Legal Analysis of the Scope of ‘Like Circumstances’ Concept under NAFTA National Treatment of Investments Obligation

Abstract

This paper seeks to shed some light on the meaning and scope of the National Treatment Obligation ‘like circumstances’ concept under the NAFTA jurisprudence. It acknowledges without argument that the term ‘like circumstances’ admits to a variety of interpretations in literal terms, but argues by jurisprudential analysis that some factors ought to be taken into considerations in determining whether two investors or investments are in ‘like circumstance’ in the NAFTA context. One has to consider whether there is a competitive relationship between the foreign investor and its chosen domestic comparator; whether the two investments or investors are bound by the same legal regimes given the peculiarity of their business objectives, including but not limited to their product or service line; and the legitimacy of the measure in issue to determine when two investments are in like circumstances. This analysis should begin with the presence of a competitive relationship between the foreign investment and its domestic comparator. Only then would a further inquiry be made as to the legitimacy of the measure in issue. This is achieved by considering the connection between the measure in issue and an existing State regulation which is not being challenged by the foreign investor. To develop the thesis of this research, this paper is divided into three parts. Part I contains a brief introduction on the nature of national treatment, and then proceeds to highlight the centrality of ‘like circumstances’ in a breach of national treatment claim. Part II analyzes NAFTA case law on like circumstances, with a view to elaborating the various tests adopted by tribunals in deciding whether a foreign investor is in like circumstances with its identified domestic comparators. My analysis of the essential factors to be taken into consideration in the evaluation of ‘like circumstances’ is also contained in Part II. The final part includes the author’s conclusion and recommendations.