The federal government is near to completing its share of
the legislative role in ratifying a very important tool for the
resolution of investor-state disputes. On October 29, 2007, the
Minister of Foreign Affairs introduced Bill C-9, An Act to
implement the Convention on the Settlement of Investment
Disputes between States and Nationals of other States (ICSID
Convention) in the House of Commons. Canada signed the
International Centre for Settlement of Investment Disputes
(ICSID) Convention last December.
The bill passed first reading and second reading on October
29 and was referred to the Standing Committee on Foreign
Affairs and International Development. The Committee reported
on the bill, without amendments, on November 28. It will now
pass back to the House of Commons for a third reading before
being considered by the Senate and ultimately receiving Royal
Assent, after which it becomes law.
Because of Canada's federal structure, the provinces
must also adopt legislation to support the ICSID Convention. To
date, Ontario, British Columbia, Newfoundland and Labrador,
Nunavut and Saskatchewan have passed such legislation. The
federal government has promised that it will continue to seek
support from the other provincial/territorial legislatures
prior to ratification.
Once ratified, Canadian investors in other ICSID member
countries and foreign investors in Canada will be able to avail
themselves of the dispute resolution mechanisms under the ICSID
Convention via investment treaties or investment contracts.
Jurisdiction of the ICSID Convention is limited to those
instances where a foreign investor's home state and the
host state where the investment is made are both ICSID member
The investment dispute settlement provisions of Canada's
free trade agreements (including NAFTA's Chapter 11) and
Canada's Bilateral Investment Treaties (BITs), generally
provide that disputes between investors and the host government
may be resolved through arbitration under the ICSID Convention.
However, until ratification, recourse must be made to either
the Additional Facility Rules of ICSID or the ad-hoc UNCITRAL
Rules under these instruments.
Among the parties to NAFTA, only the United States has
ratified the ICSID Convention, meaning that until Canada's
ultimate ratification, NAFTA Chapter 11 arbitration under the
ICSID Convention remains unavailable to both Canadian investors
in the United States and American investors in Canada.
After ratification, Canadian investors will also have the
option of negotiating arbitration clauses that provide for
ICSID arbitration in any investment contracts with foreign
governments that are parties to the ICSID Convention.
ICSID, an organization of the World Bank that offers
facilities for arbitrating investment disputes, came into
existence via the ICSID Convention in 1965. As of November 4,
2007, it has been signed by 155 countries, of which 143 have
proceeded to ratification. The majority of Canada's trading
partners, including the United Kingdom, China, Japan, Germany,
France and Chile, have already ratified ICSID. Notable trading
partners who are not yet signatories include Brazil, India and
Mexico. Bolivia, the first member ever to do so, recently
withdrew from ICSID, effective November 3, 2007. There have
been some rumblings that Venezuela and Ecuador will soon
McCarthy Tétrault Notes:
The main advantage of conducting an arbitration under the
ICSID Convention is that it contains its own review and
enforcement mechanisms. Arbitral awards issued under the ICSID
Convention are binding on the parties and not subject to review
except as provided for under the ICSID Convention. An
administrative 'appeal' may be made to the ICSID
Secretary-General for an annulment of award on any one of five
narrow enumerated grounds. Awards cannot be challenged outside
of ICSID, and national courts have no power to review an ICSID
Convention award. Parties to the ICSID Convention are bound to
recognize the award as binding and to enforce it as if it were
a final judgment of a national court.
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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