Jean Monnet Center at NYU School of Law


Author: Federico Ortino

Title: From ‘non-discrimination’ to ‘reasonableness’: a paradigm shift in international economic law?

Abstract: Among the few basic legal instruments employed in international economic law for the promotion of trade and investment, the National Treatment (NT) principle and the reasonableness principle constitute the two predominant ones.

While both norms deal principally with national measures of legislative, administrative or judicial nature taken to regulate the internal market (so called ‘internal measures’), they appear to represent two quite different legal paradigms. By requiring each member to treat products and investors of the other member (at least) as well as it treats its own products and investors, the NT principle provides for a “relative” standard of treatment. In other words, the NT principle does not guarantee a specific level of protection or that foreign products or investors will receive a “fair” or “reasonable” treatment. It simply guarantees against States affording foreign products and investors less favorable treatment compared to that granted to domestic products and investors. On the other hand, the reasonableness principle provides for an “absolute” standard of treatment, in as far as it requires States to recognize to foreign products and investors a certain (minimum) level of treatment, the determination of which does not have to depend on the treatment afforded to domestic products and investors. Although the concept of reasonableness may be given potentially a broad range of meanings, it usually refers to both substantive and procedural requirements, including concepts such as ‘suitability’, ‘necessity’, ‘proportionality’, ‘transparency’ and ‘participation’.

Accordingly, the reach of the reasonableness principle appears to be quite broad compared to that of the NT principle and the normative standards imposed on States by the former seem to bite deeper than those imposed by the latter. It may also be said that the level of intrusiveness into national regulatory prerogatives of an international legal regime providing for the reasonableness principle as its core normative standard (i.e., rationality-based regime) is on its face higher than that stemming from a regime based on the NT principle (i.e., non-discrimination-based regime).

By focusing specifically on the experience of the WTO and NAFTA in promoting trade and investment across countries through the NT principle and the reasonableness principle (i.e., Articles III/XX GATT and 1102 NAFTA; Articles 2 TBT and 1105 NAFTA), this paper tries, first of all, to show that the two norms under consideration do not represent two completely different legal paradigms. On the contrary, the overlap between non-discrimination and reasonableness is quite broad and, depending on the actual drafting, it may even be total. Secondly, and without arguing for the total abandonment of the concept of nationality discrimination as an instrument for global economic governance, the paper argues that in terms of overall legitimacy, there are several reasons supporting the claim that a rationality-based regime should be favored to one based on non-discrimination.

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Last updated on September 9th, 2004

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