1 At the WTO's 1996 Singapore Ministerial Conference, the director-general stated that” [i]n today's economy, trade and investment are not merely increasingly complementary, but also increasingly inseparable as two sides of the coin of the process of globalization.” WTO Press Release No. PRESS/42, Foreign Direct Investment Seen as Primary Motor of Globalization, Says WTO Director-General (Feb. 13,1996), at <http://www.wto.org/english/news_e/news_e.htm#archives>.

2 UNCTAD, Investor-State Dispute Settlement and Impact on Investment Rulemaking 3 (2007), UN Doc. UNCTAD/ITE/IIA/2007/3 (“By end 2006, the cumulative number of BITs stood at 2,573.”), available at <http://www.unctad.org/Templates/Page.aspJintItemID=4432&lang=1>.

3 The obligation to provide national treatment essentially prohibits discriminating between foreign and domestic products, investments, or investors.

4 See Henrik, Horn & Petros, Mavroidis, Still Hazy After All These Years: The Interpretation of National Treatment in the GATT/WTO Case-law on Tax Discrimination, 15 Eur. J. Int'l L. 39 (2004)Google Scholar.

5 See Rudolf, Dolzer, National Treatment: New Developments (Dec. 12, 2005)Google Scholar, at <http://www.oecd.org/dataoecoV5/53/36055356.pdf> (participating in the symposium co-organized by ICSID, OECD, and UNCTAD, Making the Most of International Investment Agreements: A Common Agenda).

6 Luke, Peterson, European Mining Investors Mount Arbitration over South African Black Empowerment, Investment Treaty News, Feb. 14, 2007, at 2 Google Scholar, available at <http://www.iisd.org/pdf/2007/itn_febl4_2007.pdf>.

7 See, e.g., Thomas, Waelde, The Discipline of National Treatment in International Investment Law: Boosting Good Governance and Intruding into Domestic Regulatory Space? Google Scholar'(on file with authors); Todd, Weiler, NAFTA Article 1105 and the Principles of International Economic Law, 42 Colum. J.Transnat'l L. 35 (2003)Google Scholar. Though organized under Chapter 11 of the North American Free Trade Agreement (NAFTA), see infra note 13, the tribunals in S. D. Myers v. Canada, Partial Award (Nov. 13, 2000) [hereinafter S.D. Myers Partial Award], and in Pope & Talbot v. Canada, Phase 2 (NAFTA Ch. 11 Arb. Trib. Apr. 10, 2001) [hereinafter Pope & Talbot Phase 2], both extensively referred to GATT/WTO discrimination jurisprudence. Documents pertaining to these NAFTA arbitrations and others are available at <http://naftaclaims.com>.

8 See, e.g., Joel, Trachtman, FD1and the Right to Regulate: Lessons from Trade Law , in UN Conference on Trade & Development, The Development Dimensions of FDI: Policy and Rule-Making Perspectives 189, UN Doc. UNCTAD/ITE/IIA/2003/4 (2003)Google Scholar (at 193, suggesting “caution regarding any efforts to transplant constraints on domestic regulation from the field of international trade law to the field of foreign investment law”) [hereinafter Development Dimensions], available at <http://www.unctad.org/en/docs/iteiia20034_en.pdf>. Some NAFTA tribunals—for example, in Methanex v. United States, Jurisdiction and Merits (NAFTA Ch. 11 Arb. Trib. Aug. 3,2005) [hereinafter Methanex Jurisdiction & Merits]—have also referred to textual differences in this context.

9 Calvin, A. Hamilton & Paula, I. Rochwerger, Trade and Investment: Foreign Direct Investment Through Bilateral and Multilateral Treaties, 18 N.Y. Int'l L. Rev. 1, 36-38 (2005)Google Scholar; Gaetan, Verhoorsel, The Use of Investor-State Arbitration Under Bilateral Investment Treaties to Seek Relief for Breaches of WTO Law, 6 J. Int'l Econ. L. 493, 493-96 (2003)Google Scholar.

10 Panel Report, United States—Investigation of the International Trade Commission in Softwood Lumber from Canada, Recourse by Article 21.5 of the DSU by Canada, para. 2.2, WT/DS277/RW (Nov. 15, 2005) (adopted May 9, 2006). Documents on W T O disputes are available at <http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm>.

11 Notice of Arbitration, Terminal Forest Products, Ltd. v. United States (NAFTA Ch. 11 Mar. 31,2004) (later consolidated with Canfor Corp. v. United States and Tembec v. United States (NAFTA Ch. 11 Consolidation Trib. Sept. 7, 2005)).

12 Appellate Body Report, Mexico—Measures on Soft Drinks & Other Beverages, WT/DS308/AB/R (adopted Mar. 24, 2006).

13 Dec. 17, 1992, Can.-Mex.-U.S., 32 ILM 289 & 605 (1993).

14 In re Request for Consolidation by Mexico of the Claims in Corn Products Int'l, Inc. v. Mexico, Order (NAFTA Ch. 11 Consolidation Trib.May 20,2005); see Joost, Pauwelyn, Adding Sweeteners to Softwood Lumber: The WTO NAFTA ‘Spaghetti Bowl'Is Cooking, 9 J. Int'l Econ. L. 1, 3-4 (2006)Google Scholar.

15 See Corn Products International Press Release, CPO Updates NAFTA Proceedings, at <http://www.cornproducts.com/news/archives>.

16 Agreement on Trade-Related Investment Measures [hereinafter TRIMs], Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization [hereinafter WTO Agreement], Annex 1A, in World Trade Organization, The Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts 143 Google Scholar [hereinafter The Legal Texts], reprinted in 33 ILM 81 (1994). WTO legal texts are available online at <http://www.wto.org/english/docs_e/legal_e/legal_e.htm>.

17 General Agreement on Trade in Services, Apr. 15,1994, W T O Agreement, supra note 16, Annex 1B in The Legal Texts, supra note 16, at 325, reprinted in 33 ILM 1168 (1994) [hereinafter GATS]. Despite the obvious connection between TRIMs and international investment, it was actually the GATS that made more substantial inroads to including foreign direct investment (FDI) within the WTO's liberalization agenda. Article 12(c) of the GATS defines trade in services to include a service supplier's “commercial presence in the territory of any other member,” explicitly bringing FDI in the services industry into the fold. Under the Agreement, however, countries are required only to provide market access and national treatment in service sectors that they have specifically listed in the schedules annexed to the Agreement, and even in these sectors they are allowed to specify exceptions for FDI. GATS Arts. XVI, XVII. These escape hatches have severely curtailed the effectiveness of GATS in liberalizing FDI. See Eric, M. Burt, Note and Comment, Developing Countries and the Framework for Negotiations on Foreign Direct Investment in the World Trade Organization, 12 Am. U. J. Int'l L. & Pol'y 1015, 1030-40 (1997)Google Scholar (discussing the limitations of GATS and TRIMS that developing-nation negotiators succeeded in obtaining).

18 2004 U.S. Model Bilateral Investment Treaty, at <http://www.state.gov/documents/organization/38710.pdf> [hereinafter U.S. Model BIT].

19 See infra notes 37-42 and accompanying text.

20 See, from a different angle, Federico, Ortino, From “Non-discrimination “to “Reasonableness “: A Paradigm Shift in International Economic Law? (Jean Monnet Working Paper No. 01/05, Apr. 2005)Google Scholar, at <http://ssrn.com/abstract=922524>.

21 Sornarajah, M. The International Law on Foreign Investment 209 (2d ed. 2004)Google Scholar.

22 For an elaboration on how modern international law on nondiscrimination originates in the economic sphere of international law disciplines on the treatment of aliens, see Sandra, Fredman, Discrimination Law (2002)Google Scholar.

23 On the reciprocal nature of trade obligations, see Joost, Pauwelyn, A Typology of Multilateral Treaty Obligations: Are WTO Obligations Bilateral or Collective in Nature? 14 Eur. J. Int'l L. 907 (2003)Google Scholar.

24 Sornarajah, supra note 21, at 18-22.

25 Thomas, L. Brewer & Stephen, Young, The Multilateral Investment System and Multinational Enterprises 56 (1998)Google Scholar.

26 UN Conference on Trade & Development, Fair and Equitable Treatment 48, UN Doc. UNCTAD/ITE/IIT/11 (Vol. Ill) (1999), available at <http://www.unctad.org/en/docs/psiteiitdllv3.en.pdf>.

27 Donald, R. Shea, The Calvo Clause: A Problem of Inter-American and International Law and Diplomacy 17-19 (1955)Google Scholar.

28 UN Conference on Trade & Development, National Treatment 7, UN Doc. UNCTAD/ITE/HT/11 (Vol. IV) (1999) [hereinafter National Treatment], available at <http://www.unctad.org/en/docs/psiteiitdllv4.en.pdf>.

29 See, e.g., GA Res. 5217 (Dec. 14, 1962).

30 See President George H. W. Bush's January 21, 1993, Letter of Submittal to the U.S. Senate for the 1995 Argentina-U.S. BIT, S. Treaty Doc. No. 103-3 (1995):

31 Brewer & Young, supra note 25, at 113.

32 UN Conference on Trade & Development, Trends in International Investment Agreements: An Overview 29-30, UN Doc. UNCTAD/ITE/IIT/13 (1999), available at <http://www.unctad.org/en/docs/iteiitl3_en.pdf>.

33 See supra note 2.

34 See NAFTA Free Trade Commission, Notes of Interpretation of Certain Chapter 11 Provisions (July 31, 2001), at <http://www.naftaclaims.com/files/NAFTA_Comm_1105_Transparency.pdf>, where the three NAFTA governments limited the scope of NAFTA Article 1105 (“Minimum Standard of Treatment in Accordance with International Law”). See also U.S. Model BIT, supra note 18 (limiting, for example, the meaning of indirect expropriation in Annex B); 2004 Canada Model BIT, at <http://www.naftaclaims.com/files/Canada_Model_BIT.pdf> (for example, setting out General Exceptions in Article X related to, inter alia, public health, the conservation of exhaustible natural resources, national security, and cultural industries).

35 See, for example, Bolivia's letter of withdrawal from ICSID in May 2007. Bolivia Withdraws from ICSID, Latin Law., May 22, 2007, at <http://www.americasnet.net/news/Bolivia_ICSID.pdf>.

36 See Joost, Pauwelyn, The Transformation of World Trade, 104 Mich. L. Rev. 1 (2005)Google Scholar.

37 General Agreement on Tariffs and Trade, Oct. 30,1947, TIASNo. 1700,55 UNTS 194 [hereinafter GATT]. Importantly, from 1947 onward, the objective of trade liberalization was not an end in itself, but rather, as stated in the GATT preamble, a means toward the higher goal of “raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand.” In 1994, the preamble to the W TO Agreement, supra note 16, added to this goal the “objective of sustainable development, seeking both to protect and preserve the environment … consistent with … different levels of economic development.”

38 Kyle, Bagwell & Robert, W. Staiger, The Economics of The World Trading System (2002)Google Scholar.

39 See Bernard, Hoekman & Michael, Kostecki, The Political Economy of The World Trading System (1995)Google Scholar.

40 WTO Agreement, supra note 16, pmbl.

41 In support, see Trachtman, supra note 8, and Alan, O. Sykes, Public v. Private Enforcement of International Economic Law: Standing and Remedy, 34 J. Legal Stud. 631, 644 (2005)Google Scholar.

42 Only more recent U.S. and Canadian BITs, as well as NAFTA Chapter 11, go beyond investment protection and include investment liberalization. See National Treatment, supra note 28, at 9.

43 Brewer & Young, supra note 25, at 30; Todd, S. Shenkin, Trade-Related Investment Measures in Bilateral Investment Treaties and the GATT: Moving Toward a Multilateral Investment Treaty, 55 U. Pitt. L. Rev. 541, 548-49 (1994)Google Scholar; Kenneth, J. Vandevelde, Investment Liberalization and Economic Development: The Role of Bilateral Investment Treaties, 36 Colum. J. Transnat'l L. 501, 512 & n.34 (1998)Google Scholar.

44 Preamble to the Germany-Pakistan BIT. Like trade agreements, investment treaties do not portray the promotion and protection of investment as ends in themselves. Rather, in the words of the preamble to the U.S. Model BIT, supra note 18, protection and promotion of FDI are means in pursuit of the higher goal of “maximizing] effective utilization of economic resources and improving] living standards … consistent with the protection of health, safety, and the environment, and the promotion of internationally recognized labor rights.”

45 Jeswald, W. Salacuse & Nicholas, P. Sullivan, Do BITs Really Work? An Evaluation of Bilateral Investment Treaties and Their Grand Bargain, 46 Harv. Int'l L.J. 67, 74-77 (2005)Google Scholar.

46 Andrew, T. Guzman, Why LDCs Sign Treaties That Hurt Them: Explaining the Popularity of Bilateral Investment Treaties, 38 Va. J. Int'l L. 639, 669-74 (1998)Google Scholar (discussing how the incentive to sign a BIT is different for individual developing countries compared to developing countries as a group).

47 As Thomas Walde noted in his separate, dissenting opinion in Thunderbird v. Mexico:

Thunderbird v. Mexico, Award, Sep. Op., Walde, Arb., para. 4 (NAFTA Ch. 11 Arb. Trib. Jan. 26, 2006) [hereinafter Walde Dissent].

48 In recent times the argument could be made that when large multinationals invest in small developing countries, the asymmetry may sometimes work the other way. If so, the party needing protection is not so much the foreign investor, but rather the host country.

49 As noted in Jan, Paulsson, Denial of Justice in International Law 149 (2005)Google Scholar: “Whatever the rosy rhetoric about the equality of treatment of nationals and foreigners, the very fact of being foreign creates an inequality. The foreigner's obvious handicap—his lack of citizenship—is usually compounded by vulnerabilities with respect to many types of influence: political, social, cultural.”

50 Sykes, supra note 41, at 632. In support, see Konrad von, Moltke & Howard, Mann, Misappropriation of Institutions: Some Lessons from the Environmental Dimension of the NAFTA Investor-State Dispute Settlement Process, 1 Int'l Envtl. Agreements 103, 110 (2001)Google Scholar: “it is all but impossible to conceive of an international investment regime that does not incorporate some form of investor-initiated dispute settlement. The reason for this lies in the fact that international investment disputes will generally pit an individual interest against a public one ….”

51 Joost, Pauwelyn, Enforcement and Countermeasures in the WTO: Rules Are Rules—Toward a More Collective Approach, 94 AJIL 335, 336-37 (2000)Google Scholar.

52 The preamble to the U.S. Model BIT, supra note 18, stresses “the importance of providing effective means of asserting claims and enforcing rights with respect to investment under national law as well as through international arbitration.”

53 Under NAFTA Chapter 11, for example, tribunals can award only monetary damages or restitution of property. In the latter case, however, under Article 1135:1 (b), the award “shall provide that the disputing party may pay monetary damages … in lieu of restitution.”

54 Whereas market access and liberalization are at the center of trade agreements, in investment treaties they are absent or, at best, only newly emerging concerns (and limited largely to U.S. and Canadian BITs). See National Treatment, supra note 28, at 9.

55 This view persists even though economic theory demonstrates that imports are generally “good” since they benefit consumers more than they harm import-competing producers.

56 In support, see Trachtman, supra note 8, at 191-92: “there seems to be less political pressure in host countries to construct barriers to investment than there is to construct barriers to imports of goods and services.” He nevertheless mentions a number of reasons for “economic nationalism” in the investment area. See also Bernard, Hoekman & Carlos, Primo Braga, Protection and Trade in Services: A Survey (World Bank Policy Research Working Paper No. WPS 1747), at 21 (Apr. 1997)Google Scholar, at <http://www-wds.worldbank.org> (“ [I] t is generally assumed that sectorspecific factors of production employed in inefficient protected industries will oppose liberalization of market access. In the services-context [that is, FDI in the services industry] this may not be the case. To the extent that establishment is the most efficient mode of contesting a service market, sector-specific labor may be less opposed to liberalization, insofar as it is expected that net employment in the sector concerned will not change much upon liberalization due to the establishment of foreign-owned firms.”).

57 See Sykes, supra note 41 (“[F]or any developing country that does not plan to engage in significant expropriation or … prohibited activity, a credible promise of monetary compensation to investors imposes few if any offsetting costs…. A promise of monetary compensation to investors is thus a cheap commitment device for states with benign intentions toward investors …. “).

58 Using the idea that BITs are a low-cost commitment not to take acts that the national government is unlikely to want to undertake anyhow, Sykes, supra note 41, has argued against a “regulatory takings” doctrine under NAFTA Chapter 11.

59 The product itself can, of course, be dangerous, unhealthy, or socially unacceptable and may require restrictions by the importing country. But any harm (for example, to the local environment) caused in the production process abroad is, in principle, not the concern or risk of the importing country.

60 As quoted in Thomas, Waelde & Abba, Kolo, Environmental Regulation, Investment Protection and ‘Regulatory Taking in International Law, 50 Int. & Comp. L.Q. 811,836 n. 112 (2001)Google Scholar, Rex Zedalis notes how the differences in risk between trade and investment have important repercussions for the non-discrimination principle:

61 See Sornarajah, M., Right to Regulate and Safeguards , in Development Dimensions, supra note 8, at 205 Google Scholar: “Investment is more intrusive than trade in goods. The granting of rights to foreign investment is necessarily more erosive of the sovereignty of the host State than are rights granted in connection with international trade…. Foreign investment is an activity that takes place within the borders of a State.”

62 Or as one commentator put it: “FDI is likely to have a far broader range of potential impacts on the host State and host community than the act of trading most products.” Moreover, the “different impacts of trade compared with investments… means that one cannot assume that the rules of one field can simply be transferred to the other.” Howard, Mann, The Right of States to Regulate and International Investment Law: A Comment , in Development Dimensions, supra note 8, at 211, 218-19 Google Scholar.

63 The contrast we offer is no doubt stylized since, as we pointed out earlier, modern U.S. and Canadian BITs go beyond protection of existing investments to include establishment or entry of new investments (that is, liberalization). Parties' interests in investment treaties are also increasingly aligned—as they are in trade agreements— since the once clear distinction between capital-importing and capital-exporting nations is becoming blurred (UK-India or U.S.-China investments are, for example, no longer a one-way street). Moreover, the trade regime has recently come to include rules that go beyond a reciprocal exchange of market access, such as minimum standards for intellectual property protection. Like investment standards, these new trade rules focus on individual holders of intellectual property rights, albeit without giving those holders of rights direct standing before the WTO. These new developments must be taken into account and may influence treaty interpretation.

64 For good examples, see Ortino, supra note 20, Horn & Mavroidis, supra note 4, and Lothar, Ehring, De Facto Discrimination in WTO Law: National Treatment and Most-Favoured-Nation Treatment—or Equal Treatment? 36 J. World Trade 921 (2002)Google Scholar.

65 See supra note 37.

66 GATS, supra note 17, Art. XVII.

67 GATT, supra note 37, Art. III:4 (emphasis added). Article III:2 contains a similar provision for domestic taxes.

68 As one GATT panel put it: “ [T]he intention of the drafters of the Agreement was clearly to treat the imported products in the same way as the like domestic products once they had been cleared through customs. Otherwise indirect protection could be given.” Panel Report, Italian Discrimination Against Imported Agricultural Machinery, para. 11, BISD 7S/60 (adopted Oct. 23, 1958).

69 Appellate Body Report, Japan—Taxes on Alcoholic Beverages, at 16-17, WT/DS8/AB/R, WT/DS10/AB/R, & WT/DS11/AB/R (adopted Nov. 1, 1996) (footnotes omitted) [hereinafter Japan—Alcohol].

70 Id. One delegate, quoted id. at 17 n.39, who was involved in the original negotiations of the GATT national treatment provision summarized the provision's dual objective as follows:

71 Both quotes are taken from Richard Gardner, Sterling-Dollar Diplomacy: The Origins and The Prospects of Our International Economic Order 8, 19 (1957).

72 See Arthur, Dunkel & Frieder, Roessler, The Ranking of Trade Policy Instruments Under the GA TT Legal System (on file with authors)Google Scholar; Alan, Sykes, Regulatory Protectionism and the Law of International Trade, 66 U. Chi. L. Rev. 1, 10-13 (1999)Google Scholar.

73 See GATT, supra note 37, Art. III.

74 See id., Art. II.

75 We use 1987 as a tentative cutoff date because it was the year in which the first dispute over de facto discrimination was brought (namely, the first Japan—Alcohol case).

76 Agreement on Technical Barriers to Trade, Apr. 15, 1994, WTO Agreement, supra note 16, Annex 1A, in The Legal Texts, supra note 16, at 138 [hereinafter TBT Agreement].

77 Agreement on the Application of Sanitary and Phytosanitary Measures, Apr. 15, 1994, WTO Agreement, supra note 16, Annex 1A, in The Legal Texts, supra note 16, at 69 [hereinafter SPS Agreement].

78 A prominent example is internal taxation of alcoholic beverages, the subject of three WTO disputes centered on national treatment under GATT Article III:2.

79 Methanex Jurisdiction & Merits, supra note 8.

80 Japan—Alcohol, supra note 69, at 15 & n. 34 (referring to United States—Taxes on Petroleum and Certain Imported Substances, para. 5.1.9, GATT B.I.S.D. (34th Supp.) at 136 (adopted June 17, 1987)).

81 For a similar narrative focused on European Community law, see Weiler, J.J.H., Epilogue: Towards a Common Law of International Trade , in The EU, The WTO and The NAFTA: Towards a Common Law of International Trade? (Weiler, J. J. H. ed., 2001)Google Scholar.

82 Appellate Body Report, Korea—Measures Affecting Imports of Fresh, Chilled and Frozen Beef, para. 133, WT/DS161/AB/R (Dec. 11, 2000) (adopted Jan. 10, 2001) [hereinafter Korea—Beef].

83 GATT, supra note 37, An. XX.

84 See discussion supra note 68 and accompanying text.

85 Japan—Alcohol, supra note 69.

86 Panel Report, United States—Restrictions on Imports of Tuna, DS21/R-39S/155 (circulated Sept. 3,1991).

87 On the crucial distinction in trade law between market access and domestic regulations, see Joost, Pauwelyn, Rien ne Va Plus? Distinguishing Domestic Regulation from Market Access in GA TT and GATS, 4 World Trade Rev. 131 (2005)Google Scholar.

88 The exceptions of GATT Article XX could potentially have provided a justification for the violation but were found not to be applicable in the Tuna/Dolphin cases. See Panel Report, United States—Restrictions on Imports of Tuna (circulated Aug. 16,1991), GATTB.I.S.D. (39th Supp.) at 155 (1993), reprinted in 30 ILM 1594 (1991); Panel Report, United States—Restrictions on Imports of Tuna, GATT Doc. DS29/R (circulated June 16, 1994), reprinted in 33 ILM 839 (1994).

89 Panel Report, United States—Measures Affecting Alcoholic and Malt Beverages, DS23/R-39S/206 (adopted June 19, 1992).

90 Panel Report, United States—Taxes on Automobiles, DS31/R (circulated Oct. 11, 1994).

91 GATT, supra note 37, Art. 111:1.

92 See Article 3.2 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, Apr. 15, 1994, W T O Agreement, supra note 16, Annex 2, in The Legal Texts, supra note 16, which refers to the “customary rules of interpretation of public international law.” Articles 31 and 32 of the Vienna Convention on the Law of Treaties require that interpretation start with the ordinary meaning of treaty terms and refer only in a last instance to preparatory works.

93 Appellate Body Report, European Communities—Measures Affecting Asbestos, para. 99, WT/DS135/R (adopted Apr. 5, 2001) [hereinafter EC—Asbestos].

94 Panel Report, Mexico—Tax Measures on Soft Drinks and Other Beverages, para. 8.106, W T/DS308/R (Oct. 7, 2005) (adopted Mar. 24, 2006).

95 Korea—Beef, supra note 82, para. 137.

96 Id

97 See Robert, E. Hudec, GATT/WTO Constraints on National Regulation: Requiem for an “Aim and Effects” Test, 32 Int'l Law. 619, 632-33 (1998)Google Scholar (lamenting the Appellate Body's decision in EC—Bananas for its foreclosure of the use of an “aims and effects” test for Article III:4). But see Amelia, Porges & Joel, P. Trachtman, Robert Hudec and Domestic Regulation: The Resurrection of Aims and Effects, 37 J. World Trade 783, 794-97 (2003)Google Scholar (considering whether the Appellate Body's decision in EC—Asbestos may revive the possibility of using an “aims and effects” test for Article 111:4).

98 GATT, supra note 37, Part. II, Art. XX.

99 Hudec, supra note 97, at 636-38.

100 Appellate Body Report, Chile—Taxes on Alcoholic Beverages, para. 71, WT/DS87/AB/R (adopted Jan. 12, 2000) [hereinafter Chile—Alcohol].

101 Id.

102 Appellate Body Report, EC—Bananas, para. 216, WT/DS27/AB/R (adopted Sept. 25, 1997) (“[A] determination of whether there has been a violation of Article III:4 does not require a separate consideration of whether a measure ‘afford[s] protection to domestic production'.”).

103 EC—Asbestos, supra note 93.

104 Id, para. 100.

105 See, e.g., NAFTA, supra note 13, 32 ILM at 639.

106 Shenkin, supra note 43, at 549.

107 SHEA, supra note 27, at 17-19.

108 See supra text accompanying note 30.

109 See supra notes 31-32 and accompanying text.

110 See Todd, Weiler, 2002 in Review: From Expropriation to Non-discrimination, 2002 Y.B. Int'l Envtl. L. Google Scholar; Charles, H. Brewer II, Case Report: S.D. Myers, Inc. v. Canada, 98 AJIL 339, 344. (2004)Google Scholar.

111 With NAFTA investment disciplines applying also to Canadian and Mexican investments in the United States, the shifting positions around the Calvo doctrine (or national treatment) have now come full circle. Whereas the United States was an early supporter of minimum standards against the Calvo doctrine or national treatment, the United States itself has now raised questions about the minimum standard. It does not want the minimum standard to support a requirement that foreigners invested in the United States receive treatment that is better than the treatment that U.S. investors receive. In other words, now that the minimum standard increasingly applies also to the United States, the country is shifting positions in favor of “mere” national treatment. See, e.g., Bipartisan Trade Promotion Authority Act of 2002, 19 U.S.C. §3802(b)(3) (Supp. V2005) (expired July 1, 2007).

112 See Sornarajah, supra note G\, at 209 (“In the case of developing countries, most of the litigation has arisen from expropriation and not from violation of standards of treatment. The experience of the litigation under NAFTA between Canada and the United States, however, has largely concerned the treatment provisions.”).

113 The national treatment provision within NAFTA's Chapter 11 is especially broad: “Each Party shall accord to investments or investors of another Party treatment no less favorable than that it accords, in like circumstances, to investments of its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments.”

114 As an UNCTAD study pointed out:

National Treatment, supra note 28, at 9 (emphasis added).

115 See supra text accompanying notes 76 - 78.

116 National Treatment, supra note 28, at 1.

117 The S.D. Myers tribunal, for example, found that breach of national treatment under NAFTA Article 1102 also entails breach of the fair and equitable treatment standard under NAFTA Article 1105. The tribunal held that the latter standard is breached when “an investor has been treated in such an unjust or arbitrary manner that the treatment rises to the level that is unacceptable from the international perspective.” S.D. Myers Partial Award, supra note 7, para. 263.

118 As in the trade context, where complainants may simply skip national treatment and go directly to the more stringent “necessity” and sound-science tests under the TBT and SPS Agreements, complainants in the investment context may want to avoid the more controversial national treatment discipline and turn, instead, to the more broadly phrased and interpreted fair and equitable treatment standard.

119 Specific BIT obligations regarding expropriation also reflect this broad principle of nondiscrimination by including the requirement that expropriations not be “discriminatory.” See generally Maniruzzaman, A. F. M., Expropriation of Alien Property and the Principle of Non-discrimination in International Law of Foreign Investment: An Overview, 8 J. Transnat'l L. & Pol'y 57 (1998)Google Scholar.

120 As the representative of Indonesia put it at the negotiations of Article 2.3 of the 1966 International Covenant on Economic, Social and Cultural Rights (an article that reserves the right of developing countries to “determine to what extent they would guarantee the economic rights recognized in the present Covenant to non-nationals”):

121 May 9, 1995 (emphasis added), at <http://www.unctad.org/sections/dite/iia/docs/bits/netherlands_southafrica.pdf>.

122 Waste Management, Inc. v. Mexico, Award, para. 98 (Apr. 30, 2004) (emphasis added).

123 As one recent investment tribunal noted, “The purpose of [national treatment in the U.S.-Egypt BIT] is to promote foreign investment and to guarantee the foreign investor that his investment will not because of his foreign nationality be accorded a treatment less favourable than that accorded to others in like situations.” Champion Trading Co. v. Arab Republic of Egypt, ICSID Case No. ARB/02/9, para. 126 (Oct. 27, 2006). Materials on arbitrations before the International Centre for Settlement of Investment Disputes (ICSID) are available at <http://www.worldbank.org/icsid/cases/cases.htm>.

124 The absence of proof of actual harm will mitigate, however, the degree of retaliation that a winning WTO member can impose in the event of noncompliance.

125 See supra text accompanying notes 50-53.

126 NAFTA, supra note 13,32ILM at 639 (emphasis added). Note, interestingly, that the WTO's TRIMs agreement, supra note 16, Art. 1, has a similar requirement (“[TRIMs] applies to investment measures related to trade in goods only” (emphasis added)).

127 More specifically, in Methanex, supra note 8, the United States had argued that the tribunal lacked jurisdiction because the challenged measure, a ban on MTBE, did not sufficiendy “relate to” Methanex. It claimed a lack of relationship for two reasons. First, Methanex did not produce the banned substance MTBE, but rather methanol, which is only an ingredient of MTBE. Second, to the extent that the ban on MTBE affected methanol producers, it affected both foreign and U.S. methanol producers (indeed, 47 percent of methanol producers in the United States were domestic at the time of the Methanex case). See Methanex Jurisdiction & Merits, supra note 8, pt. IV, ch. B, para. 18; Todd, Weiler, Methanex Corp. v. U.S.A.—Turning the Page on NAFTA Chapter Eleven:? 6 J. World Investment & Trade 903, 906 (2005)Google Scholar.

128 Methanex Jurisdiction & Merits, supra note 8, pt. IV, ch. E, para. 22.

129 Methanex Corp. v. United States, Preliminary Award, Jurisdiction and Admissibility, para. 138 (Aug. 7, 2002).

130 For example, Weiler , supra note 127, at 906, argues that “technically, [the U.S.] argument was not based upon NAFTA Article 1101 [“related to”] but, rather, upon the United States' reading of Article 1102 [national treatment].” He also notes, id.:

131 That said, counterexamples exist in both regimes: many antidumping or subsidy disputes at the WTO focus on one or a limited number of exporters; recent investment disputes such as Methanex, Corn Products, see supra note 14, and Foresti, see infra note 187, target laws of general application (a prohibition on MTBE, tax on certain sweeteners, and affirmative action for blacks, respectively). These cases illustrate the recent convergence between trade and investment regimes.

132 See Methanex Jurisdiction & Merits, supra note 8, pt. IV, ch. B, paras. 34-37; Occidental Exploration & Prod. Co. v. Republic of Ecuador, infra note 151, para. 176; Pope & Talbot Phase 2, supra note 7, para. 57.

133 Methanex Jurisdiction & Merits, supra note 8, pt. IV, ch. B, paras. 34-37.

134 Pope & Talbot Phase 2, supra note 7, para. 78 n.73. The tribunal refers here to page 22 of the 1993 OECD study National Treatment for Foreign-Controlled Enterprises. This OECD statement was given considerable importance because national treatment is part of the OECD Declaration on International Investment and Multinational Enterprises (Guideline II), at <http://www.oecd.org>, a declaration that has been ratified by all thirty OECD members and ten nonmembers.

135 Pope & Talbot Phase 2, supra note 7, para. 79 (emphasis added).

136 But see the new trend discussed supra text accompanying notes 100-04 and infra text accompanying notes 189-91.

137 S.D. Myers Partial Award, supra note 7, para. 248.

138 Id, para. 246.

139 NAFTA Article 2101(1), supra note 13, explicitly provides that GATT Article XX is incorporated into certain chapters of the NAFTA, including those governing trade in goods (Part 2), “except to the extent that a provision of that Part applies to … investment.”

140 S.D. Myers Partial Award, supra note 7, para. 250.

141 Id., para. 255.

142 Pope & Talbot Phase 2, supra note 7, paras. 18-29.

143 Id, para. 78.

144 The tribunal concluded that Canada was able to rebut the presumption that it was discriminating against Pope & Talbot based upon its nationality. The tribunal noted that the United States had made a final decision to impose countervailing duties only upon the four provinces covered by Canada's quota regime and that Canada's decision to include only those provinces was therefore “reasonably related to … removing the threat of [countervailing duty] actions.” Id., para. 87. The measure drew a legitimate distinction between companies in threatened versus nonthreatened provinces, with the consequence that companies in nonthreatened provinces were not in “like circumstances” with Pope & Talbot. Id., para. 88. Only domestic companies residing within the threatened provinces could be compared to Pope & Talbot, and since those companies were equally disadvantaged, the measure could not “reasonably be said to be motivated by discrimination outlawed by Article 1102.” Id., para. 87.

145 Feldman v. Mexico, ICSID Case No. ARB(AF)/99/l, Award, para. 181 (Dec. 16, 2002).

146 Id.

147 Id, para. 170.

148 Id.

149 Id, para. 183.

150 Id, para. 184.

151 Occidental Exploration & Prod. Co. v. Republic of Ecuador, Award, para. 173 (London Ct. Int'l Arb. July 1, 2004), at <http://www.investmentclaims.com/decisions/Occidental-Ecuador-FinalAward-lJul2004.pdf>.

152 Id, para. 125.

153 Id, para. 168.

154 Id, para. 34.

155 Id, para. 172.

156 Id, para. 171.

157 Id, para. 176.

158 Id, para. 141.

159 Id., paras. 175-76 (emphasis added).

160 Methanex Jurisdiction & Merits, supra note 8.

161 Id., pt. II, ch. D, para. 3.

162 Id, para. 14.

163 Id, para. 19.

164 Id pt. IV, ch. B.para. 6.

165 Id, para. 14.

166 As Canada explained in one dispute:

167 For a recent decision using the “same economic or business sector” test within its “like circumstances” analysis— this time under the most-favored-nation (MFN) clause of a BIT—see Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award, para. 371 (Sept. 11, 2007).

168 In a recent dispute, all three NAFTA governments argued that “pursuant to Article 1102 Claimant needs to prove that the government had a direct intention to harm the foreign investor because it is foreign.” Wälde Dissent, supra note 47, para. 1.

169 The one exception is Methanex Jurisdiction & Merits, supra note 8, pt. IV, ch. B, para. 12 (emphasis added), where the tribunal did require discriminatory intent: “In order to sustain its claim under Article 1102(3), Methanex must demonstrate, cumulatively, that California intended to favour domestic investors by discriminating against foreign investors and that Methanex and the domestic investor supposedly being favored by California are in like circumstances.” Yet this standard may well be an aberration based on how the case was pleaded. Methanex itself had stipulated that California's ban on MTBE “related to” its investment only if the ban was intentionally aimed at harming Methanex as a foreign company.

170 The tribunal in the recent dispute, Siemens v. Argentina, summarized the current state-of-play on discriminatory intent as follows:

171 The Appellate Body has held:

172 See, e.g., Pope & Talbot Phase 2, supra note 7, paras. 43-45.

173 NAFTA, supra note 13, 32 ILM at 639.

174 Methanex Jurisdiction & Merits, supra note 8, pt. IV, ch. B, para. 21.

175 Pope & Talbot Phase 2, supra note 7, paras. 43-45.

176 Id, para. 57.

177 Id., para. 79.

178 Id.

179 Examples can be found in the S.D. Myers and Feldman awards. See supra notes 137-41,146-50, and accompanying text.

180 See supra notes 127-33, 160-65, and accompanying text.

181 In Thunderbird, the majority did not find a national treatment violation even though the dissenting arbitrator was “able to identify ‘discriminatory elements' in the greater energy, focus and effectiveness of the enforcement activities by [Mexican authorities] against Thunderbird—which had arranged (or at least tried to arrange) a clearance of its activities as compared to the main and most successful Mexican competitor, Mr. Guardia (who had always taken a non-cooperative approach).” Walde Dissent, supra note 47, para. 2.

182 In UPS, as in Thunderbird, the majority found no national treatment violation, see UPS Award, supra note 166, paras. 87-120, although the dissenting arbitrator in UPS did find “the basic elements of a violation of Article 1102” (Sep. Statement, Cass, Arb., para. 133) [hereinafter Cass Dissent].

183 See supra notes 127-33, 160-65, and accompanying text. What is perhaps most worrisome for investors is that both the Methanex and Thunderbird awards forced the complaining investors to pay most of the arbitration costs, including part of the legal fees of the defending government.

184 Methanex Jurisdiction & Merits, supra note 8, Pt. IV, ch. D, para. 7. Similarly, the U.S. Model BIT, supra note 18, Annex B, Art. 4(b), specifies: “Except in rare circumstances, non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, and the environment, do not constitute indirect expropriations.”

185 NAFTA, supra note 13, 32 ILM at 639.

186 As Todd Weiler, supra note 127, at 915 (footnote omitted), has pointed out: “Simply put, to understand whether a domestic and a foreign investor are suitable comparators requires one to understand the circumstances of the measure as imposed upon them. In some cases, it will matter what kind of products the investors make; in others it will not.”

187 See Foresti v. South Africa, ICSID Case No. ARB(AF)/07/l (registered Jan. 8, 2007)

188 As Joel Trachtman pointed out, supra note 8, at 196, “simply examining whether any two competing products are treated differently, anti-discrimination rules would inappropriately invalidate much valid regulation.”

189 Chile—Alcohol, supra note 100, para. 71.

190 Appellate Body Report, Dominican Republic—Cigarettes, para. 96, WT/DS302/AB/R (adopted May 19, 2005).

191 Panel Report, EC—Biotech Products, para. 7.2514, WT/DS291/R (adopted Nov. 21, 2006).

192 This is not say that no presumptions at all should be used in national treatment examinations under investment law. Presumptions are needed since de facto discrimination can, by definition, never be proven 100 per cent. If national treatment means anything different from the nondiscrimination component of fair and equitable treatment, presumptions must be made. Adjudicators should not make presumptions as quickly or as easily, however, as they do under trade law.

193 Substantive Ecuadorian tax law prevented the tribunal from exploring this issue. See supra note 158 and accompanying text.

194 UPS Award, supra note 166, paras. 87-120. Th e same tribunal, id., paras. 173 - 81, also referred to the universal service requirement imposed on Canada Post as an element that put it in different circumstances than private operators such as UPS or, for that matter, Canadian courier companies competing with UPS. Although the tribunal was right to refer to these broader regulatory concerns, it is unfortunate, even troubling, that it did not even allude to economic competition. See Cass Dissent, supra note 182, paras. 18-26.

195 But see supra note 192.

196 As noted by the majority in UPS v. Canada, supra note 166, para. 84, the “legal burden” of proving a national treatment violation under NAFTA Article 1102 is one “that rests squarely with the Claimant. That burden never shifts to the Party, here Canada.” Ronald Cass, see Cass Dissent, supra note 182, para. 17, however, would have shifted the burden of proof once UPS had established a competitive relationship, similar to what traditionally happens in WTO jurisprudence. Not surprisingly, many host countries have argued along similar lines. See, e.g., Government of Canada Rejoinder, para. 48, UPS Award, supra note 166; Methanex v. United States, Rejoinder of Respondent United States of America, para. 179 (Apr. 23, 2004), Methanex Jurisdiction & Merits, supra note 8.

197 See supra note 187 and accompanying text.

198 Chile—Alcohol, supra note 100, para. 72 (emphasis added).

199 An example is the GATT exception for conservation of exhaustible natural resources. GATT, supra note 37, Art. XX(g).

200 Surprising consequences may also follow if the nexus required within national treatment itself is something less than “necessity.” If a panel finds that a measure is not, for example, “related to” a legitimate government objective and therefore constitutes de facto discrimination under GATT Article III, then, a fortiori, a necessity requirement for an exception under GATT Article XX cannot possibly be met. The exceptions in GATT Article XX are not therefore inconsequential. They remain fully operational in cases of de jure discrimination, for which less favorable treatment based upon nationality is a foregone conclusion, and as potential justifications under any GATT provisions other than Article III (of special note in this context is Article XI, which imposes a general prohibition on quantitative border restrictions).

201 Appellate Body Report, United States—Measures Affecting the Cross-border Supply of Gambling and Betting Services, para. 306, WT/DS285/AB/R (adopted Apr. 20, 2005); EC—Asbestos, supra note 93, para. 172; Korea—Beef, supra note 82, para. 162.

202 Along these lines, albeit in the context of discrimination under the MFN clause, see Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award, para. 368 (Sept. 11, 2007) (“[Discrimination must be unreasonable or lacking proportionality, for instance, it must be inapposite or excessive to achieve an otherwise legitimate objective of the State. An objective justification may justify differentiated treatments of similar cases. It would be necessary, in each case, to evaluate the exact circumstances and the context” (para. 368); “ [A] less favourable treatment is acceptable if a State's legitimate objective justifies such different treatment in relation to the specificity of the investment” (para. 371)). In that BIT dispute, the City of Vilnius's rejection of the claimant's project to build two car parks—in favor of the tender-proposal of another foreign company—was found not to violate MFN treatment, because the two proposals were significantly different. For example, the car parks proposed by the claimant extended more significantly into Vilnius's Old Town, which is a UNESCO-protected site, and there were also differences in terms of size, historical and archaeological preservation, and environmental protection. See id., paras. 392, 396. According to the tribunal, these differences between the two proposals put the investots in “unlike circumstances”; hence, no discrimination could be found.

203 Hudec, supra note 97, at 626.