Canada has announced, on November 1, 2013, that it has ratified
the ICSID Convention and will at long last become a member of the
principal international rule-making and administrative body for
disputes between investors and their host states. This is welcome
news for Canadian companies and individuals concerned about the
protection of their investments abroad.
The ICSID Convention, known formally as the Convention on
the Settlement of Investment Disputes between States and Nationals
of Other States (and in shorthand as the Washington
Convention), entered into force in 1966. Canada did not sign
the Convention until 2006 and two years later enacted the
legislation required to give it domestic effect at the federal
level. However, until today's ratification, the Convention was
not legally binding on Canada, nor was Canada a member of the
namesake organization established by the Convention, the
International Centre for the Settlement of Investment Disputes.
The principal benefit of Canada's ICSID membership is that
Canadian investors abroad will now have access to ICSID's
arbitration regime when embroiled in a dispute with a foreign state
in connection with an investment made in that state, provided that
state is also an ICSID member, or Contracting State.
The key feature of investment arbitration under the ICSID regime
(which consists of the ICSID Convention itself and ICSID's
Arbitration Rules) is that it is largely divorced from the laws and
courts of individual countries. In particular, in contrast to
investment arbitration conducted under other rules, neither the
jurisdictional competence of ICSID arbitral tribunals nor the
awards of those tribunals may be reviewed or set aside by national
courts. Awards are subject only to limited review by
ICSID-appointed annulment committees and are to be immediately
recognized and enforced by the courts of other ICSID Contracting
States. The autonomy of the ICSID process offers an additional
measure of confidence to claimants that arbitration proceedings
will not be hindered by domestic court challenges and that they
will be able to promptly realize on awards in their favour, a
particular advantage to companies and individuals with investments
in locations where the rule of law and confidence in the courts is
lacking. It is therefore unsurprising that the ICSID regime is the
preferred choice of investors for investment arbitrations.
ICSID arbitration can be used either pursuant to investor-State
contracts containing ICSID arbitration clauses or pursuant to
bilateral or plurilateral investment treaties. Canada's
investment treaties have long provided for the use of the ICSID
Arbitration Rules, but those Rules are only available when both the
State party to a dispute and the investor's home State are
ICSID Contracting States. Therefore, until now they have not been
available to Canadian investors or in investment treaty claims
against Canada, although ICSID as an institution has administered
cases involving Canada under other rules.
Canada's ratification has ended many years of speculation as
to why Canada had not previously joined an organization that counts
nearly 150 other states as members, including the rest of the
developed world. Moreover, the ICSID Secretariat, which assists the
parties and tribunals in the arbitration process, has for several
years been headed by a Canadian, making Canada's absence from
the organization all the more difficult to explain.
The glacial pace at which Canada has proceeded to bind itself to
the Convention is largely explained by Canada's federal
structure. The Convention does allow for a Contracting State to
designate the constituent subdivisions in which the
Convention will apply. Nevertheless, successive Canadian
governments have sought commitments from all provinces and
territories that they would give effect to the Convention within
their jurisdictions or, failing that, have sought to assure
themselves that Canada can comply with the Convention's
requirement that an award against a constituent subdivision be
enforceable throughout Canada.
Although not all Canadian provinces and territories have enacted
implementing legislation to give effect to the Convention within
their jurisdictions, many have, including Ontario, British Columbia
and Saskatchewan, and others, notably Quebec and Alberta, are
poised to do so soon.
Canada's ICSID membership will take effect on December 1,
2013, 30 days after its ratification.
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