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 countries.
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 follow.
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.
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