I've mentioned before (most recently, here) that I'm skeptical of applying a "best treatment" / "individual comparison" standard to non-discrimination in the IEL context (I'm more concerned with WTO rules than with investment treaties, but my views apply to the latter as well). I'm not sure if everyone uses the terms "best treatment" and "individual comparison" in exactly the same way, but at the very least they are similar. (You could also use the term "diagonal" comparison, as described by Lothar Ehring here).
Let's look at some specifics. In the GATT Article III:4 National Treatment context, such a standard would be applied something like this. A complainant argues that an individual foreign product is receiving worse ("less favorable") treatment than a comparable ("like") individual domestic product. As a result, a violation exists, regardless of the overall treatment of the group of imported products in relation to the group of comparable domestic products. Similarly, in the investment treaty context, the argument is that an individual foreign investor is receiving worse treatment than a comparable domestic investor.
Using the term "best treatment," the same argument can be made by saying that the foreign product/investor is not receiving the "best treatment" that is being offered to a comparable domestic product/investor. That is, as long as one domestic product/investor is receiving better treatment, the foreign product/investor in question is not receiving the "best treatment" available.
I think these two ways of arguing the point get you to pretty much the same place.
This "best treatment"/"individual comparison" approach can be distinguished from a "nationality" based non-discrimination standard, in which the class or group of foreign products/investors is examined in relation to the class or group of comparable domestic products/investors.
So that's the IEL context. I don't look at domestic law all that much (mostly some law blog reading), but recently I came across an approach to non-discrimination in the context of the U.S. Constitution's Equal Protection Clause that appears to be similar to the "best treatment"/"individual comparison" idea: The "class of one" claim. Here's a good summary:
Generally, the Equal Protection Clause only applies where a person can show that he is a) part of a protected class, and b) is being discriminated against because of his class membership. A couple of years ago the Supreme Court held that a person not belonging to a protected class could sue under the Equal Protection Clause if a government actor treated him irrationally and differently. The person being mistreated belongs to a "class of one." In other words, under the "class of one" theory, it violates the Equal Protection Clause for a government actor to treat you differently than others similarly situated, just because the government official doesn't like you. Let's say "George" wants to build a deck. His permit application is denied because someone at city hall hates his guts, but George's neighbor's permit application is granted. George can sue under a class-of-one theory since he has been treated differently from others similarly situated (in this case, homeowners), and because his disparate treatment was irrational.
Generally, the Equal Protection Clause only applies where a person can show that he is a) part of a protected class, and b) is being discriminated against because of his class membership. A couple of years ago the Supreme Court held that a person not belonging to a protected class could sue under the Equal Protection Clause if a government actor treated him irrationally and differently. The person being mistreated belongs to a "class of one." In other words, under the "class of one" theory, it violates the Equal Protection Clause for a government actor to treat you differently than others similarly situated, just because the government official doesn't like you.
Let's say "George" wants to build a deck. His permit application is denied because someone at city hall hates his guts, but George's neighbor's permit application is granted. George can sue under a class-of-one theory since he has been treated differently from others similarly situated (in this case, homeowners), and because his disparate treatment was irrational.
For more detail, see the papers/articles here, here, here, here, and here. Basically, the idea is that while Equal Protection is generally about comparing the treatment of classes of people (e.g., based on race, gender), you can also have discrimination against individuals who are not part of a larger class, i.e., they are a class of just one person. An Equal Protection violation will exist if there is no rational basis for the government action (a minority view is that a violation will only exist if the discrimination is based on ill-will).
(I assume that this issue has come up in other jurisdictions, but I'm not aware of the details. If you know something about it, feel free to post in the comments).
After reading a bit about the "class of one" jurisprudence, it struck me that the idea is similar to the "best treatment"/"individual comparison" approach to non-discrimination in the IEL context. In a sense, the individual product/investor is a "class of one" who is receiving worse treatment than a comparable product/investor. There may be a slight distinction in that the IEL context requires a domestic to foreign comparison. Thus, the individual foreign product/investor is compared to an individual domestic product/investor. This foreign/domestic comparison injects a class-based element (i.e., nationality), in effect combining elements of an individual comparison (the effect on an individual is considered) with elements of a full class-based comparison (the class is taken into account).
In reality, though, this distinction might not have much significance. As long as any differentiation exists with respect to the individual product/investor (that is, the individual product/investor gets worse treatment than some comparator), there is likely to be differentiation that exists between the foreign individual and a domestic comparator. It is theoretically possible that the only actual differentiation is with other comparators of the same nationality, and thus there will be no foreign/domestic class-based comparison to make, but that seems likely to be a rare occurrence. In most cases where there is alleged to be unfavorable treatment for a foreign product/investor, there will be some domestic product/investor getting better treatment. So, in practice, the way "best treatment"/"individual" comparisons work in the IEL context is going to be pretty similar to the "class of one" approach. (And regardless, if there were no foreign/domestic comparison, there would be a foreign/foreign MFN comparison.)
Even assuming this distinction does mean something, while the IEL "best treatment"/"individual comparison" approach might not go quite as far as the "class of one," it is along the same lines. Perhaps it could be thought of as a hybrid of class-based and individual comparisons. Taking gender-based discrimination as an example, while a standard disparate impact analysis might look at how many women received the bad treatment in comparison to how many men received that treatment, the hybrid approach would look only at whether any individual woman received worse treatment than any individual man, regardless of the overall impact on the two groups.
Looking at the cases, the similarities in language between the IEL and Equal Protection contexts are readily apparent. Recall this recent statement from para. 94 of the Merrill NAFTA Chapter 11 tribunal:
... While nationality-based discrimination would make a finding of breach of national treatment unavoidable, some argue that this is not the only aim of the concept of national treatment under Article 1102. They would say that, even in the absence of discrimination, a differentiated treatment which is arbitrary and unjustified might qualify as a breach of national treatment. ...
So the argument is that National Treatment is violated where there is "a differentiated treatment which is arbitrary and unjustified," aside from any nationality-based discrimination. I take this as an argument along the lines of "best treatment"/"individual comparisons" although it was not explicitly referred to in these terms (and it's sometimes difficult to get a precise understanding of what underlies specific statements of this sort). This statement reads very much like a description of the "class of one" theory. In the Olech case, which is the 2000 case that established the concept, the Supreme Court said the following:
Our cases have recognized successful equal protection claims brought by a “class of one,” where the plaintiff alleges that she has been intentionally treated differently from others similarly situated and that there is no rational basis for the difference in treatment. See Sioux City Bridge Co. v. Dakota County, 260 U.S. 441 (1923); Allegheny Pittsburgh Coal Co. v. Commission of Webster Cty., 488 U.S. 336 (1989). In so doing, we have explained that “‘[t]he purpose of the equal protection clause of the Fourteenth Amendment is to secure every person within the State’s jurisdiction against intentional and arbitrary discrimination, whether occasioned by express terms of a statute or by its improper execution through duly constituted agents.’” Sioux City Bridge Co., supra, at 445 (quoting Sunday Lake Iron Co. v. Township of Wakefield, 247 U.S. 350, 352 (1918)).
And this is from the 2008 Engquist decision, which carved out an exception for government employment:
What seems to have been significant in Olech and the cases on which it relied was the existence of a clear standard against which departures, even for a single plaintiff, could be readily assessed. There was no indication in Olech that the zoning board was exercising discretionary authority based on subjective, individualized determinations--at least not with regard to easement length, however typical such determinations may be as a general zoning matter. See id., at 565 (Breyer, J., concurring in result). Rather, the complaint alleged that the board consistently required only a 15-foot easement, but subjected Olech to a 33-foot easement. This differential treatment raised a concern of arbitrary classification, and we therefore required that the State provide a rational basis for it.
While the language is not identical, it is quite similar, as both the IEL and Equal Protection contexts refer to "different" or "differential" or "differentiated" treatment that is "arbitrary."
However you refer to this concept, does it make sense in either the Equal Protection or IEL context? The big difference I see between Equal Protection and IEL non-discrimination standards is the explicit textual limitation in IEL treaties to the class of "nationality." The Equal Protection clause is vague enough that I see how it can go beyond classifications, and thus can deal with individuals. By contrast, it seems to me that classification by nationality is at the heart of most IEL non-discrimination. Without it, the nature of IEL non-discrimination is changed considerably.
As a final point, some people don't even think the "class of one" concept works in the Equal Protection context. Thisis from law prof David Fagundes:
... Olech didn’t generate much reaction, let alone criticism, from commentators, but has always seemed to me to rely on a problematic interpretation of the equal protection clause. There may be a lot of dispute over which and what kind of groups the clause is supposed to protect, but it seems to me that the best reading of the clause is that it was designed to protect groups in the interest of preventing the development of a caste-based society, as opposed to merely shielding individuals from arbitrary exercises of state authority.
I'm not sure what I think about all of this in the Equal Protection context, but I do think this last quote is a very good way to frame the issue in the IEL context: Is IEL non-discrimination about protecting non-nationals from discrimination against them as a class, or is it about "shielding individual foreign investors/traders from arbitrary exercises of state authority"?