This chapter addresses two obligations commonly included in investment protection treaties and drafted in a contingent manner: national treatment and most-favoured-nation (MFN) treatment. The topic is addressed in four parts: Sections 1 and 2 deal with national treatment, and Sections 3 and 4 deal with most-favoured-nation treatment. Section 1 sets the scene, outlining how national treatment may be expressed in various primary obligations of investment protection law. Section 2 analyses various legal issues that arise in the application of national treatment, dealing in turn with the accepted categories of ‘like circumstances’ and ‘distinctions with treatment’, as well as the less settled issue of ‘justification’. Sections 3 and 4 deal with the MFN treatment obligation, and consider in turn its application to primary obligations and to rules of international dispute settlement.
At one point in time, non-discrimination was the issue in the international law on treatment of aliens and foreign investment. In the late nineteenth and early last centuries, this body of law was shaped primarily by contestation between non-discrimination and the international minimum standard – or, as modern international lawyers would put it, between primary obligations of international law that only require States to conform with internal law, and primary obligations that require States to (also) engage in other conduct.
2001 International Law Commission's (ILC) Articles on State Responsibility for Internationally Wrongful Acts (2001 ILC Articles), Art. 3, Commentary 7
The rule that the characterization of conduct as unlawful in international law cannot be affected by the characterization of the same act as lawful in internal law makes no exception for cases where rules of international law require a State to conform to the provisions of its internal law, for instance by applying to aliens the same legal treatment as to nationals. It is true that in such a case, compliance with internal law is relevant to the question of international responsibility. But this is because the rule of international law makes it relevant, e.g. by incorporating the standard of compliance with internal law as the applicable international standard or as an aspect of it. Especially in the fields of injury to aliens and their property and of human rights, the content and application of internal law will often be relevant to the question of international responsibility.