Canada: The Canada-China Foreign Investment Promotion And Protection Agreement: Investor-State Dispute Settlement Provisions *

Last Updated: January 10 2013
Article by Michael Woods and Catherine Walsh2

Negotiations for a bilateral Foreign Investment Promotion and Protection Agreement ["FIPA"] between Canada and China have been ongoing for over a decade. An agreement was finally signed on September 9, 2012 during Prime Minster Harper's visit to China. This agreement represents China's 140th bilateral investment treaty and Canada's 25th. Once ratified by both Governments, the Canada-China FIPA ["C-C FIPA" or the "Agreement"], will come into force, for a minimum period of 15 years. Part I3 in this series compared the substantive investor protections afforded under the C-C FIPA including national treatment, most-favoured-nation, minimum standard of treatment, performance requirements and expropriation with those provided under Canada's Model FIPA ["Model"]. This second note will look at the C-C FIPA's investor-state dispute settlement provisions through a similar lens, with a focus on the process of making a claim.

Canada's Model FIPA

Canada's Model FIPA was designed to be used as a template in negotiations for bilateral investment rules, building on lessons learned from Chapter 11 of the North-American Free Trade Agreement ["NAFTA"]. The Model sets a base for Canadian negotiators and fosters transparency and efficiency in the overall dispute settlement process.4 It is useful to compare the C-C FIPA's text with that of the Model to learn more about the Agreement and to identify areas of contention in the negotiations leading up to the Agreement.

Investor-State Dispute Settlement in General

Investment treaties have increasingly been including provisions relating to investor-state dispute settlement ["ISDS"] mechanisms in their text. In general, the ISDS mechanisms found in investment treaties such as FIPAs or Bilateral Investment Treaties provide foreign investors the right to seek compensation for damages arising out of breaches of investment-related obligations by host state governments.5 These provisions allow private investors of a contracting party to launch an action for compensation directly against a contracting state where that state implements or enforces measures that damage the foreign investor's investment.

Under the C-C FIPA, the ISDS mechanism gives an investor the option of pursuing its rights for damages before an impartial international tribunal. This is perhaps the most important development in international investment law – the provisions of direct access to third-party adjudication. Arguably, NAFTA Chapter 11 and the Canadian Model FIPA's provisions represent a very advanced form of this tool.

It is important to note that the process leaves damages as the only remedy. In other words, the contracting parties to a FIPA cannot be forced to eliminate or amend measures to bring them into compliance with treaty obligations. That said however, the presence of FIPA obligations is often the best way to discourage and eliminate potential and continuing liability for a contracting party.

Any citizen (corporate or individual) with an investment in the other contracting party's state is eligible to launch a claim. Pursuant to Article 23 of the C-C FIPA, the contracting parties are bound by a general consent to arbitration as long as the claimant meets certain preconditions set out in Article 21. Article 21 sets out the procedure – commencing with a Notice of Intent to commence a claim – required at least four months in advance of the submission of the claim. In addition, there is a general three-year limitation period on all arbitration claims and a six-month waiting period from the time of the allegation of breach before which the claim to arbitration can be made.

The C-C FIPA's ISDS Provisions

The ISDS provisions in Part C of the C-C FIPA provide the parameters for the settlement of investment disputes. As we have indicated, these provisions strive to provide equal treatment of investors in accordance with the principles of international reciprocity and due process before an impartial tribunal.6

The Model generally aims for a more open and transparent process than that found in earlier Canadian agreements. Under the Model, all disputes must be publicly notified, and all arbitration proceedings, in addition to all documents and pleadings, are to be accessible to the public. Pursuant to Article 38, the Model also requires hearings to be open to the public unless the tribunal decides to move in camera to ensure the protection of confidential information, including business confidential information. Although the C-C FIPA requires that parties adapt the laws and regulations affecting covered investments in a transparent manner, the transparency of the arbitration process as a whole is somewhat more restricted under Article 28. Pursuant to Article 28, the ultimate decision of the tribunal is the only document that must be made available to the public, subject of course to the redaction of confidential information. All other documents submitted or issued by the tribunal will be publicly available only if a disputing party determines that it is in the public interest to do so. In addition, the arbitral proceedings themselves will only be open to the public if, after consulting with a disputing investor, a disputing party determines that it is in the public interest to do so. Therefore, when defending a claim, a party will have the power to unilaterally make documents available to the public. As a whole, this amounts to a departure from the Model in terms of transparency although some degree of accommodation for China's traditionally more restrictive approach to public access in proceedings should not come entirely as a surprise.

A point of difference to note in the C-C FIPA relates to the conditions precedent with respect to the eligibility of claims for submission to arbitration under Article 21. Annex C.21 of the Agreement goes one step further and deals specifically with party-specific requirements for submission of a claim. Pursuant to Annex C.21, if a Canadian measure is at issue, the investor initiating the arbitration will be deemed to waive the right to initiate or continue actions relating to the matter of the claim before any court or dispute settlement body with the exception of injunctive, declaratory or other extraordinary relief. On the other hand, where a Chinese measure is at issue, an investor will first have to navigate through China's administrative reconsideration procedure. The claim may only be submitted to arbitration after four months have elapsed without resolve from China's administrative reconsideration procedure. In addition, the claim may only be submitted under Article 20 if the investor has withdrawn the case from the Chinese national courts before judgment has been made on the dispute. If a case is withdrawn after judgment has been rendered, then that case may no longer qualify for arbitration.

In terms of notice periods, the time limit for a contracting party to give notice of its intent to submit a claim to arbitration is ninety days under the Model. Under the C-C FIPA, this time limit has been extended to "at least four months prior to submitting the claim."7 This slight extension of time is based on the relevant provisions of the law of the People's Republic of China on administrative reconsideration, and will likely not have a large impact on the rights of foreign investors.

A disputing investor who meets the conditions precedent under Article 21 will be allowed to submit its claim to arbitration pursuant to Article 22. Pursuant to the Agreement, the investor may submit the claim under the International Centre for Settlement of Investment Disputes ["ICSID"] Convention provided that both contracting parties are parties to the ICSID Convention. The Additional Facility Rules of ICSID and the United Nations Commission on International Trade Law ["UNCITRAL"] Arbitration Rules are two other available avenues under which to submit a claim to arbitration where one contracting party, but not both, is a party to the ICSID Convention. Although China has ratified the ICSID Convention, Canada is not yet a member and therefore the only available options to submit a claim for arbitration under the C-C FIPA are the Additional Facility Rules of ICSID and UNCITRAL Arbitration Rules.

As the process continues, the two sides each nominate an arbitrator pursuant to Article 24. The disputing parties must then agree to appoint the third and presiding arbitrator for the arbitral panel. Under the Agreement, arbitrators are required to have expertise or experience in international law, be independent of either disputing party and comply with any additional rules where such rules are agreed to by the contracting parties.8 Notably, where a dispute arises as to the interpretation or application of the Agreement, the presiding arbitrator must be a national of a third state which has diplomatic relations with both contracting parties.

Article 31 of the C-C FIPA provides for interim measures of protection, such as preserving the rights of a disputing party, preserving evidence and protecting the tribunal's jurisdiction and effectiveness. An important difference between the Model and the C-C FIPA is that the latter states that "a tribunal may recommend an interim measure of protection [...]" whereas the Model uses the words "a tribunal may order [...]." Interestingly, NAFTA also uses the term "order" in its article relating to interim measures. Some of Canada's more recent FIPAs, such as the Canada-Latvia9 and the Canada-Romania10 FIPAs also use the term "order" in their respective articles. The difference between the word "recommend" in the C-C FIPA and "order" in the Model leads one to the conclusion that an arbitral tribunal will have less power or authority to order interim measures of protection under the C-C FIPA. The tribunal's restricted authority may be a potential problem area for foreign investors attempting to ensure the preservation of their rights in the event of a dispute.

In Article 32, the C-C FIPA, similarly to the Model, confirms that each party is responsible for the enforcement of an arbitral award in its territory. It is therefore imperative for Canada to ensure that a system of enforcement for awards is properly implemented in China. At this point in time, it remains to be seen as to whether both the Canadian and Chinese governments will implement systems to actively enforce awards made by the arbitral tribunal. Without these systems in place, the relevance of awards will be significantly diminished – indeed, the inevitable lack of certainty that would follow might possibly dissuade foreign investment.

Domestic Implications for Canada

The recent arbitral application in Ping An Life Insurance Company of China, Limited and Ping An Insurance (Group) Company of China, Limited v. Kingdom of Belgium11 [the "Ping An Case"], filed on September 19, 2012 before the ICSID deals with banking and financial services matters and is the first investor-state claim of significant magnitude to be filed before ICSID on behalf of a company from China's mainland.12 Details regarding this landmark arbitration have yet to be published, however the claim is most likely tied to the losses incurred by Ping An, China's second largest insurer, as a result of measures taken by the Belgian government in the wake of the 2008 global financial crisis. Ping An was forced to write down a nearly $3.8-billion investment in Fortis, a Belgo-Dutch bank, when the latter was nationalized by the Belgian government and subsequently sold.13

This case has led some to foresee the potential of Chinese investors seeking to make more use of arbitration clauses in existing bilateral treaties. Moving forward, some observers indicate that legal challenges from Chinese corporations are likely to multiply as those corporations look to invest in Canada pursuant to the terms of the C-C FIPA, which now provides comprehensive legal mechanisms to protect such investments.14 Concerns in Canada about potential claims should be balanced by consideration for the increased protection that is afforded to Canadian investors operating in China. It will be important to monitor developments regarding the application and enforcement of the C-C FIPA and its impact on the promotion of investment between the two countries.


* We are grateful to Jonathan Nuss from the Montreal Heenan Blaikie office for his assistance with this piece.

2 Catherine Walsh is an articling student at Heenan Blaikie's Ottawa office and graduated from the University of Ottawa in social sciences with a concentration in criminology, after which she completed her LL.B. before pursuing a Master's in Business Administration. Prior to beginning her articles, Catherine worked for an international company as a corporate sales executive.

3 Catherine Walsh & Michael G. Woods, " The Canada-China Foreign Investment Protection and Promotion Agreement: A Comparative Analysis to Canada's Model FIPA" Heenan Blaikie (December 2012).

4 Andrew Newcombe, "Canada's New Model Foreign Investment Protection Agreement" (2004) University of Victoria Faculty of Law.

5 Katia Yannaca-Small, "Improving the System of Investor-State Dispute Settlement: An Overview" (2006) 1 Working Papers on International Investment 3.

6 Bronwyn Pavey & Tim Williams, "The North American Free Trade Agreement: Chapter 11" (2003) PRB 02-54E.

7 Agreement Between the Government of Canada and the Government of the People's Republic of China for the Promotion and Reciprocal Protection of Investments, C 2012, Article 21.

8 Agreement Between the Government of Canada and the Government of the People's Republic of China for the Promotion and Reciprocal Protection of Investments, C 2012.

9 Trade Negotiations and Agreements, Canada Treaty Information: Foreign Affairs and International Trade Canada.

10 Ibid.

11 ICSID Case No. ARB/12/29.

12 Simon Rabinovitch and James Fontanella-Khan, "Ping An Arbitration Claims over Fortis" Financial Times (24 September 2012).

13 Fiona Law, "Ping An Insurance Files Arbitration Claim Over Fortis Losses" Wall Street Journal (25 September 2012).

14 Shawn McCarthy, "China turns to courts in business disputes with western goverments" The Globe and Mail (5 October 2012).

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions