Canada has just passed legislation implementing the ICSID Convention, a very important tool for the resolution of investor-state disputes: Bill C-9, An Act to implement the Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID Convention), received Royal Assent on March 14, 2007.

The Act enables the federal government to ratify the ICSID Convention, which it signed in December 2006.

Ratification of the ICSID Convention would be a significant step in furthering the federal government's "Global Commerce Strategy" of deepening Canadian access to global markets through an active international negotiations agenda. The move follows the recent signing of free trade agreements with the European Free Trade Association countries (Iceland, Norway, Switzerland and Liechtenstein) and Peru, and the conclusion of a bilateral investment treaty with Peru.

Canada's implementation of the ICSID Convention will strengthen the protections available to Canadian investors abroad who face discriminatory or expropriatory measures and sue host governments under bilateral investment treaties (BITs) for damages arising from those measures. It will also enable foreign investors suing the Canadian government under the North American Free Trade Agreement (NAFTA) Chapter 11 or other BITs to use the institutional arbitration mechanism available under ICSID.

Benefits of Arbitration Under ICSID

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.

Decisions rendered under an ICSID arbitration are effectively final. An administrative 'appeal' may be made to the ICSID Secretary-General for an annulment of award, but only on one of five narrow enumerated grounds: 1) that the Tribunal was not properly constituted; 2) that the Tribunal has manifestly exceeded its powers; 3) that there was corruption on the part of a member of the Tribunal; 4) that there has been a serious departure from a fundamental rule of procedure; or 5) that the award has failed to state the reasons on which it is based.

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.

Ratification Next

The government has not yet indicated a timetable for ratification of the treaty. To date, only four provinces and one territory have passed similar implementing legislation: Ontario, British Columbia, Newfoundland and Labrador, Saskatchewan and Nunavut.

With its announcement of the passing of the Act, the government issued an "invitation" to the provinces to adopt implementing legislation.

Impact on Canadian and Foreign Investors

Upon ratification, Canadian investors in other ICSID member countries as well as 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 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 United Nations Commission on International Trade Law (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.

While Canada has recently embraced the ICSID Convention, certain South American countries appear to be reversing course. Last year, Venezuela and Bolivia declared their displeasure with the ICSID Convention and Bolivia has since formally withdrawn. Ecuador recently followed suit, notifying ICSID that it will not consent to ICSID jurisdiction relating to disputes involving its natural resources.

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