On November 1, 2013 Canada ratified the Convention on the
Settlement of Investment Disputes between States and Nationals of
Other States (the "Convention").
Once this ratification comes into force on December 1, Canadian
companies will have access to dispute resolution facilities at the
International Centre for Settlement of Investment Disputes
What is ICSID?
ICSID is an international institution organized under the
auspices of the World Bank that provides facilities and
organizational support for the arbitration and settlement of
international investment disputes.
In particular, the Centre provides an internationalized setting
for the arbitration of disputes between foreign investors and the
governments hosting their investments. Arbitrations at ICSID can be
brought both under contracts between host governments and foreign
investors, and under investment treaties such as found in Chapter
11 of the North American Free Trade Agreement.
Nearly 150 countries are parties to the Convention. Access to
the ICSID will be helpful for some Canadian foreign investment.
What Does This Mean For Canadian Investors?
Canada's ratification of the Convention allows Canadians
investors to utilize the ICSID dispute-settlement mechanisms to
resolve disputes with the governments of the 149 other contracting
The principal advantage of Canada's ICSID membership is that
Canadians will be able resolve disputes with the governments of the
countries in which they invest before an independent and
internationalized dispute resolution body.
ICSID Arbitrations Are Consensual
Arbitration and conciliation at ICSID are voluntary. The parties
must give their consent in writing to submit their dispute to the
Canadians investing abroad should thus consider whether they
would benefit from ICSID and, if so, ensure that jurisdiction is
properly provided in their investment agreements.
Parties to ICSID Arbitrations
While there are other arbitral institutions that focus on
commercial arbitrations between private bodies (i.e. the London
Court of International Arbitration) or public international law
arbitrations between governments (i.e. the World Trade Organization
or the International Court of Justice), the ICSID is somewhat
unique as an institution in that its focus is on disputes between a
private entity (i.e. a corporate investor) and a government.
"Government" is broadly defined and so encompasses
subservient units of the state (i.e. provincial or state
governments), and state agencies (i.e. state controlled non- or
ICSID Mitigates Political Risk
The ICSID's focus on investor-state dispute resolution makes
it an excellent body at which to arbitrate disputes under
concession agreements for resource or infrastructure development,
licenses and tenures, and disputes under investment treaties.
Long-term foreign investments, such as those in the resource
exploitation or infrastructure development are fraught with risk
that the politics that once encouraged an investment become opposed
to it, leading the government to act contrary to its commitments.
Recourse to the host country courts may seem small consolation as
the victimized investor may see them as less than independent.
These are the disputes that the ICSID specializes in resolving.
Canada's membership in ICSID should be seen as a measurable
reduction in the political risk facing foreign investments by
Canadians who are savvy enough to ensure that their investment
agreements properly provide it with jurisdiction.
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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