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Published online by Cambridge University Press: 09 March 2016
The Canada–China Foreign Investment Promotion and Protection Agreement (China FIPPA) is novel and, in key respects, non-reciprocal in favour of China. For example, it would provide a general right of market access by Chinese investors to Canada but not by Canadian investors to China; allow wider scope for investment screening by China than by Canada; omit a long-standing Canadian reservation for performance requirements that favour Aboriginal peoples; and dilute Canada’s established position on transparency in investor-state arbitration. These and other textual aspects of the China FIPPA are highlighted in comparison to other trade and investment treaties, especially those to which Canada is a party, that provide for investorstate arbitration. The China FIPPA is also examined in the current economic context of investment flows between Canada and China. The article responds partly to claims by Canadian trade officials that the China FIPPA is unremarkable because it simply continues Canada’s past foreign investment promotion and protection practice.
1 Hupacasath First Nation v Minister of Foreign Affairs of Canada and Attorney General of Canada, Federal Court Case No T-153-13 (Cross-Examination on Affidavit of Vernon John MacKay) (3 April 2013) at 9 [MacKay Cross-Examination].
2 Agreement between the Government of Canada and the Government of the People’s Republic of China for the Promotion and Reciprocal Protection of Investments (9 September 2012), online: <http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/fipa-apie/china-text-chine.aspx?lang=eng> [not yet in force] [China FIPPA]. On the reported delay in ratification by Canada, see McCarthy, Shawn “Pressure Mounts with Tories Ready to Ratify China Trade Deal by Thursday,” Globe and Mail (30 October 2012), online: <http://www.theglobeand mail.com>;Google Scholar Mas, Susana, “Delayed China Trade Deal Reflects Tory Dissent, NDP Says,” CBC News (22 April 2013), online: CBC News <http://www.cbc.ca/news>.Google Scholar
3 North American Free Trade Agreement between the Government of Canada, the Government of the United Mexican States, and the Government of the United States of America, Can TS 1994 No 2, 32 ILM 296 and 605 (1993) (in force 1 January 1994) [NAFTA].
4 That is, the proposed Canada—European Union Comprehensive Economic and Trade Agreement ( CETA) and the Trans-Pacific Partnership (TPP).
5 That is, a larger share of foreign direct investment (FDI) stocks in Canada than in the United States, Western Europe, and Australia would be covered by investor-state arbitration (ISA). See further discussion in note 177 in this article.
6 See text accompanying note 171 in this article.
7 Canada has concluded five trade agreements, including NAFTA, supra note 3, that provide for ISA and has concluded twenty-five foreign investment promotion and protection agreement (FIPPAs) (that is, bilateral investment treaties (BITs), all of which provide for ISA. The texts of the relevant treaties are available online at Department of Foreign Affairs, Trade and Development Canada (DFATD) <http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/fipa-apie/index.aspx?lang=eng>. See also Annexes 1 and 2 in this article.
8 By its non-reciprocity in these respects, the China FIPPA, supra note 2, differs from all of Canada’s FIPPAs and trade agreements that provide for ISA as well as Canada’s Model FIPPA. Canada, “Agreement between Canada and [other country] for the Promotion and Protection of Investments” (2004), online: <http://italaw.com/documents/Canadian2004-FIPA-model-en.pdf> [Canada’s Model FIPPA].
9 Investment Canada Act, RSC 1985, c 28 (1st Supp).
10 See further text accompanying notes 106–8 in this article.
11 This distinguishes the China FIPPA from Canada’s Model FIPPA, supra note 8; NAFTA, supra note 3; Canada’s other trade agreements that provide for ISA; and all but two of the twenty-five FIPPAs. These two FIPPAs also do not raise comparable issues for Canada concerning regulatory flexibility because they apply to little inward FDI. See Annex 2 in this article.
12 This includes all of Canada’s FIPPAs and trade agreements that provide for ISA and prohibit performance requirements. See further text accompanying notes 149–50 in this article.
13 This distinguishes the China FIPPA, supra note 2; from Canada’s Model FIPPA, supra note 8; NAFTA, supra note 3; and all ten of Canada’s post-2001 FIPPAs and trade agreements that provide for ISA (that is, all relevant treaties since the federal government responded to issues arising from ISA confidentiality under NAFTA).
14 See further text accompanying note 171 in this article.
15 See further Table 2 in this article. This distinguishes the China FIPPA from all of Canada’s relevant treaties except NAFTA, supra note 3.
16 See, for example, MacKay Cross-Examination, supra note 1.
17 Newcombe, Andrew and Paradell, Lluís, Law and Practice of Investment Treaties (Alphen aan den Rijn: Kluwer Law International, 2009) at 44–49.Google Scholar
18 Berger, Axel, China and the Global Governance of Foreign Direct Investment (Bonn: German Development Institute, 2008) at 21–22 Google Scholar; Heymann, Monica CE, “International Law and the Settlement of Investment Disputes Relating to China” (2008) 11:3 J Int’l Econ L 507 at 515–16Google Scholar; Smith, Gordon, “Chinese Bilateral Investment Treaties: Restrictions on International Arbitration” (2010) 76 Arbitration 58 at 58–59.Google Scholar
19 Van Harten, Gus, “Investment Treaty Arbitration, Procedural Fairness, and the Rule of Law” in Schill, Stephan W, ed, International Investment Law and Comparative Public Law (Oxford: Oxford University Press, 2010) 628 at 645–48.Google Scholar
20 International Centre for Settlement of Investment Disputes (ICSID), Rules of Procedure for Arbitration Proceedings (revised 26 September 1984 and 1 January 2003; original rules 1968), reprinted in ICSID, Convention, Regulations and Rules (Washington: ICSID, 2003) [ICSID Rules]; ICSID, Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the International Centre for Settlement of Investment Disputes (revised 1 January 2003; original rules 1978) (1992) 1 ICSID Rep 213 [ICSID Additional Facility Rules]; UN Commission on International Trade Law (UNCITRAL), Arbitration Rules of the United Nations Commission on International Trade Law, UN GA Res 31/98, UN GAOR, 31st Sess, Supp No 17, UN Doc A/31/17 (1976), c V, s C [UNCITRAL Rules].
21 Van Harten, Gus, Sovereign Choices and Sovereign Constraints: Judicial Restraint in Investment Treaty Arbitration (Oxford: Oxford University Press, 2013) at 135–47.CrossRefGoogle Scholar
22 van Aaken, Anne, “Primary and Secondary Remedies in International Investment Law and National State Liability: A Functional and Comparative View” in Schill, , supra note 19, 722 at 723, 725–30.Google Scholar
23 Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 4 ILM 524 (1965) (in force 14 October 1966); United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 330 UNTS 3 (in force 7 June 1959); Inter-American Convention on International Commercial Arbitration, 14 ILM 336 (1975).
24 China FIPPA, supra note 2, art 16(2)–(3). Thorn, Rachel and Doucleff, Jennifer, “Disregarding the Corporate Veil and Denial of Benefits Clause: Testing Treaty Language and the Concept of ‘Investor’” in Waibel, Michael et al, eds, The Backlash against Investment Arbitration (Alphen aan den Rijn: Kluwer Law International, 2010) 3 at 25–26.Google Scholar
25 Van Harten, Gus, “Arbitrator Behaviour in Asymmetrical Adjudication: An Empirical Study of Investment Treaty Arbitration” (2012) 50 Osgoode Hall LJ 211 at 228, 237–38.Google Scholar
26 Canada’s Model FIPPA, supra note 8.
27 China FIPPA, supra note 2, art 1(1).
28 See, for example, Steven Shrybman, “Submissions to Standing Committee on International Trade Re: Abitibi Bowater NAFTA Claim Settlement,” Submission to the House of Commons Standing Committee on International Trade (8 March 2011), online: <http://www.canadians.org/sites/default/files/Trade/ Submissions_AbitibiBowater.pdf>.
29 China FIPPA, supra note 2, art 1(2), (10)(a).
30 Ibid, art 16(2)–(3).
31 No other relevant treaties to which Canada is a party include the express clarification contained in the China FIPPA that access to ISA can be denied after the initiation of an ISA claim. China FIPPA, supra note 2, art 18(3). Compare NAFTA, supra note 3, art 1113(2); Canada’s Model FIPPA, supra note 8, art 18(2). Thorn and Doucleff, supra note 24 at 25–26. Other treaties concluded by Canada that have more ambiguous denial-of-benefits provisions include Canada’s FIPPAs with Costa Rica, the Czech Republic, Jordan, Latvia, Peru, Romania, the Slovak Republic, and Tanzania as well as Canada’s trade agreements with Chile, Colombia, Panama, and Peru. In addition, seventeen of Canada’s FIPPAs, the latest of which (with Croatia) entered into force in 2001, do not have any denial-of-benefits provisions. See further Annex 1 in this article.
32 China FIPPA, supra note 2, art 2(1); see also art 2(2).
33 See, for example, International Law Commission, “Draft Articles on the Responsibility of States for Internationally Wrongful Acts” in Report of the International Law Commission, UN GAOR, 56th Sess, Supp No 10 at c IV, para 76, UN Doc A/56/10 (2001), art 4(1).
34 The China FIPPA also excludes, whether entirely or from ISA only, provisions on monopolies and regulatory transparency. That said, comparable provisions in other treaties have not figured prominently, if at all, in actual ISA cases and are apparently non-binding in important respects in Canada’s Model FIPPA, supra note 8, arts 8, 19.
35 China FIPPA, supra note 2, art 4(1).
36 Ibid, arts 5(1)–(2), 6(1)–(2); see also art 11.
37 Ibid, art 10.
38 Ibid, art 12.
39 Ibid, art 5(1)–(2).
40 Ibid, art 9.
41 Ibid, art 7(1)–(3).
42 NAFTA Free Trade Commission, Notes of Interpretation of Certain Chapter 11 Provisions (31 July 2001), (2001) 13(6) WTAM 139, art B(1).
43 China FIPPA, supra note 2, art 4(2)–(3).
44 Ibid, art 5(3).
45 Ibid,Annex B.10; Menaker, Andrea J, “Benefiting from Experience: Developments in the United States’ Most Recent Investment Agreements” (2005) 12 UC Davis J Int’l L & Pol 121 at 124, n 8.Google Scholar
46 Van Harten, supra note 25 at 225–28, 237–40.
47 China FIPPA, supra note 2, art 12(1).
48 Ibid, art 12(4). Compare Canada’s Model FIPPA, supra note 8, art 14(6). Only Canada’s four pre-1994 FIPPAs do not contain the relevant clause.
49 China FIPPA, supra note 2, art 14(1), (4), (5). The carve-out is partial because it does not apply to tax measures that lead to expropriation claims where the state parties do not agree, after the filing of the claim, that the relevant measure is not an expropriation.
50 Ibid, art 8.
51 Canada’s four pre-1994 FIPPAs do not contain these general exceptions. NAFTA and Canada’s trade agreement with Chile limit the exceptions to certain performance requirements. See, for example, NAFTA, supra note 3, art 1106(6). See further Annex 1 in this article.
52 China FIPPA, supra note 2, art 33(2). The agreement also has a general exception for cultural industries, which is similar to that found in Canada’s other FIPPAs and trade agreements (art 33(1)).
53 See, for example, CMS v Argentina (ICSID), 44 ILM 1205 (2005) at paras 316–17, 329, 331; Enron v Argentina, ICSID Case No ARB/01/3 (2007) at paras 303–9, 311–13; Sempra v Argentina (ICSID), 20 WTAM 117 (2007) at paras 34755, 373–74; National Grid v Argentina (UNCITRAL) (3 November 2008) at paras 257–62, online: <http://italaw.com/sites/default/files/case-documents/ita0555.pdf>; Suez andInterAgua v Argentina, ICSID Case No ARB/03/17 (2010) at paras 235–43; Total v Argentina, ICSID Case No ARB/04/01 (2010) at paras 221–24, 345, 483–84; EDF v Argentina, ICSID Case No ARB/03/23 (2012) at paras 1171–73. Contrast LG&E v Argentina (ICSID), 46 ILM 40 (2006) at paras 228–61; Continental Casualty v Argentina (ICSID), 21 WTAM 181 (2008) at paras 173–81, 192–210, 227–36.
54 General Agreement on Tariffs and Trade, 55 UNTS 194, Can TS 1948 No 31 (in force 1 January 1948), now incorporated by reference into the General Agreement on Tariffs and Trade 1994, 1867 UNTS 187, Annex 1A to the Agreement Establishing the World Trade Organization, 15 April 1994, 1867 UNTS 154, 33 ILM 1144 (1994) (in force 1 January 1995), art XX [GATT]; China FIPPA, supra note 2, art 33(2).
55 This would depend, among other things, on whether the language defining the general exception in any post-1993 FIPPA was weaker than that in the China FIPPA. See Mann, Howard, “The Canada-China Investment Treaty Sleight of Hand,” Embassy News (8 January 2013).Google Scholar
56 See also Newcombe, Andrew, “Canada’s New Model Foreign Investment Protection Agreement” (August 2004) at 4–5, online: <http://italaw.com/documents/CanadianFIPA.pdf>.Google Scholar
57 China FIPPA, supra note 2, art 15.
58 Ibid, especially arts 20, 22.
59 Ibid, art 22(1).
60 Ibid, art 24(5).
61 Ibid, art 18(2).
62 Ibid, art 30.
63 Ibid, art 28.
64 Ibid, art 32.
65 Ibid, art 35.
66 See text accompanying notes 164 and 171 in this article.
67 Some non-reciprocal aspects of the China FIPPA, supra note 2, such as its provision in Annex C.21(1) that Canadian (but not Chinese) investors must submit a dispute to domestic administrative procedures for four months before bringing a FIPPA claim, were not thought to be important enough to discuss in detail.
68 This element originates in US BITs and has been adopted in various forms in twenty-one of Canada’s post-NAFTA FIPPAs or trade agreements that provide for ISA. See Annex 2 in this article.
69 Brownfield investment involves the acquisition of an existing company or business; greenfield investment involves the establishment of a new venture.
70 China FIPPA, supra note 2, art 6(1)–(2).
71 Ibid, art 5(1)–(2) [emphasis added].
72 All of Canada’s five trade agreements that provide for ISA and all but four of Canada’s twenty-one FIPPAs since NAFTA extend national treatment to the preestablishment stage of a foreign investment. In contrast, Canada’s four pre-1994 FIPPAs do not extend national treatment to the pre-establishment stage. See Annex 2 in this article.
73 MacKay Cross-Examination, supra note 1 at 39: “[O]ver 90 percent of investment entering the Chinese market is subject to review under laws, regulations and rules.” European Union Chamber of Commerce in China (EUCCC), European Business in China Position Paper 2013/2014 (EUCCC, 2013) at 19–20: “China has used the vast size of its domestic marketplace to protect domestic companies and to place conditionalities on market access for foreign companies.” Although the relevant rankings do not necessarily define good economic policy, China was listed as the most restrictive of fifty-five countries in the Organisation for Economic Co-operation and Development’s (OECD) FDI Regulatory Restrict-iveness Index as of September 2013, online: OECD <http://www.oecd.org/daf/inv/ColumnChart-FDI_RR_Index_2013.pdf>.
74 As an aside, the China FIPPA, supra note 2, preserves the state parties’ ability to block takeovers of domestic firms, although the relevant provision is also non-reciprocal in important respects. See further text accompanying note 85 in this article.
75 China FIPPA, supra note 2, arts 5, 8(1)(b).
76 Schill, Stephan W, “Tearing Down the Great Wall: The New Generation of Investment Treaties of the People’s Republic of China” (2007) 15 Cardozo J Intl Comp L 73 at 86.Google Scholar
77 The China FIPPA does not extend the requirement to provide market access based on most-favoured-nation (MFN) treatment to trade agreements or to pre-1994 FIPPAs. China FIPPA, supra note 2, art 8(1)(a)(i), (b).
78 Agreement Between the Government of Canada and the Government of the Republic of Costa Rica for the Promotion and Protection of Investments, Can TS 1999 No 43, art (in force 29 September 1999) [Costa Rica FIPPA]. See also Canada’s FIPPAs with Croatia (art III(1)(b)), Jordan (art 3(1)), Lebanon (art III(b)), Peru (art 3(1)), Tanzania (art 4(1)), and Uruguay (art III(b)), online: DFATD <http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/fipa-apie/index.aspx?lang=eng>. See also Annex 2 in this article.
79 These include exceptions for existing non-conforming measures (so long as they have been laid out by letter from Canada to Costa Rica within two years of the Costa Rica FIPPA’s entry into force) and for future measures in areas such as social services, oceanfront land, and government securities. Costa Rica FIPPA, supra note 78, Annex I, art II(1)(c), (2).
80 Each of these areas is listed as exempted for the state party other than Canada, but not for Canada, in at least one other post-1993 FIPPA that provides for preestablishment national treatment. See, for example, Agreement between the Government of Canada and the Government of the Republic of Croatia for the Promotion and Protection of Investments, Can TS 2001 No 4, Annex I, art II(1)(c) (in force 30 January 2001) [Croatia FIPPA]; Agreement between the Government of Canada and the Government of the Lebanese Republic for the Promotion and Protection of Investments, Can TS 1999 No 15, Annex I, art II(1)(d) (in force 19 June 1999).
81 As an aside, it would make no difference that Costa Rica, Croatia, and Jordan do not own substantial assets in Canada for the operation of MFN treatment and market access, as discussed here, in the China FIPPA. What would entitle Chinese investors to the same rights under the China FIPPA is that the relevant third-state investors receive more favourable treatment at the pre-establishment stage.
82 Schill, supra note 76. Chinese BITs that entered into force after 2006, the texts of which were available via the UN Conference on Trade and Development’s (UNCTAD) database of Investment Instruments Online, were reviewed by the author of the present article in order to confirm Schill’s report on this aspect of China’s BIT policy. The author’s review covered China’s BITs with Colombia, Cuba, France, India, Madagascar, Mexico, Portugal, Romania, Slovakia, South Korea, and Switzerland, none of which were found to provide for pre-establishment national treatment. China’s BITs are available online: <http://www.unctadxi. org/templates/DocSearch____779.aspx>.
83 The right is also subject in the China FIPPA, supra note 2, to the federal government’s ability to block foreign takeovers under the Investment Canada Act, supra note 9, as discussed later in this article.
84 Investment Canada Act, supra note 9.
85 China FIPPA, supra note 2, Annex D.34 [emphasis added].
86 See note 97 in this article.
87 Strauss, Marina and Marotte, Bertrand, “Quebec Eyes Buying Rona Shares to Block Lowe’s,” Globe and Mail (31 July 2012), online: Globe and Mail <http://wwwtheglobeandmail.com>.Google Scholar Incidentally, under NAFTA, supra note 3, art 1108(1) (a)(ii), subnational decisions are exempted from the NAFTA national treatment obligation.
88 For an indication of the potential significance of this carve-out, see the comment by David Fung, vice chair of the Canada China Business Council (offered by him as a reason for Canada to conclude the China FIPPA but without reference to the FIPPA’s carve-out for investment screening and existing discriminatory measures in China): “There are lots of horror stories about Canadian investments in China & In Canada, our cities don’t go and destroy somebody else’s investment. But, in China, a mayor has a lot more power than our mayors in Canada.” Quoted in Keith Norbury, “Canada-China FIPA: A Good Deal for Canadian Investors, or Not?” Canadian Sailings (14 April 2013), online: <http://www.canadiansailings.ca/?p=6437>.
89 Investment Canada Act, supra note 9, s 25.1.
90 Ibid, s 14(1).
91 Industry Canada, “Investment Canada Act: Thresholds for Review,” online: Industry Canada <http://www.ic.gc.ca/eic/site/ica-lic.nsf/eng/h_lk00050.html>. The thresholds are different for takeovers by state-owned enterprises (SOEs). See Industry Canada, “Investment Canada Act: Guidelines on Investment by State-Owned Enterprises: Net Benefit Assessment,” online: Industry Canada <https:// www.ic.gc.ca/eic/site/ica-lic.nsf/eng/lk00064.html#p2>.
92 Cotula, Lorenzo et al, Land Grab or Development Opportunity? (London/Rome: International Institute for Environment and Development/Food and Agriculture Organization/International Fund for Agricultural Development, 2009) at 36, 55Google Scholar; Deininger, Klaus and Byerlee, Derek, Rising Global Interest in Farmland (Washington, DC: World Bank, 2011) at 53.CrossRefGoogle Scholar For a discussion of how Chinese SOEs may purchase land directly to avoid investment screening under the Canadian federal government’s 2012 restrictions on SOE takeovers in the resource sector, see Vanderklippe, Nathan, “For China, An Oil Sands Investment That Can’t Be Blocked,” Globe and Mail (11 March 2014), online: Globe and Mail <http://www.theglobeandmail.com>.Google Scholar
93 Investment Canada Act, supra note 9, s 38; Industry Canada, “Investment Canada Act: Related-Business Guidelines,” online: Industry Canada <https://www.ic.gc.ca/eic/site/ica-lic.nsf/eng/lk00064.html#p2> [Related-Business Guidelines].
94 Ibid.
95 McCarthy, Shawn and Chase, Steven, “Ottawa Approves Nexen, Progress Foreign Takeovers,” Globe and Mail (7 December 2012), online: Globe and Mail <http://www.theglobeandmail.com>.Google Scholar
96 Cryderman, Kelly, “Ottawa’s Foreign Ownership Strategy Hurts Alberta, Mulcair Argues,” Globe and Mail (19 February 2013), online: Globe and Mail <http://www.theglobeandmail.com>.Google Scholar The concern is credible assuming that the China FIPPA, if ratified, would implicitly preclude future changes to the Investment Canada Act (as conditioned by existing instruments such as the Related-Business Guidelines, supra note 93) that would expand the scope of Annex D.34 of the China FIPPA.
97 See Canada’s FIPPAs with Costa Rica (Annex I(VI)(1)-(2)); Croatia (Annex I(VI) (1)-(2)); Ecuador (art II(4)(a)-(b)); Egypt (art II(4)(a)-(b)); Latvia (art II(4) (a)-(b)); Panama (art II(4)(a)-(b)); Philippines (art II(4)-(5)); Romania (art II(4)(a)-(b)); Trinidad and Tobago (art II(4)(a)-(b)); Ukraine (art II(4)(a)-(b)); Uruguay (Annex I(VI)(1)-(2)); and Venezuela (Annex II(3)(a)-(b)). See Annex 2 in this article; relevant treaty texts available online: DFATD <http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/fipa-apie/index.aspx?lang=eng>.
98 See, for example, Kanargelidis, Greg, Libbey, Aaron, and Nachmani, Tamara, “Canada-China Investment Treaty: Ratification Process Begins,” Blakes Bulletin (1 October 2012), online: Blakes <http://www.blakes.com/English/Resources/Bulletins/Pages/Details.aspx?BulletinID=1702> Google Scholar: “[W]hile some critics have attacked the Canada-China FIPA, arguing it results in a forfeiture of Canadian sovereignty with respect to Chinese foreign investment in Canada, this exception [for the Investment Canada Act] ensures the Government of Canada retains the ability to exercise oversight in this area.”
99 For example, Agreement between the Government of Canada and the Government of the Eastern Republic of Uruguay for the Promotion and Protection of Investments, Can TS 1999 No 31, Annex I(VI)(1) (in force 2 June 1999): “Decisions of a Contracting Party as to whether or not to permit establishment of a new business enterprise, or acquisition of an existing business enterprise or a share of such enterprise, by investors or prospective investors of the other Contracting Party shall not be subject to dispute settlement [i.e. investor-state arbitration] under Article XII of this Agreement.” See also agreements listed in note 97 in this article.
100 China FIPPA, supra note 2, art 8(2)-(5). Less significantly, these exceptions also apply to the China FIPPA’s provisions on senior management requirements and on pre- and post-establishment MFN treatment.
101 Ibid, art 8(2)(a)(i).
102 See the definition of “measure” in Ibid, art 1(6).
103 Ibid, art 8(2)(c).
104 In Canada’s Model FIPPA, three of Canada’s trade agreements (including NAFTA), and two FIPPAs (with Jordan and Peru), the exception is limited to subnational measures and extends to national measures only where the exempted relevant measure is listed specifically. For example, Canada’s Model FIPPA, supra note 8, art 9(1)(a)(i). Also, Canada’s trade agreements with Chile and Colombia go further by requiring a negative-list approach for exempted state/provincial measures as well as national measures. See Annex 2 in this article.
105 This is so for twenty-two of Canada’s twenty-five FIPPAs. One other FIPPA (with Poland) appears not to provide for post-establishment national treatment at all. See Annex 2 in this article.
106 US-China Business Council (USCBC), USCBC 2013 China Business Environment Survey Results: Tempered Optimism Continues amid Moderating Growth, Rising Costs, and Persistent Market Barriers (USCBC, 2013) at 5-6, online: USCBC <http://uschina.org/sites/default/files/USCBC—2013MemberSurvey_0.pdf>. The USCBC reported that its survey was conducted by the USCBC with US- and China-based executives among USCBC members and that the survey included a cross-section of US companies that do business in China. Further information on methodology, such as the survey size, was not provided in the USCBC report.
107 Ibid at 5–6, 11–12.
108 MacKay Cross-Examination, supra note 1 at 40–41.
109 See Fung, supra note 88.
110 See text accompanying notes 43 and 45 in this article.
111 Canada’s Model FIPPA, supra note 8, art 38(1)–(4). See also Canada’s post-2001 FIPPAs with the Czech Republic, Jordan, Latvia, Peru, Romania, the Slovak Republic, and Tanzania as well as Canada’s trade agreements with Colombia, Panama, and Peru. See Annex 1 in this article.
112 See, for example, MacKay Cross-Examination, supra note 1 at 43, 53, 66.
113 For a contrary position, which was adopted by the Canadian federal government, that the limiting language makes no difference to the meaning of the substantive standard of fair and equitable treatment, see Chemtura Corporation v Government of Canada (UNCITRAL), Respondent Counter-Memorial (20 October 2008) at para 896. The tribunal in that case appeared not to resolve this particular issue. Chemtura Corporation v Government of Canada (UNCITRAL), Award (2 August 2010) at para 235.
114 Mann, supra note 55.
115 China FIPPA, supra note 2, art 8(1)(b) (MFN treatment does not apply to “treatment accorded under any bilateral or multilateral international agreement in force prior to 1 January 1994”). MFN treatment also does not extend to trade agreements (China FIPPA, Ibid, art 8(1)(a)(i)) but this does not affect the present analysis because the express application of MFN treatment to post-1993 FIPPAs is sufficient to undermine Canada’s post-2001 limiting language (assuming that the pre-2001 language provides more favourable treatment to foreign investors than the post-2001 language).
116 That is, Canada’s FIPPAs with Jordan (in 2009) and Tanzania (in 2013). See Annex 2 in this article.
117 That is, Canada’s FIPPA with Peru and the Canada-Chile trade agreement. See Annex 2 in this article.
118 This is the case for the remaining twenty-six of Canada’s treaties that provide for ISA. See Annex 2 in this article.
119 Canada’s Model FIPPA, supra note 8, Annex
120 Schill, Stephan W, The Multilateralization of International Investment Law (Cambridge: Cambridge University Press, 2009) at 140–42.CrossRefGoogle Scholar For a discussion of rationales for limiting this mix-and-match approach as well as limiting the implied application of MFN treatment to past treaties, see Cole, Tony, The Structure of Investment Arbitration (Milton Park: Routledge, 2013) at 97–112.Google Scholar
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122 China FIPPA, supra note 2, art 4(2).
123 The language also makes clear the requirement that claimants, in order to establish a change in the content of customary international law, must supply evidence of state practice and opinio juris — a requirement to which few ISA tribunals have held claimants. See Porterfield, Matthew C, “A Distinction without a Difference? The Interpretation of Fair and Equitable Treatment under Customary International Law by Investment Tribunals,” Investment Treaty News (22 March 2013).Google Scholar
124 China FIPPA, supra note 2, Annex B.10.
125 Metalclad v Mexico (ICSID Additional Facility), 40 ILM 36 (2000) at para 103. See also United Mexican States v Metalclad Corporation, 2001 BCSC 664 at para 99. The Metalclad award is still widely cited by ISA tribunals. See, for example, Occidental v Ecuador (No 2), ICSID Case No ARB/06/11 (2012) at para 455.
126 For example, ISA tribunals have incorporated new concepts into the customary international legal standard without requiring the claimant to provide evidence of corresponding state practice and opinio juris. See, for example, Railroad Development Corporation v Guatemala, ICSID Case No ARB/07/23 (2012) at paras 207-11, 216-19. See also Porterfield, supra note 123.
127 Judging from the NAFTA experience, the limiting language has gone some way towards reining in arbitrators’ approaches to relevant concepts even if variation remains and even if, outside NAFTA, ISA tribunals typically take a more expansive approach. See Van Harten, supra note 25 at 225–28, 237–40, and the authorities cited in note 121 in this article. See also Peterson, Luke Eric, “Evaluating Canada’s 2004 Model Foreign Investment Protection Agreement in Light of Civil Society Concerns,” Report for the Canadian Council for International Co-operation (June 2006).Google Scholar
128 For example, Croatia FIPPA, supra note 80; Agreement on Encouragement and Reciprocal Protection of Investments between the Government of the People’s Republic of China and the Government of the Kingdom of the Netherlands (26 November 2001, in force 1 August 2004), online: UNCTAD <http://unctad.org/sections/dite/iia/docs/bits/china_netherlands.pdf>.
129 See Canada’s FIPPAs with Armenia, Barbados, Costa Rica, Croatia, Ecuador, Egypt, Lebanon, Panama, the Philippines, Thailand, Trinidad and Tobago, Ukraine, Uruguay, and Venezuela. See Annex 1 in this article.
130 Van Harten, supra note 25 at 228, 238.
131 Paushok v Mongolia (UNCITRAL), Award (28 April 2011), online: <http://italaw.com/sites/default/files/case-documents/ita0622.pdf>.
132 Ibid at paras 565, 570.
133 Van Harten, supra note 25 at 228, 238.
134 For example, Hupacasath First Nation v Canada (Foreign Affairs), 2013 FC 900 at para 103.
135 MacKay Cross-Examination, supra note 1 at 51–53.
136 For example, DFATD, Final Environmental Assessment of the Canada-China Foreign Investment Protection Agreement (FIPA) (Ottawa: Government of Canada, undated), online: DFATD <http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/china-chine/finalEA-china-chine-EEfinale.aspx?lang=eng> [EnvironmentalAssessment]: “No new issues arose during the latter stages of the Canada-China FIPA negotiations with respect to potential environmental impacts in Canada & [A]s is found in [Canada’s Model FIPPA], Annex B.10 of the Canada-China FIPA provides that regulations designed and applied to advance legitimate public welfare objectives, such as those respecting health, safety and the environment, do not constitute an indirect expropriation.”
137 China FIPPA, supra note 2, art 9.
138 Compare NAFTA, supra note 3, art 1106.
139 In particular, the China FIPPA incorporates Article 2 and the Annex of the Agreement on Trade-Related Investment Measures, 1868 UNTS 186 (in force 1 January 1995) [TRIMS Agreement].
140 Molinuevo, Martin, Protecting Investment in Services: Investor-State Arbitration Versus WTO Dispute Settlement (Alphen aan den Rijn: Wolters Kluwer, 2012) at 72–74, 233–34.Google Scholar
141 Also, in contrast to World Trade Organization (WTO) arbitration, the legal claims in ISA are formulated by private parties who are not subject to the treaty obligations and who do not have a corresponding interest to moderate their claims.
142 van Aaken, supra note 22.
143 Compare the monetary limits on penalties in person-to-government dispute resolution under Canada’s Agreement on Internal Trade — Consolidated Version, 2012, Annex 1707.1(2), online: <http://www.ait-aci.ca/en/ait/ait_en.pdf> (providing for a maximum penalty of $5 million per case for the largest provinces).
144 Two other FIPPAs refer to TRIMS Agreement obligations as prohibited performance requirements, but both of these FIPPAs include the aboriginal exception. See Canada’s FIPPAs with Thailand and Costa Rica in Annex 1 in this article.
145 Van Harten, , Investment Treaty Arbitration and Public Law (Oxford: Oxford University Press, 2007) at 73–80.Google Scholar
146 Green Energy Act, SO 2009, c 12.
147 Canada - Certain Measures Affecting the Renewable Energy Generation Sector/ Canada — Measures Relating to the Feed-In Tariff Program, WTO Docs WT/DS412/R, WT/ DS426/R (2012) at para 7.111 (panel reports) [emphasis added]; Canada – Certain Measures Affecting the Renewable Energy Generation Sector/ Canada — Measures Relating to the Feed-In Tariff Program, WTO Docs WT/DS412/AB/R, WT/DS426/ AB/R (2013) at para 5.6 (reports of the Appellate Body): “Domestic content requirements are one type of TRIM regulated under the TRIMS Agreement.”
148 For instance, of the twenty-four relevant treaties that contain an obligation on performance requirements, all have an exception for aboriginal rights and preferences. Likewise, Canada’s Model FIPPA, supra note 8, allows for similar reservations and exceptions. See further Annex 1 in this article.
149 For example, NAFTA, supra note 3, art 1108(1)(a)(ii)-(iii) (the relevant obligations “do not apply to & any existing non-conforming measure that is maintained by & a state or province & or & a local government”). Note that this NAFTA clause provides that the reserved state and provincial measures must be listed within two years in a separate schedule. The schedule was never completed, leaving by implication a reservation for all existing non-conforming measures of states and provinces. The sole exceptions appear to be Canada’s trade agreements with Chile and Colombia.
150 See note 148 in this article.
151 NAFTA, supra note 3, Annex II (Schedule of Canada). Similarly, other state measures in some areas, such as the protection of rights of disadvantaged minorities, are also exempted in NAFTA and some other FIPPAs. See further Annex 1 in this article.
152 China FIPPA, supra note 2, art 8(2)(a)(i), Annex B.8, which incorporate into the China FIPPA a series of reservations contained in the Free Trade Agreement between Canada and the Republic of Peru, Can TS 2009 No 15, Annex II (in force 1 August 2009) and in the Free Trade Agreement between China and the Republic of Peru (28 April 2009, entered into force 1 March 2010), ch 10, online: <http://fta.mofcom.gov.cn/topic/enperu.shtml>.
153 Mobil Investments Canada Inc and Murphy Oil Corp v Canada, ICSID Case No ARB(AF)/07/4 (2012) (ICSID Additional Facility), online: <http://www.italaw.com/sites/default/files/case-documents/italaw1145.pdf>.
154 Ibid at para 246.
155 Ibid at paras 410–16. For a critical comment on the award, see Bankes, Nigel, “From Regulatory Chill to Regulatory Concussion: NAFTA’s Prohibition on Domestic Performance Requirements and an Absurdly Narrow Interpretation of Country Specific Reservations,” Case Comment (6 May 2013), online: <http://ablawg.ca/wp-content/uploads/2013/05/Blog_NB_Mobil_Investments_ May20131.pdf>.Google Scholar
156 Gogal, Sandra, Riegert, Richard, and Jamieson, JoAnn, “Aboriginal Impact and Benefit Agreements: Practical Considerations” (2005) 43 Alta L Rev 129;Google Scholar Fidler, Courtney and Hitch, Michael, “Impact and Benefit Agreements: A Contentious Issue for Environmental and Aboriginal Justice” (2007) 35:2 Environments Journal 49 at 61.Google Scholar
157 A joint government taskforce reported in 2010 that aboriginal organizations and mining companies concluded ninety-one agreements during 1998-2008 that were “designed to secure both benefits for Aboriginal communities and certainty for exploration and mining companies” and that may include, for example, “preferential hiring practices for Aboriginal workers.” Federal, Provincial and Territorial Social Licence Task Group, Mining Sector Performance Report: 1998–2008 (Ottawa: Government of Canada, 2010) at 27.
158 MacKay Cross-Examination, supra note 1 at 9.
159 Ibid at 11.
160 NAFTA Free Trade Commission, supra note 42, art B(1). Kinnear, Meg and Hansen, Robin, “The Influence of NAFTA Chapter 11 in the BIT Landscape” (2005) 12 UC Davis J Int’l L & Pol’y 101 at 111.Google Scholar
161 This includes Canada’s Model FIPPA, supra note 8; all of Canada’s post-2001 FIPPAs, including those with the Czech Republic (which entered into force in 2012 and adopts the presumption that all documents are public but like the China FIPPA provides that hearings are public if the respondent state so decides), Jordan, Latvia, Peru, Romania, the Slovak Republic, and Tanzania; and all of Canada’s post-2001 trade agreements, including those with Colombia, Panama, and Peru. See Annex 1 in this article.
162 Canada’s Model FIPPA, supra note 8, art 38.
163 Salacuse, Jeswald W, The Law of Investment Treaties (Oxford: Oxford University Press, 2010) at 354–57Google Scholar; Kulick, Andreas, Global Public Interest in International Investment Law (Cambridge: Cambridge University Press, 2012) at 1–2, 94–97CrossRefGoogle Scholar; Vadi, Valentina, Public Health in International Investment Arbitration (London: Routledge, 2013) at 20–21, 57–58Google Scholar; Van Harten, supra note 145 at 58–70.
164 China FIPPA, supra note 2, art 28(1)-(2).
165 See note 160 in this article.
166 This extension of the period of presumed confidentiality, beyond the time at which an ISA claim is filed, exacerbates the existing concern that compensation may be paid or decisions altered due to ISA without public knowledge.
167 Ethyl Corporation v Government of Canada (UNCITRAL), 38 ILM 78 (1998). The settlement has been discussed as an apparent case of regulatory chill. See, for example, Traynor, K, “How Canada Became a Shill for Ethyl Corporation” (1998) 23:3 Intervenor (Canadian Environmental Law Association), online: <http://www.cela.ca/print/954>..>Google Scholar On this, it is suggested here that the NAFTA claim by Ethyl Corporation — the manufacturer of the gasoline additive in question — was a significant factor in the federal government’s decision to withdraw its prohibition. Also, the fact that the case attracted controversy highlights the importance of public access to ISA documents and indicates the potential governmental interest in withholding embarrassing information about ISA claims and settlements.
168 Meron, Theodor, “Judicial Independence and Impartiality in International Criminal Tribunals” (2005) 99 AJIL 359 at 360–61CrossRefGoogle Scholar; Van Harten, supra note 19.
169 UNCITRAL Working Group II (Arbitration and Conciliation), 53d Sess, UN Doc A/CN.9/WG.II/WP.159/Add.1 (2010) [emphasis added].
170 NAFTA, supra note 3, art 2205.
171 China FIPPA, supra note 2, art 35(1)–(3).
172 See note 176 in this article.
173 That said, for Canada, the adjustment cost of terminating NAFTA may presumably be much greater than the cost of terminating the China FIPPA or any other of Canada’s FIPPAs or trade agreements.
174 By “substantial” assets, I mean $1 billion or more in inward FDI stocks.
175 Carter, Justin, “The Protracted Bargain: Negotiating the Canada-China Foreign Investment Promotion and Protection Agreement” (2009) 47 Can YB Int’l L 197 at 205–6Google Scholar; Salacuse, supra note 163 at 91–97.
176 There is also an indirect risk of claims based on forum shopping, although none appear to have materialized in Canada’s case.
177 That is, based on inward FDI stocks in 2013, Canada will have allowed approximately 83 percent of its foreign-owned economy to be covered by ISA. Other major countries, including the United States, western European states, Australia, and Japan, have not consented to ISA in treaties with one another. In contrast, Canada would have consented to ISA in treaties with all of the main capital exporters: the United States in NAFTA and the TPP; the UK, Germany, France, Netherlands, and Belgium-Luxembourg in the Canada-EU CETA; Japan in the TPP; and China in the China FIPPA.
178 Guzman, Andrew T, “Why LDCs Sign Treaties That Hurt Them: Explaining the Popularity of Bilateral Investment Treaties” (1998) 38 Va J Int’l L 639.Google Scholar
179 See, for example, “Oil Sands Need China, Oliver Says on Visit,” National Post (13 February 2012), online: National Post <http://www.nationalpost.com/index.html>.
180 Department of Foreign Affairs and International Trade (DFAIT), Responses to Questions submitted through the Chair of the House of Commons Standing Committee on International Trade on behalf of the Liberal Party (Ottawa: undated) [received by author 9 November 2012; on file with author].
181 Prime Minister of Canada, Statement by the Prime Minister of Canada on Foreign Investment (Ottawa: 7 December 2012), online: <http://www.pm.gc.ca/eng/ news/2012/12/07/statement-prime-minister-canada-foreign-investment>: “In light of growing trends, and following the decisions made today, the Government of Canada has determined that foreign state control of oil sands development has reached the point at which further such foreign control would not be of net benefit to Canada. Therefore, going forward, the Minister will find the acquisition of control of a Canadian oil-sands business by a foreign state-owned enterprise to be of net benefit only in an exceptional circumstance.”
182 Vanderklippe, Nathan, “Investment Deal with China Coming ‘in Short Order’: Baird,” Globe and Mail (16 October 2013), online: Globe and Mail <http://theglobeandmail.com>.Google Scholar
183 Aisbett, Emma, Karp, Larry, and McAusland, Carol, “Compensation for Indirect Expropriation in International Investment Agreements: Implications of National Treatment and Rights to Invest” (2010) 1:2 J Globalization & Development 5.CrossRefGoogle Scholar
184 Treasury Board of Canada Secretariat, Guidelines on International Regulatory Obligations and Cooperation (Ottawa: Queen’s Printer, 2007), online: Treasury Board Secretariat <http://www.tbs-sct.gc.ca/rtrap-parfa/iroc-cori/iroc-cori01-eng.asp#Toc175098395> [emphasis added].
185 Barutciski, Milos and Kronby, Matthew, “Investment Agreement with China Will Benefit Canada,” Globe and Mail (2 November 2012), online: Globe and Mail <http://theglobeandmail.com>.Google Scholar
186 These include BITs with Belgium-Luxembourg, Finland, France, Germany, India, the Netherlands, Norway, Russia, South Korea, Spain, Sweden, and Switzerland: UNCTAD, “Full List of Bilateral Investment Agreements Concluded [by China], 1 June 2013,” online: UNCTAD <http://unctad.org/Sections/ dite_pcbb/docs/bits_china.pdf>. Other BITs concluded by China with major economies, especially Austria, Australia, Denmark, Italy, Japan, New Zealand, and the United Kingdom, date from the 1980s and would not reflect China’s shift towards a more muscular regime of ISA since the early 2000s.
187 See text accompanying note 109 in this article.
188 See, for example, Gaukrodger, David and Gordon, Kathryn, “Investor-State Dispute Settlement: A Scoping Paper for the Investment Policy Community,” OECD Working Paper on International Investment no 2012/3 (OECD Investment Division, 2012).Google Scholar
189 Carter, supra note 175 at 216.
190 The Environmental Assesssment, supra note 136, is of little use as an evaluation of environmental impact and seems more a public relations document. It discounts any environmental impact of the China FIPPA on the assumption that there would be no direct causative relationship between the China FIPPA and increased investment flows: “As new flows of investment from China into Canada (or Canada into China) cannot be directly attributed to the presence of a FIPA, there can be no causal relationship found between the implementation of such a treaty and environmental impacts in Canada. It is for this reason that the claim made in the initial environmental assessment, that no significant environmental impacts are expected based on the introduction of a Canada-China FIPA, is upheld.” The absence of a causative relationship in this respect was assumed in the environmental assessment based partly on the assertion that “this type of government-to-government treaty cannot directly facilitate new investments or directly create new opportunities for investment.” This assertion is inaccurate in that many BITs, including FIPPAs provide for a right of market access by foreign investors. The assertion was also contradicted by the Prime Minister’s Office’s in a statement on the China FIPPA that was cited but not addressed in this respect in the environmental assessment: “Once implemented, the Canada-China FIPA will facilitate investment flows, contributing to job creation and economic growth in Canada”: Prime Minister of Canada, Canada-China Foreign Investment Promotion and Protection Agreement (FIPA) (Ottawa, 8 February 2012), online: <http://www.pm.gc.ca/eng/news/2012/02/08/canada-china-foreign-investment-promotion-and-protection-agreement-fipa>. Finally, the environmental assessment’s discounting of environmental impacts of the China FIPPA is undermined seriously by the assessment’s failure to consider how a BIT may have environmental impacts due to new legal rights it bestows on foreign investors — whether or not their investment decisions are linked to the China FIPPA — and the corresponding fiscal risks and regulatory constraints for host states.
