Canada: Canada Signs Bilateral Investment Treaty with Peru - India and China Are Next

On November 14, 2006, Canada and Peru signed a bilateral investment treaty (BIT), otherwise referred to as a Foreign Investment Protection and Promotion Agreement (FIPA). This is Canada’s first BIT to be negotiated in eight years and the first BIT to be based on Canada’s new 2004 Model FIPA. This will bring the number of BITs Canada has with developing and newly industrialized countries to a total of 22. Canada is currently in the process of active negotiations with two other countries: India and China. The BIT with India is expected to be finalized within the next four months and the BIT with China within the next eight to 12 months.

Over the last decade or so, BITs have quickly emerged as a viable option for businesses seeking protection of their investments in foreign jurisdictions. Traditionally, when investment disputes arose, foreign investors were limited to seeking remedies through either the domestic court of the host country system or diplomatic espousal claims. These BITs are an attractive alternative because they provide a mechanism to pursue damages claims directly against host states through international arbitration. There has been phenomenal growth in the negotiation of these agreements worldwide–in 1989, there were less than 400 BITs in force and by the end of 2005, that number increased to approximately 2,500.

Negotiations with Peru

Negotiations for the Canada-Peru BIT commenced in the early 1990s, but were put on hold for several years while Canada drafted the new 2004 Model FIPA, taking into account its experiences as a respondent in investment claims brought under NAFTA Chapter 11. After a hiatus of several years, negotiations were re-started in December 2003 after Cabinet had approved the new 2004 Model FIPA. The BIT that was signed on November 14, 2006 closely mirrors the 2004 Model FIPA (with a few exceptions) and is comprised of 52 articles and some 50 pages of reservations and exceptions. Canada’s existing BITs typically contain less than 20 articles and few reservations and exceptions.

Canada’s BIT with Peru contains, as does its BITs with other countries, three core substantive obligations which can be briefly described as follows:

(i) non-discriminatory treatment: the foreign investor and the investment must be accorded treatment no less favourable than that accorded to domestic investors (national treatment) and investors from any other country (most-favoured-nation treatment or MFN treatment);

(ii) fair and equitable treatment: the foreign investment must be accorded fair and equitable treatment in accordance with international law, including full protection and security; and

(iii) compensation for expropriation: expropriation, or measures equivalent to expropriation, must be for a public purpose, non-discriminatory, in accordance with due process of law and accompanied by payment of prompt, adequate and effective compensation.

Significant Changes in Investment Obligations

The obligations contained in the Canada-Peru BIT differ in a number of respects from those contained in other Canadian BITs. The following are areas where we consider that the Canada-Peru BIT has made significant changes in the key substantive areas of investment protection:

(i) narrower scope of protected investments: the definition of "investment" in Canada’s earlier BITs can generally be described as a relatively broad and open-ended asset-based definition with a list of specific types of investments that is indicative rather than definitive. It embraces "any kind of asset" and is followed by a non-exhaustive illustrative list of specific rights and assets. In addressing the meaning of investment, the Canada-Peru BIT departs from the previous open asset-based definition, replacing it with a closed list of defined investments. The BIT also defines what is not included in the definition of investment (e.g. claims to money that arise solely from commercial contracts).

(ii) the removal of protections for "returns": the reference to the "returns of investors" is absent from the operative provisions of the Canada-Peru BIT, including the provisions concerning fair and equitable treatment, expropriation, national treatment and MFN treatment. The Canada-Peru BIT’s obligations apply to investors and covered investments, but not necessarily to the returns from those investments. Given recent expropriation jurisprudence, aggressive measures taken by a host government against investments which significantly impact returns but do not remove the underlying investment itself may be difficult to characterize as compensable expropriation, and will likely be more difficult to challenge under the provisions of the BIT. The protections for "returns of investors" in Canada’s earlier BITs was a rather novel approach when compared to the vast majority of BITs worldwide.

(iii) MFN treatment: the Canada-Peru BIT limits the ability of Canadian investors to benefit from the host government’s MFN obligations, including the potential to benefit from more favourable treaties negotiated by Peru with third countries. Annex III to the BIT contains broad exceptions available to the host government seeking to avoid according MFN treatment to investors. Pursuant to these exceptions, the host government need not extend to investors treatment as favourable as that extended to investors from other countries under agreements existing prior to the entry into force of the Canada-Peru BIT. Further, Annex B4 (unlike the 2004 Model FIPA) explicitly provides that MFN treatment does not encompass dispute resolution mechanisms that are provided for in international treaties or trade agreements. Annex B4 seeks to directly address relatively recent BIT jurisprudence suggesting that the MFN obligations apply to allow an investor to benefit from BITs that the host government has concluded with third countries.

(iv) fair and equitable treatment: the Canada-Peru BIT explicitly provides that fair and equitable treatment is to be limited to treatment accorded to covered investments in accordance with the "customary international law minimum standard of treatment of aliens." This text very closely tracks the language contained in the NAFTA Free Trade Commission’s 2001 interpretive statement on Article 1105 of the NAFTA. The NAFTA interpretation has been considered by some commentators to limit the ability of Canadian investors to address host government behaviour that may be considered unfair or inequitable but which may be permissible under the historic customary international law minimum standard of treatment of aliens. Although this is an evolving area of the law, in the past host governments have argued that the "customary international law" standard represents a higher threshold for demonstrating breach than the "international law" standard of treatment generally provided for in Canada’s existing BITs.

(v) expropriation and compensation: the Canada-Peru BIT also contains new provisions that may operate to limit the protections available to investors from government measures constituting indirect expropriation. The expropriation obligation is one of the more controversial elements of BITs as scholars and arbitral tribunals continue to struggle to distinguish between measures that are confiscatory or equivalent to expropriation and measures that constitute bona fide or legitimate regulation. In particular, there has been a good deal of controversy in the BIT jurisprudence on the degree of government interference necessary to constitute what arbitral tribunals have referred to as "indirect" or "creeping" expropriation. Regarding indirect expropriation, Annex B.13(1) of the Canada-Peru BIT provides that the analysis requires a case specific fact-based inquiry and identifies factors that should be taken into consideration when making the determination of what constitutes compensable indirect expropriation (e.g. it provides that an adverse economic impact on the economic value of an investment does not, in and of itself, establish that an indirect expropriation has occurred). Annex B.13(1) also provides that non-discriminatory measures that are adopted and applied in good faith and that are designed to protect legitimate public welfare objectives will only constitute indirect expropriation in "rare circumstances." This clarification of the meaning of indirect expropriation may lead to the tolerance of a wider range of regulatory interference which has the effect of diminishing, but not completely destroying, an investment’s value.

The Canada-Peru BIT also modifies and supplements a number of other provisions under Canada’s existing BITs. These modifications in respect of such areas as investor-state dispute settlement, prudential measures and financial services, national security, public access to hearings and documents and participation by non-disputing parties should also be carefully reviewed and analyzed. Finally, the 50 some pages of reservations and exceptions, atypical to Canada’s existing BITs (but similar to NAFTA Chapter 11) should also be carefully scrutinized by Canadian investors seeking to understand the protections accorded under the Canada-Peru BIT.


As Canada’s first BIT in eight years, and as the first to be based on the 2004 Model FIPA, the negotiation of the Canada-Peru BIT represents a watershed moment in the development of Canada’s BITs. Arguably, the protections to investors under this treaty have been somewhat diluted when compared to Canada’s existing BITs. This may be a reaction by the Canadian government to its role as a respondent in several NAFTA Chapter 11 cases. The Canadian government has never been a respondent to a BIT claim and, to date, only one award has been issued under a Canadian BIT (EnCana Corporation v. Republic of Ecuador, LCIA Case No. UN3481, UNCITRAL, February 3, 2006, Canada-Ecuador BIT).

Investors and other stakeholders should take this opportunity to review the Canada-Peru BIT and the 2004 Model FIPA and consult with the Canadian government to stress the importance of maintaining strong investment protection provisions under these instruments. This is particularly so since the BITs with China and India have yet to be finalized and Canada’s Department of Foreign Affairs and International Trade has recently stated that it is currently in the process of reviewing the provisions of the 2004 Model FIPA.

Canada's Existing BITs

Canada has concluded BITs with the following countries (entry into force date): Russia (1989); Poland (1990); Czech Republic (1992); Slovak Republic (1992); Argentina (1993); Hungary (1992); Ukraine (1995); Latvia (1995); Philippines (1996); Trinidad & Tobago (1996); Barbados (1997); Ecuador (1997); Egypt (1997); Romania (1997); Venezuela (1998); Panama (1998); Thailand (1998); Armenia (1999); Uruguay (1999); Lebanon (1999); Costa Rica (1999); and Croatia (2001).

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
Related Video
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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.