As Canada renews economic discussions with India and China, two countries with which relations have been strained in recent years, it highlights the importance of reliable investment frameworks for international investors.
Investors between Canada and China are provided some investment stability by the Canada-China Foreign Investment Promotion and Protection Agreement (Canada-China BIT). However, as we have noted elsewhere, while this treaty offers key protections, including guarantees of fair and equitable treatment, most-favoured-nation and national treatment, protection from unlawful expropriation, and free transfer of funds, as well as investor-state dispute resolution mechanisms, these are subject to certain limitations and exclusions. Thus, investors between Canada and China should not assume that they will be able to rely on the Canada-China BIT for all manner of stability.
To mitigate risks inherent in cross-border investment, it is essential for investors to carefully assess and select contractual protections and dispute resolution mechanisms that align with their strategic interests. These considerations should not be limited only to the standard choices between governing law and the selection of court jurisdiction or arbitration agreements, although these remain important foundational elements.
Given the shifting nature of global geopolitics, which are increasingly defined by evolving circumstances rather than clear boundaries, investors will benefit by incorporating specific contractual provisions that address the unique challenges of international trade. This can include clauses related to trade and tariff issues, triggers for renegotiation in response to material changes, and the adoption of less conventional dispute resolution processes. For example, parties may benefit from the creative use of expert determination or mediation to address the commercial effects of unforeseen geopolitical changes.
These kinds of considerations are especially important for investors between Canada and India, as currently there is no treaty between them that provides for investor protections. While the negotiations for a comprehensive economic partnership agreement are now (again) underway, India’s recent approach to narrowing the scope of investor protections and complicating the investor-state dispute resolution options in its BITs suggest that a significant shift in the paradigm regarding investor protections between the two countries is unlikely.
As the global economic order continues to develop, cross-border investors should remain vigilant. Proactively addressing legal, geopolitical, and contractual risks remains essential for safeguarding investments and ensuring predictable business outcomes in an ever-evolving global landscape.
