Canada is currently in the later stages of negotiating a bilateral investment treaty (BIT) with China, which is expected to be completed in 2007. Canada is negotiating on the basis of its 2004 Model Foreign Investment Protection and Promotion Agreement (FIPA). The Model FIPA and Canada’s 23 current BITs are generally more detailed and contain more substantive obligations than the approximately 100 Chinese BITs currently in existence, and also have a broader investor-state dispute settlement mechanism.
Given the divergence between Canada’s and China’s BITs, the negotiations address several key issues. Some of those key issues are noted below.
Administrative review process — A recent Chinese BIT provides that an investor can proceed to investor-state arbitration only after first submitting a claim to an administrative review process and then waiting three months for a resolution. The majority of Canadian BITs provide for a direct recourse to investorstate arbitration.
Fork in the road — In contrast with Canada’s Model FIPA, many other BITs require that the investor choose at the outset between domestic proceedings and international arbitration. Once domestic proceedings have commenced, the investor is precluded from bringing a claim under the BIT.
Standing — Canada’s Model FIPA permits investors to bring a claim on their own behalf and/or on behalf of an enterprise they own or control for damages resulting from a violation of the BIT. China’s existing BITs, on the other hand, contain a more general provision regarding dispute settlement and an investor’s right to bring a damages claim.
Place of arbitration — Many BITs permit the investor to choose the applicable arbitration rules, which generally leave the determination of the place of arbitration to the administrative tribunal unless the parties have already agreed upon the place of arbitration.
Canada has signed but not yet ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), of which China is a member. Arbitral awards issued under the ICSID Convention are binding on the parties, and appeal rights to the ICSID Secretary-General are only permitted on very limited grounds. Non-ICSID awards, by contrast, may be challenged in the national courts of the situs of arbitration in accordance with the arbitration law applicable in that jurisdiction.
Enforceability of awards — Under Canada’s Model FIPA, the parties have an obligation to provide for the enforcement of awards in their territory. To ensure that the New York Convention can be invoked to enforce UNCITRAL or ICSID Additional Facility awards, Canada’s BITs usually stipulate that the consent in writing requirement is met and that a claim under the BIT is deemed to arise out of a commercial relationship or transaction. Generally, China does not include such specific provisions for enforceability of awards.
Transparency — Canada’s Model FIPA, in contrast with most other BITs, contains several transparency provisions that permit public access to documents, open hearings and publication of the award.
Governing law — Canada’s Model FIPA includes a provision that indicates that an arbitral tribunal will decide the dispute in accordance with the BIT and applicable rules of international law. Some BITs do not contain any such provisions.
McCarthy Tétrault Notes:
Canadian investors should consider the impact of the absence or variation of these various terms (and others) when contemplating trade with China.
Given the size of the Chinese market and significant investment opportunities for Canadians, the negotiation of the Canada– China BIT is of particular importance to Canadian investors. It is also significant because it is part of the first series of BITs to be negotiated based on Canada’s Model FIPA.
See the more detailed discussion of these issues in the article on our website written by John W. Boscariol and Orlando E. Silva.