Jurisdiction(s):
United Kingdom

Key definition

Most favoured nation definition

What does Most favoured nation mean? In loan documentation, a most favoured nation (MFN) clause protects existing lenders by ensuring that any later‑incurred additional debt is not priced materially higher than the existing facilities unless the existing pricing steps up to preserve an agreed differential. It typically applies to incremental/accordion facilities or similar additional pari passu term debt. If the new debt would exceed the agreed margin or all‑in yield cap, the existing term debt margin (or yield) increases to maintain the cap. MFN is a market expression rather than a statutory or case‑law definition and is used consistently in leveraged finance documentation governed...

WTO GATS Financial Services: Scope, Prudential Carve-out, Recognition, Dispute Settlement, MFN Exceptions (Second Annex, Decision), and the Understanding on Commitments

Published by a LexisNexis International Trade expert

Practice notes

Introduction

This Practice Note offers practical, practitioner-focused guidance on the trading of financial services. It considers the Annex and Second Annex on financial services, together with the Decision on financial services and the Understanding on commitments in financial services. These instruments are considered collectively.

Trade in financial services is governed by the World Trade Organisation’s (WTO) General Agreement on Trade in Services (GATS). Accordingly, our materials on the GATS apply to trade in financial services. See Practice Note: An introduction to Trade in Services.

However, two annexes on financial services to the GATS, as well as an understanding and a decision, are key to understanding trade in financial services. The annexes are titled the Annex on Financial Services and the Second Annex on Financial Services. The understanding is the Understanding on commitments in financial services. The decision is the Decision on Financial Services.

The Annex on Financial Services sets out specific provisions relevant to domestic regulation adopted for prudential purposes. The Second Annex on Financial Services contains provisions concerning measures under the GATS that are inconsistent with the most favoured nation (MFN) principle. The Understanding on commitments in financial services in turn contains provisions that allow Member States to make...

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Web page updated on 22/05/2026

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