CAB129-33 — Page 185

Page 185

Page 186.

ANNEX "B"

90

Page 186.

THE COMMONWEALTH RELATIONSHIP

Most-Favoured-Nation Questions

66

>

BY a series of treaties the United Kingdom Government are under an obligation to accord to other countries most-favoured-nation treatment", that is to say, to accord to the particular country with which the treaty is made treatment at least as favourable as that accorded to any other foreign country. Under the full commercial treaties, of which some thirty are in force, this obligation extends alike to goods and to persons and companies (as well as shipping, &c.). The most-favoured-nation obligation is also laid down, in respect of goods only, in a number of trade agreements concluded since the 1930's: many of these are with countries with which the United Kingdom already had full commercial treaties, though some are with countries with which she had no such treaty.

The precise terms of the most-favoured-nation clauses (which are, of course, reciprocal, and apply to both the parties to each agreement) vary to some extent from one agreement to another, but a common essential feature of practically all of them (except the General Agreement on Tariffs and Trade: see (3) below) is that the obligation is expressed as being to accord to the other country party to the agreement treatment in all respects as favourable as that accorded to other foreign country' The precise significance of the expression

any other foreign country" is therefore crucial for the interpretation of the obligations under the agreements. Most of the more recent agreements contain specific definitions of this expression, while the earlier agreements leave its significance to be inferred by implication.

!

!

''

any

Broadly there are, in this respect, three main categories of agreements :- (1) The full commercial treaties, which, while normally not defining “foreign country", everywhere use this term in direct contrast to His Majesty's dominions" (or the equivalent, such as "territories under His Majesty's sovereignty, suzerainty, protection or mandate") on the other side of the picture. (List in Annex 1.)

(2) The trade agreements of the 1930's and since, which-

(a) define "foreign country as not a part of the British Common- wealth (Scandinavian agreements of 1933-list in Annex 2); or (b) define " foreign country as not a territory under His Majesty's sovereignty, &c. (Poland 1935, &c.-list in Annex 3); or, in place of a definition,

(c) provide that nothing shall entitle the foreign party to claim the benefit of any preference, &c., in force exclusively between territories under the sovereignty, &c., of His Majesty (France 1934, Soviet Union 1934, &c.-list in Annex 4).

(Categories (b) and (c) are practically the same in effect.)

(3) The General Agreement on Tariffs and Trade, concluded at Geneva in 1947 (relating to goods only). The territories now or formerly forming part of the Commonwealth between which preference is sanctioned are listed nominatim in Annex A to that Agreement, without any reference either to the Commonwealth relationship or to the Crown link this list includes India (as on 10th April, 1947, i.e., Pakistan is also covered), "Ireland " [sic], and Burma. (The parties in this Agreement are listed in Annex 5.)

Categories (2) (a), (b) and (c) and (3) apply practically only to goods—(2) (a) and (3) exclusively 88 while the most-favoured-nation provisions gelating to nationals are nearly all of type (1). Most of the countries comprised under (2)

36678

B

2

and RabalsbЯavefties under (1). Some countries agmeldorf al8 She categories, viz., (1), one of the forms of (2), and also (3). It is probably safe to regard the latest agreement as prevailing in these cases, which affect only goods.

2. The broad effect is that, in the case of countries coming under (1), (2) (b) or (c), if they are not also parties to the General Agreement on Tariffs and Trade, the test is Sovereignty of His Majesty ". For countries coming under (2) (a), membership of the British Commonwealth suffices subject to the argument that that expression means the British Commonwealth as constituted at the time of the treaty and is not satisfied by the ipse dixit of two countries that they regard themselves as belonging to the British Commonwealth. For countries under (3), i.e., the General Agreement on Tariffs and Trade, neither His Majesty's sovereignty nor Commonwealth membership is material.

3. The conclusion from what has already been said is that, as regards goods, the potential challengers of the United Kingdom's action would be those countries which possess treaty rights of the types cited at (1), (2) (b) and (2) (c) above, excluding those which fall under (3) and probably (subject to the argument indicated) those which fall under (2) (a), viz. :—

*

Albania, Argentina, Bolivia, Chile, Colombia, Costa Rica, Egypt, Finland, Greece, Haiti, Hungary, Iceland, Nicaragua, Poland, Portugal, Roumania, Salvador,* Siam, Soviet Union, Spain, Switzerland, Turkey, Uruguay, Venezuela, Yugoslavia.

*

4. The English Law Officers are therefore of opinion that, in respect of the trade preferences affecting goods, the countries listed in paragraph 3 above would be legally entitled, once India had ceased to acknowledge allegiance to the Crown, to claim the benefit of the preferences which the United Kingdom accords to goods originating in India.

On the other hand, the United Kingdom should be immune from such claims from the countries which are parties to the General Agreement on Tariffs and Trade, and probably also from the Scandinavian countries, unless she were to grant the preferences to some other foreign country, in which case these countries also would be entitled to lay a claim.

It is possible, though by no means certain, that foreign countries would refrain from most-favoured-nation claims if India remained a part of the Commonwealth; and the maintenance of preferences would have to be justified in any discussion which might take place about the matter in the United Kingdom Parliament or elsewhere by arguments analogous to those devised to meet the case of Eire, which would be based largely on the continuing de facto relationship. Their nature is explained more fully in paragraphs 16 and 17 below.

5. As regards nationals, the relevant agreements practically all fall under category (1) except for two treaties, those with Siam of 1937 and with Muscat of 1939, which contain a definition of type (2) (b) The General Agreement is inapplicable; and all the cases turn on the test of" His Majesty's sovereignty or His Majesty's dominions

,,

The list of countries possessing such most-favoured-nation rights as regards nationals is :-

Argentina, Bolivia, Colombia, Costa Rica, Czechoslovakia, Denmark, Finland, France, Greece, Hungary, Iceland, Liberia, Morocco, Nicaragua, Peru, Poland, Portugal, Roumania, Spain, Sweden, Switzerland, Turkey, United States, Venezuela and Yugoslavia.

Most-favoured-nation claims in respect of nationals would be most likely to be brought in respect of rights of entry and residence in the United Kingdom (the other cases in which the treatment of foreigners in the United Kingdom is inferior to the treatment of British subjects being relatively few and unimportant). An example of a modern standard most-favoured-nation provision relating to these matters is Article 4 of the Anglo-Roumanian Treaty of 1930, which reads:-

"The subjects of either of the high contracting parties shall be entitled to enter, travel and reside in the territories of the other so long as they satisfy and observe the conditions and regulations applicable to the entry, travelling and residence of all foreigners.""