After a long delay, on November 1, 2013, Canada ratified
the Convention on the Settlement of Investment Disputes between
States and Nationals of Other States (the Convention). In so doing,
Canada has become the 150th member state of the International
Centre for the Settlement of Investment Disputes (ICSID).
Although Canada signed the Convention in December 2006, and passed
implementing legislation in 2008, it had not ratified the
Convention until recently. As a result of ratification, the
Convention will become law in Canada on December 1, 2013, nearly
seven years after Canada first became a signatory.
BACKGROUND ON ICSID
ICSID is a widely used institution that assists in resolving
legal disputes between host states and foreign investors. Most
nations, including nearly all of Canada's major trading
partners and all G8 countries, are ICSID members. The
Secretary-General of the organization is a Canadian, and Canadians
have arbitrated ICSID disputes in the past. ICSID was established
under the umbrella of the World Bank and receives its funding from
that organization, though it operates as an autonomous body.
Generally, ICSID offers institutional and procedural support in
relation to conciliation or arbitration proceedings involving legal
disputes between investors and member states.
ICSID aims to create a symbiotic relationship between states and
investors. By providing consent to ICSID arbitration, member states
can spur investment in their country by assuring foreign investors
that they will have recourse to an independent body in the event
the government unlawfully interferes with the investment. In
addition, the Convention is beneficial to investors, as it protects
their investment in foreign enterprises and comes with an effective
regime for enforcing awards that are made against states.
The Convention seeks to remove impediments to the free flow of
private international investment posed by non-commercial risks,
such as an expropriation of assets without compensation by a host
state, and to provide a mechanism for the settlement of investment
disputes where the parties to a legal dispute provide consent.
Prior to ratifying the Convention, Canada's framework for
resolving investor-state disputes was governed by a series of
bilateral investment treaties, which are often styled as foreign
investment protection agreements in Canada. Other international
trade agreements may include mechanisms that are designed to
address foreign investment disputes as well. In the past, Canada
has been involved with investor-state arbitrations through these
IMPLICATIONS OF RATIFICATION FOR FOREIGN INVESTORS AND
CANADIANS DOING BUSINESS ABROAD
Canada's ratification of the Convention will provide a
number of benefits to its investors with international operations,
particularly in the oil and gas and mining industries, where
concerns about state interference with investments in foreign
countries may be especially acute.
Canadian investors now have direct access to a form of
international dispute settlement that enables them to seek a remedy
outside of the courts of the host state. These investors are no
longer required to depend on the Canadian government's
discretion to exercise diplomatic protection on their behalf if a
foreign government unlawfully interferes with their investment. As
well, the provisions of the Convention make it highly probable that
investors will be able to enforce an award that is decided in their
In addition to the benefits that Canadian investors stand to
gain as a result of Canada's ratification of the Convention,
the economic boost to Canada could prove significant. With access
to a single institutional forum for resolving investor-state
disputes that does not depend on domestic courts, foreign investors
may gain a sense of security over their Canadian investments, in
turn creating a more favourable climate for investment.
Canada's ratification of the Convention has significant
implications for Canadian investors, and the country as a whole.
Access to a single point of access for the resolution of investment
disputes will protect the interests of Canadian businesses abroad
and will encourage foreign investment in Canada. Accordingly,
Canadians can expect substantial economic gain upon the
Convention's coming into force.
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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