On September 8, 2012, Canada and the People's Republic of
China signed the Canada-China Foreign Investment Promotion and
Protection Agreement (Canada-China FIPA). The specific provisions
of the Canada-China FIPA will not become public until the treaty is
tabled in Parliament for ratification. In general terms, however,
bilateral investment treaties of this kind are reciprocal
international legal agreements that states enter into to provide
their national investors with protection against arbitrary or
discriminatory government actions when investing abroad, while at
the same time promoting their domestic market as an investment
These treaties oblige host states to adhere to a certain
standard of treatment with regard to counterparty foreign investors
and their investments, and often set out arbitral mechanisms to
resolve any disputes that arise related to such investments to
ensure foreign investors receive impartial judicial treatment. The
execution of the Canada-China FIPA marks the formal end of a series
of negotiations that spanned an 18-year period, with efforts
beginning in 1994, tapering prior to China's accession to the
World Trade Organization and redoubling from 2004 onward.
Scope of Agreement
China has historically negotiated bilateral investment treaties
characterized by significant limitations with regard to
non-discrimination and dispute resolution. The Canada-China FIPA
may reflect China's recent tack toward allowing more robust
protections in its international investment treaties, as evidenced
in its recent bilateral investment treaties with Germany and the
It is likely that the Canada-China FIPA will include substantive
investor protections by providing for:
non-discrimination rights, such that investors and their
investments are not disadvantaged relative to investors from the
counterparty or other countries;
a minimum standard of treatment to be accorded to investments,
consistent with international law;
transparency in the passage of laws or decisions that have an
impact on investors and their investments;
the ability to transfer funds arising from investments;
compensation for expropriation of investments.
Additionally, Canada's Department of Foreign Affairs and
International Trade (DFAIT) notes that the Canada-China FIPA will
grant investors access to "investor-state" dispute
settlement arbitration. Dispute settlement mechanisms of this sort
allow aggrieved foreign investors to seek remedies against the host
country outside of national court systems, pursuant to the rules
and procedures of one of the various international arbitration
regimes, such as the International Centre for Settlement of
Investment Disputes (ICSID). Canadian bilateral investment treaties
(referred to in Canada as Foreign Investment Promotion and
Protection Agreements or FIPAs) typically include robust
investor-state dispute resolution provisions that feature detailed
rules on standing of the investor, procedural requirements and
Strengthening Economic Ties
The signing of the Canada-China FIPA comes amid a period of
intensification in Sino-Canadian investment activity. Examples of
this activity include CNOOC Limited's proposed $15.1-billion
acquisition of Nexen Inc. and the Bank of Nova Scotia's pending
purchase of the Bank of Ghuangzhou. This milestone is also
reflective of a deepening economic relationship between the
countries, noted in the August 15, 2012 release of a joint
Canada-China study that recommended fostering even deeper trade
links. To this effect, before the end of the year, Canada and China
may announce the beginning of formal negotiations to strengthen
their bilateral trade relationship through a free trade
Ratification and Implementation
Now that the parties have signed the Canada-China FIPA, Canada
and China will subject the treaty to their respective ratification
processes. In Canada, the ratification process will involve a
21-sitting-day period, during which the Canada-China FIPA will be
tabled in the House of Commons for examination and debate. The
treaty will be brought into force pursuant to an Order-in-Council
authorized by the Governor General, Canada's head of state.
Prime Minister Stephen Harper indicated that the Canada-China FIPA
will be tabled during the fall session of Parliament. We have no
reason to believe that it will not be ratified and implemented by
Companies that have made or are considering investments in
Canada or China would be well served to educate themselves about
international investment treaty protections that the Canada-China
FIPA will afford. The Canada-China FIPA will be particularly
helpful to Canadian businesses looking for greater certainty and
security when making investments in China.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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