From the claimants' submission in the Grand River Enterprises NAFTA Chapter 11 case:
There is simply no room in the language of [the NAFTA Chapter 11 National Treatment and MFN] provisions for reading-in the requirement for an investor to either prove that the measures according less favorable treatment were imposed on the basis of his or her nationality; or to demonstrate that the impact of the measures fell disproportionately on investors of his or her nationality as opposed to those of the host state or another. The Investor’s burden under either Article 1102 or 1103 is to prove that more favorable treatment has been granted to another investor in like circumstances, than that which has been accorded to him.
(para. 239)
... determining whether treatment was more or less favorable does not involve a global comparison of treatment received by foreigners and domestic investors. For example, sometimes measures accord more favorable treatment to a ‘national champion’ enterprise, to the disadvantage of all others (domestic or foreign). Sometimes measures accord more favorable treatment to a chosen group of foreigners and/or domestic enterprises, to the disadvantage of all other competitors. When an individual investor claims ‘treatment no less favorable,’ the analysis is specific to the treatment being accorded to that claimant under the measure, vis-à-vis its competitors.
(para. 254)
I think I understand the claimants' argument here, but I just want to be sure, so let me take an extreme situation to illustrate the impact of this approach. Let's say you have 10 foreign investors and 10 domestic investors (all in "like circumstances"). Country A adopts a measure that is non-discriminatory on its face. However, as it turns out, certain investors do worse than others under the measure. In particular, 9 domestic investors and 1 foreign investor receive less favorable treatment than the other 9 foreign investors and the other 1 domestic investor. Thus, most foreign investors do better under the law than most domestic investors. But that 1 foreign investor who did badly brings a NAFTA Chapter 11 claim alleging a violation of national treatment. As I understand it, the argument here would be that this 1 foreign investor should succeed on its national treatment claim because it is worse off than at least one competitor. Does anyone understand this differently?
I don't usually follow Chapter 11 cases very closely. However, I read a news article about the case and it appeared there would be a de facto discrimination claim, which are always of interest to me, so I decided to check out the submission. This argument immediately jumped out at me. We've been through this issue in the WTO context, and I am pretty sure that we have moved away from the approach the claimants set out here. In several GATT cases and early WTO cases, there were findings to the effect that any less favorable treatment for individual foreign products would result in a violation of GATT Article III, regardless of the overall impact on foreign products as compared to "like" domestic products. However, my sense is that the current WTO approach would focus on the overall impact on foreign goods versus domestic goods. The Appellate Body's reversal of the panel's findings in the Asbestos case was a pretty clear statement on the matter. And the panel in the EC - Trademarks/Geographical Indications case later made this even more explicit. To me, the view expressed in these decisions seems to be that a discriminatory effect on imported products (as a whole) as compared to "like" domestic products (as a whole) is very important, or even required, for a finding of de facto discrimination. Given the evolution of GATT/WTO jurisprudence, I'll be very interested to see what the Chapter 11 arbitrators have to say on the matter.