Canada: Canada Signs International Investment Dispute Resolution Convention

Last Updated: April 13 2007
Article by Angus Gunn

Most Read Contributor in Canada, September 2016

The federal, provincial and territorial governments of Canada are taking steps to embrace the Convention on the Settlement of Investment Disputes between States and Nationals of other States (the "ICSID Convention"), an innovative mechanism for resolving international "investor-state" disputes between investors and the foreign states in which they invest.

Unique challenges arise in the resolution of international investor-state disputes. Chief among them is finding an effective mechanism for resolving the disputes. Should investors rely on diplomatic channels, despite the delay and uncertainty they entail? Should investors sue in the local courts of the host state, despite fears of discriminatory adjudication on foreign soil?

Realizing that such concerns could discourage foreign investment in developing countries, the World Bank sponsored negotiations in the 1960s to develop a reliable alternative dispute resolution framework. They resulted in the ICSID Convention, which came into force in 1966.

The ICSID Convention offered a major step forward in resolving international investorstate disputes. Its genius lay in establishing neutral ad hoc arbitration tribunals. The neutrality of those tribunals would avert any fears of discriminatory adjudication.

As well, ICSID awards would be enforceable with the same ease as other international arbitral awards – indeed, even greater ease. The sole mechanism for challenging a final ICSID award was the self-contained review regime established by the ICSID Convention itself. As a result, and unlike many other forms of investor-state arbitration, awards under the ICSID Convention could not be challenged in national courts.

Over the ensuing 40 years, the ICSID Convention has become a cornerstone of international investor protection. It came into its own in the 1990s with the proliferation of bilateral investment treaties that required disputes to be resolved under it. More than 2,000 such treaties are now in place. As of December, 2006, more than 143 states have ratified the ICSID Convention and become members of the International Centre for Settlement of Investment Disputes.

Alone among the G-8 countries, though, Canada remained on the sidelines by not ratifying the ICSID Convention. Most observers attribute the delay to Canada’s federal system of government: Canadian ratification of the Convention requires its implementation not only by the federal Parliament but also by each of the provincial and territorial legislatures – effectively establishing 14 vetoes.

Over the last 20 years, the federal government has been actively promoting Canadian ratification of the ICSID Convention. With most of the provinces and territories now expressing support in principle for implementing the Convention, those efforts seem to have paid off. The Uniform Law Conference of Canada drafted an "off the shelf" model statute for adoption by each legislature, to facilitate implementation. The model statute aims to implement the ICSID Convention provisions on the jurisdiction and powers of the provincial superior courts to recognize and enforce ICSID awards. Once registered in a provincial superior court, an ICSID award will be enforceable as a judgment of that court. The model statute declares that an ICSID award is final and binding "and is not subject to appeal, review, setting aside or any other remedy except as provided in the Convention." The model statute allows for variation as to whether ICSID awards will be binding against crown corporations, crown agents, and other similar entities. The model statute proposes to come into force on royal assent – so that the coming into force of the legislation in each jurisdiction may be coordinated simultaneously.

To date, five jurisdictions have enacted ICSID Convention implementation legislation based on the model statute: Ontario, British Columbia, Newfoundland and Labrador, Saskatchewan and Nunavut. With only minor variations, the provincial statutes have followed the model statute template. Ratification now awaits the enactment of implementation legislation in Alberta, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Yukon, Northwest Territories, and by the federal Parliament. Despite the length of that list, the federal government is optimistic that each of these governments will do its part, and has now signed the Convention.

Once Canadian ratification of the ICSID Convention is complete, direct access to the many advantages of dispute resolution under the Convention will be available for the first time to Canadians investing in other ratifying states and to those nationals of other ratifying states who invest in Canada. If you are:

  • a Canadian national considering investments in another state that has ratified the ICSID Convention, or
  • a national of another ratifying state considering investments in Canada

then you should consider whether disputes arising directly out of that investment should be resolved under the Convention.

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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