MEZCLA ASFÁLTICA

Option 1: Application of MFN treatment to pre-establishment States may wish to afford MFN treatment to the pre- establishment phase. This can be done by explicitly referring to establishment-related activities (e.g., “establishment, acquisition or expansion”). Under such circumstances, the entry regime is governed by the treaty itself and not by the domestic framework. When combined with NT pre-establishment commitments (as is usually the case), the system offers more transparency, certainty and predictability for the investment flows. Worth noting is that NT is much more central than MFN treatment for purposes of liberalizing the entry regime of the host State, given that most barriers of entry are measures inconsistent with NT and only a few with MFN treatment. In and of itself, the major role of MFN treatment here is

UNCTAD Series on International Investment Agreement II to guarantee that any further liberalization as regards entry conditions offered to a third country will be extended to the investors of the beneficiary State. See Section II.A.1(ii) for examples and further details.

This approach, which is found in IIAs dealing with liberalization (e.g. FTAs/EPAs), effectively imposes upon host States important constraints as already explained. No discriminatory measures between investors that are based on their nationality are allowed. However, these effects may be mitigated through the inclusion of specific or generic exceptions, by means of which countries may retain a sound policy space and the flexibility to regulate specific activities or areas of their interest. See Section II.A.3.(ii) for examples and further details.

Option 2: Application of MFN treatment to post-establishment Another policy option – the one most frequently used in BITs – is to apply the MFN clause to post-entry only. In this context the IIA would contain an “admission clause” and the MFN treatment clause will not refer to any establishment-related activities, resulting in a situation where the entry conditions are left to domestic regulatory prerogatives. This approach is appropriate when the IIA’s objective is merely to protect FDI flows and not to liberalize. Additionally, from the negotiation perspective, this is a prudent approach when a State lacks the institutional capacity or finds it difficult to accurately identify all non-conforming measures or the exceptions it requires to keep for itself a sound policy space. The rational of MFN treatment here is weaker as opposed to the pre-establishment model, given that States normally do not discriminate amongst foreigners once they are established. However, it finds a role inasmuch the standard protects not only against “de facto” but also “de iure” discriminatory measures. See Section II.A.1.(i) for examples and further details).

Option 3: Application of the MFN clause to investors and/or investments

IIAs generally cover both investments and their investors, although there could be variants such as limiting the protection to investments. The latter approach diminishes the object and purpose of the IIA. But by the other token, it minimizes the exposure of the State to international liability, inter alia, because investments are qualified and defined by domestic law, may not possess legal personality (thus being subjected to a lesser universe of measures) and may not be able to claim via MFN treatment a number of privileges applicable only to investors (e.g. access to ISDS). However, this decision of subjective coverage seems less important as compared to the decision regarding the entry model and the inclusion of exceptions and qualifications. Moreover, practice is highly uniform as to include both investors and investments within MFN treatment and no significant problems have arisen as a consequence thereof. See Section II.A.2 for examples and further details.

Option 4: Systemic exceptions

Many MFN clauses in BITs contain reciprocal, subject-specific exceptions. The most common of these systemic exceptions, particularly when it comes to post-establishment IIAs, are the REIO and taxation exceptions (see Section II.A.3.(i) for examples and further details). Essentially they aim at preventing benefits under such treaties from passing to investors/investments of non-parties. In both cases, the application of MFN treatment would nullify the very idea underlying the agreement for which an exception is sought (regional economic integration or elimination of double taxation). Exceptions for regional integration processes might be particularly important for preserving and strengthening South-South integration. Hence, where parties want to retain control of existing arrangements, they may specify that the benefits conferred by certain current arrangements are not covered by the MFN treatment

UNCTAD Series on International Investment Agreement II clause. This could be particularly helpful for maintaining intra- regional arrangements, especially between developing countries. Option 5: Country/sector-specific exceptions

Other IIAs (notably those granting pre-establishment rights) include exceptions of different type, based on (a) specific development policy/regulatory concerns on areas such as intellectual property rights, subsidies, grants and governmental procurement; (b) the need to preserve certain existing non-conforming measures stemming from the domestic legal regime at the time the treaty is being negotiated; and (c) the need to preserve the full ability to regulate certain areas or sectors in the future. Other exceptions may include, for instance, concerns on culture, minority groups and land. As noted already, these exceptions somehow offset the limits that the pre-establishment model imposes upon States. See Section II.A.3.(ii) for examples and further details.