On March 30, 2007, Minister of Foreign Affairs Peter MacKay introduced the Settlement of International Investment Disputes Act in the House of Commons. This follows Canada’s signing of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "ICSID Convention") on December 15, 2006.

The bill, which will ensure that ICSID arbitration awards are recognized and enforced in Canada, must be adopted prior to ratification of the ICSID Convention. Because of Canada’s federal structure, the provinces must also adopt legislation to support the ICSID Convention. To date, Ontario, British Columbia, Newfoundland & Labrador, Nunavut and Saskatchewan have passed such legislation.

Investor-State Claims

Canada’s signing of the ICSID Convention will be of particular interest to investors in Canada, the United States and other countries with which Canada has negotiated bilateral investment treaties (see list below* – negotiations with China and India are currently in the final stages). These treaties contain private investor-state mechanisms which enable investors to sue host governments that fail to comply with their investment obligations and thereby cause damage or loss to foreign investors.

Under the investment dispute settlement provisions of Canada’s free trade agreements (including NAFTA’s Chapter 11) and Canada's 23 bilateral investment treaties, disputes between Canadian investors and a host government may be resolved through arbitration under the ICSID Convention, the Additional Facility Rules of ICSID or the ad-hoc UNCITRAL Rules. However, Canada must be a Party to the ICSID Convention before a dispute brought by a Canadian investor can proceed under the ICSID Convention. The signing of the ICSID Convention has therefore been long-awaited as Canadian investors have until now been precluded from choosing arbitration under the auspices of the ICSID Convention.


ICSID is an organization of the World Bank that offers facilities for the conciliation and arbitration of investment disputes between Contracting States and nationals of other Contracting States. The Centre came into existence via the ICSID Convention in 1965 and currently has over 140 Contracting States, which include a majority of Canada’s trading partners.

The main advantage of conducting 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. This is to be contrasted with non-ICSID awards (i.e., Additional Facility and UNCITRAL awards) which may be challenged in the national courts of the situs of arbitration in accordance with the arbitration law applicable in that jurisdiction.

Enforcement of an arbitration award under the ICSID Convention award is more straightforward than enforcement under the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"), which would apply to UNCITRAL and Additional Facility awards. Under the New York Convention, national courts considering an award in the enforcing jurisdiction are obliged to enforce it without reconsideration of the underlying merits. However, the court may refuse to enforce an award on specific enumerated grounds (e.g., the incapacity of a party, a lack of notice, the award decided matters not within the scope of the arbitration agreement, a tribunal was not properly constituted, or an award was contrary to public policy). 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.

Investors in Canada, the United States and other countries with which Canada has negotiated investment protection treaties will have an additional tool when seeking arbitration to resolve investment disputes arising with host governments.

McCarthy Tétrault’s International Trade and Investment Law Group has one of Canada’s leading investor-state arbitration practices and assists clients in developing solutions to address harmful or discriminatory measures taken by host governments.