II. General treaty practice and status
III. Scope of protection
The significant majority of national treatment provisions concerns solely treatment during the post-establishment period (e.g. management, maintenance, use, enjoyment and sale or disposal of investment). Some treaties broaden the scope of the national treatment standard to cover also pre-establishment phases (establishment, acquisition or expansion).4 Treaties covering both pre- and post-establishment periods of investment are predominantly of recent date.5
IV. Limitations and carve-outs
Recent treaties incorporate exceptions under Article XX of GATT 1994.9
The national treatment standard ensures competitive equality and prohibits discriminatory treatment between domestic and foreign investors and investments.10 In general, it is irrelevant whether the discriminatory treatment is prescribed by law (de jure) or exists only in fact (de facto).11 Tribunals instead considered the adverse discriminatory effect of the treatment.12 The prohibited “treatment” is understood not merely to cover a regulatory measure but may also include “the manner in which a State concludes an investment contract or exercises its rights.”13
National treatment provision requires the same treatment for foreign investors as that accorded to domestic or national investors. Some treaty formulations contain further specifications referring to “like circumstances”14 or “like situations”,15 or even narrower “same” or “identical” circumstances,16 with further elaboration by additional criteria. The application is fact17 - and context-specific.18 Some treaties include a list of criteria elaborating on “like circumstances”.19 Tribunals have come up with various considerations that may help to define the term “like” in the relevant treaties.20
The determination of a proper comparator could lead to divergent outcomes. The comparator in case law ranges from a narrow reference to an investor in the same business,21 the same economic sector,22 to a broad reference to all local producers irrespective of the economic sector.23 See further Similarity / In Like circumstances.
VII. Breach and burden of proof
A. Standard of review
A breach of the national treatment standard is established if the treatment of foreigners is less favourable than the treatment accorded to domestic or national investors.24 De jure discriminatory treatment is set out in the laws and regulations of the host State specifically targeting foreigners compared to national investors.25 More common, however, is de facto discrimination resulting from practices having detrimental effect on investors and their investments.26
Various tests have been deployed by arbitral tribunals to determine a violation of the national treatment standard.27 These tests suggest two common issues that the tribunals often seek to establish: (i) the relevant comparator, and (ii) comparison between the treatment accorded to the foreign investor or investment and the domestic comparator.28
B. Standard of proof
C. Burden of proof
A claimant bears the burden of proof.35 The burden of evidence may, however, shift to respondent in certain circumstances.36 Moreover, depending on the content of the treaty provision, a breach can be refuted by demonstration of legitimate government policy rationally explaining and justifying the different treatment.37 An arbitrator suggested that post-factum rationalization of the disparate treatment may not excuse the government’s actions.38
VIII. National treatment and other standards of protection
National treatment provisions, together with most favoured nation provisions and provisions on the prohibition of arbitrary or discriminatory39 measures,40 belong to a group of relative standards, requiring a comparator vis-à-vis the treatment of a foreign investor or investment.41 The fair and equitable treatment standard also includes protection against discriminatory conduct, which in its proper context constitutes a non-contingent obligation.42
Dolzer, R. and Schreuer, C., Principles of International Investment Law, 2nd ed., 2012, pp. 198-206.
Bjorklund, A.K., The National Treatment Obligation, in Yannaca-Small, K. (ed.), Arbitration Under International Investment Agreements: A Guide to the Key Issues, 2nd ed., 2018, pp. 532-561.
McLachlan, C., and Others, International Investment Arbitration: Substantive Principles, 2nd ed., 2017, pp. 336-343.
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