Todd Weiler has written a fascinating book on international investment law. He has done extensive research on negotiating history, which I always enjoy. It's the kind of book where you read each footnote carefully, because there are important nuggets of information in each one.
As much as I am enjoying the book, though, Todd and I have different views on certain issues, and I wanted to challenge him on a couple issues related to national treatment. Here are some passages from pages 434-444 of the book:
Nationality-based discrimination versus effective equality of opportunity
The most common formulation of an IIL TNLF provision calls for a comparison of "treatment no less favorable … in like circumstances." There is not even so much as a hint in such texts that the aim or intent of the State responsible for the impugned measure should be relevant in the determine of prima facie compliance. There is also no mention whatsoever of the concept of nativist protectionism. The obligation presumes that establishment has been or will be granted on a TNLF basis, focusing instead on whether anything has happened to upset the equality of effective opportunity legitimately expected by the foreign investor from the moment of establishment. The nationality of the investor is only relevant in so far as it is necessary to hold the correct nationality in order to qualify to the TNLF offered under the provision … . The plain and ordinary meaning of such provisions forecloses on any attempt to import the anti-cheating function of ITL TNLF provisions and the analysis. It is simply not necessary to determine whether prima facie less favorable treatment was accorded the foreign investors on the basis of his nationality.
It lies for the host state to demonstrate why its having accorded less favorable treatment was appropriate in the circumstances. … The pertinent question is whether there is a legitimate reason as to why the equality of effective opportunity promised in the TNLF measure has not been accorded a result. …
Despite the flurry of IIL arbitrations that have taken place over the past decade, there still have been relatively few awards issued on the construction of TNLF provisions. Most of the handful of cases decided this far has involved NAFTA article 1102 -- which is a good example of a typical IIL NT provision. In each of the NAFTA cases, the respondent State has taken the position that investor must prove discriminatory intent, on the part of the host state, in order to prove that it has received less favorable treatment under the provision. On its face, the provision provides no indication such a requirement could or should exist. … …
Yet another way to think about the spuriousness of the "treatment on the basis of nationality" problematique is to unpack it from the perspective of a practitioner. Should it be necessary to prove that the impugned measure was imposed on the basis of nationality? If the answer is yes, how should one go about identifying such evidence? In the ITL context, the WTO Appellate Body has cautioned against any attempts to "sort through the many reasons legislators and regulators often have for what they do and weigh the relative significance of those reasons to establish legislative or regulatory intent." It has observed how "subjective intentions inhabiting the minds of individual legislators and regulators [should] not bear upon the inquiry, if only because they're not accessible to treaty interpreters." …
In a nutshell, as I read it, Todd argues that national treatment provisions are not about looking for nationality-based discrimination, and should not look at intent as part of the prima facie case.
Let me talk about nationality and intent separately.
Starting with nationality, the first quoted paragraph concludes: "It is simply not necessary to determine whether prima facie less favorable treatment was accorded the foreign investors on the basis of his nationality." In response, let me ask the following question: What is the purpose of this provision if not to root out nationality-based discrimination? I've previously written about the issue of "class of one"-type discrimination. Is that what Todd is after? Any time an individual investor (who happens to be foreign) gets worse treatment than another investor, it should be able to file a claim with an international tribunal? My sense is that "class of one" claims are somewhat controversial in U.S. law. Do we want to elevate them to an international legal obligation? Or should international legal obligations be closely tied to more traditional class-based discrimination obligations such as nationality? Obviously, I prefer the latter, but I'm happy to hear arguments for the former.
In addition, with regard to the proper legal interpretation, it seems to me that when a provision is labelled with "National Treatment", it is pretty clear that only nationality-based discrimination is covered. This phrase indicates that nationality is the basis of comparing the treatment offered. By contrast, if you are doing a "class of one" analysis, the treatment is not tied to nationality (except in the sense that only non-nationals can sue, but that's not tying nationality to treatment, but rather tying nationality to the ability to sue).
Moving to intent, Todd says, "There is not even so much as a hint in such texts that the aim or intent of the State responsible for the impugned measure should be relevant in the determine of prima facie compliance." For me, as I have written previously, the word "treatment" offers a good textual basis for looking at intent. I'll grant that you could also look at "treatment" as only about effect, but I think it's at least a close call.
Furthermore, it seems to me that Todd actually concedes that intent is relevant when he says:
It lies for the host state to demonstrate why its having accorded less favorable treatment was appropriate in the circumstances. … The pertinent question is whether there is a legitimate reason as to why the equality of effective opportunity promised in the TNLF measure has not been accorded a result.
Basically, he says that the the host state can show why the treatment was "appropriate in the circumstances," in the sense of looking for a "legitimate reason" for its impact. But what is this inquiry about if not the intent of the measure? It seems to me that this is nothing more than a call for the defending government to explain the non-protectionist basis for its actions. Now, maybe his point is that intent is not part of the prima facie case, but rather a defense of sorts. This softens his argument considerably, although I'm not sure why this is a better approach than making it part of the prima facie case.
My sense is that the debate about national treatment in trade law is becoming more settled. However, it may be just about to heat up in investment law.