekman and MM Kostecki, The Political Economy of the World Trading System: The wTO and Beyond (2nd edn, Oxford University Press 2001).

41 This has been conceptualized by Stephan Schill as the “multilateralizing” function of MFN treatment. See Schill (n 22)134.

42 Tanjina Sharmin, Application of Most-Favoured-Nation Clauses by Investor-State Arbitral Tribunals: Implications for the Developing Countries (Springer 2020) 34, which refers to: Interim Commission for the International Trade Organization, Final Act and Related Documents, United Nations Conference on Trade and Employment (New York, 1948). <https://www.wto.org/english/docs_e/legal_e/havana_e.pdf> accessed 20 April 2022; Hoekman and Kostecki (n 40) 12-13.

discriminatory treatment. Because of the countries’ strong desire to immediately bring the GATT into force, a protocol on provisional application of the GATT was agreed to on October 30, 1947, by eight of the 23 negotiating countries, including the U.S. and the United Kingdom, two of the major leaders on this issue.43

Given the purpose of this agreement, Article of GATT imposed a general unconditional MFN clause which stated that: “... any advantage, [favor], privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.’*4 The text of this MFN clause took its wording from predecessor clauses in bilateral trade agreements; only this time, it became enshrined in a multilateral trade agreement. This meant the MFN clause was no longer limited to bilateral trade relations but had been adopted as part of a more extensive and comprehensive international legal agreement. It provided a legal basis for equal treatment and trade liberalization and contributed both economically and politically to postwar reconstruction.*®

GATT 1947 was later incorporated into GATT 1994, a component of the World Trade Organization (wTO) Agreement. In the meantime, countries continued to pursue the elimination of tariffs and the general liberalization of trade.*6 The importance of the MFN clause in the wTO system can be seen in its ubiquity in wTO instruments. It has been provided for in basically all trade-related areas: trade in goods (GATT 1994, Article 1), trade in services (General Agreement on Trade in Services (GATS), Article 11), trade-related aspects of intellectual property rights (wro Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Article 4), and technical barriers (Agreement on Technical Barriers to Trade (TBT), Article 5). As perhaps the

43 See, for example, John Howard Jackson, The World Trade Organization: Constitution and Jurisprudence (Royal Institute of International Affairs 1998) 15-16; Kanu Agrawal, ‘Bilateral Investment Treaties: A Developing History’ (2016) 7 Jindal Global Law Review 175; Hoekman and Kostecki (n 40) 12-13.

44 Article 1 of the GATT, available at <https://www.wto.org/english /docs_e/legal_e/gatt47 _o1_e.htm> accessed 20 April 2022.

45 The Director of GATT Trade Policy delivered a lecture in 1956 to the Bologna Center of the School of Advanced International Studies of John Hopkins University. This lecture is cited in the third chapter of Gerard Curzon, Multilateral Commercial Diplomacy: The General Agreement on Tariffs and Trade, and Its Impact on National Commercial Policies and Techniques (Michael Joseph ed, 1965).

46 ‘wro: Understanding the wro-The GATT Years: From Havana to Marrakesh’ <https:// www.wto.org/english/thewto_e/whatis_e/tif_e/fact4_e.htm> accessed 20 April 2022.

most important nondiscrimination obligation, MFN treatment helps maintain a rule-based system for states and has been called a cornerstone and “one of the pillars of the wTo trading system.”4”

This section has attempted to illustrate the role and function of the MFN clause within the world trading system since it first appeared. Because of the fierce competition between merchants from different city-states, it originally appeared in the form of promises made by Oriental emperors to foreign merchants. Since then, the mode of MFN treatment has changed several times throughout its evolution, as demonstrated above.

A review of history shows that the development and application of MFN principles largely coincided with the contemporary ideologies of countries and is closely linked to the political and economic situation of a particular era. Thus, MFN treatment has tended to be welcomed and embraced by countries during periods of economic stability and the consequent adoption of liberal policies, usually by powerful countries, while it has been curtailed or even abandoned during periods of economic decline and political tension. As Synder has clarified: