Canada has recently ratified the Foreign Investment Promotion and Protection Agreement ("FIPA") with China. The agreement (referred to as "中加投资保护协定" in China) was signed in September 2012, and China ratified the agreement soon thereafter. As both governments have ratified the FIPA, it came into force on October 1, 2014.
The FIPA is a bilateral agreement between the governments of Canada and China for protecting and promoting foreign investment by setting out certain rights of foreign investors and legally-binding obligations of both governments. In particular, the FIPA sets out the obligations of the Canadian government with respect to how it treats Chinese investors, and vice versa. The agreement will have no direct impact on intellectual property legislation in Canada. However, the FIPA does impact on protection of intellectual property rights (IPRs), as IPRs are included in the "investments" protected under the agreement.
The FIPA confers a number of important benefits on Chinese investors and their investments including IPRs in Canada, and provides Chinese investors with important new tools with which they can protect their investments including IPRs in Canada.
In addition to the "most-favored-nation treatment" (最惠国待遇) and the "national treatment" (国民待遇), which have been previously afforded to IPRs owned by Chinese investors in Canada under the TRIPS Agreement (与贸易有关的知识产权协定), IPRs owned by Chinese investors now also enjoy the "minimum standard of treatment" (待遇最低标准), i.e. "fair and equitable treatment and full protection and security, in accordance with international law" (既, 根据国际法的要求获得 "公平与公正待遇" 以及享有 "充分保护和安全"). The FIPA specifically provides that transfers of IPRs should be "made freely and without delay."
The FIPA provides assurances that Chinese investors will be treated fairly under Canadian law and benefit from a predictable and transparent set of rules for investing, including how they might try to seek compensation for government actions that damage their investment or are otherwise in breach of the FIPA. Chinese investors will have recourse to a new dispute resolution mechanism, which allows a Chinese investor to claim damages from a breach of the FIPA, by any level of the Government of Canada, directly to an independent arbitration tribunal, and the tribunal will have the power to order and award compensation to the Chinese investor.
The FIPA will remain in force for at least an initial period of fifteen years, and have an effect on investment for at least thirty one years. After the expiration of the initial fifteen-year period, the government of Canada or China may terminate the agreement by giving the other party one year's notice. After termination of the agreement, its provisions will remain effective for an additional fifteen-year period with respect to investments made before termination.
Ratification of the FIPA by Canada is seen by many as a strong signal from the Canadian government of its interest and support for improving and strengthening bilateral investment and trade relationship with China, and that Chinese investments are welcome and desirable in Canada.
According to Chinese government officials, China-Canada bilateral trade volume reached $60 billion in 2013. By the end of 2013, the total cumulative bilateral investment was more than $55 billion. In the next five years, China's imports are expected to reach $10 trillion and its outbound investment will reach $500 billion. China is dedicated to developing industries where Canada boasts strong innovation, such as clean energy, environmental protection, information technology, high-end manufacturing and financial services. Chinese investors have shown keen interests to enter Canada's natural resources, financial, real estate and information-technology sectors. According to a report released earlier this year by the World Intellectual Property Organization (WIPO), Canada is ranked fifth in terms of patent applications filed by Chinese applicants abroad up to 2012, only after the U.S., European Patent Office, Japan and Korea. Canada's innovation advantage and rich natural resources combined with China's well-established manufacturing industry, abundant technical workers and huge market, could bring great possibilities for co-operation and yield sound economic and social benefits.
It is widely expected that the FIPA will have a profound, positive impact on the development of bilateral trade relations, investments and economic co-operation between China and Canada.
The greatest impact of the FIPA may be on Canada's energy sector. China has been investing heavily in this sector since 2007. It is reported that from 2007 to 2013, Chinese investments in Canada's oil and gas sector amounted to about $28 billion. With fewer restrictions on investment, the oil sands industry may see greater activity and interest from Chinese companies. The FIPA may provide the protection and confidence many Chinese companies are looking for and need to expand, grow and succeed in Canada.
The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.