Canada continues its progress towards ratifying the 1965 Convention on the Settlement of Disputes between States and Nationals of Other States (the "ICSID Convention"). Although Canada signed the ICSID Convention on December 15, 2006, Canadian provinces and territories are required to adopt implementing legislation, and the federal legislation ratifying the Convention must be passed by the Canadian parliament. When it finally ratifies the Convention, Canada will join the 143 other members of the World Bank's investment dispute mechanism, including most of Canada's trading partners. Canada's ratification of the ICSID Convention will improve the rights of investors under the North American Free Trade Agreement ("NAFTA") and under most of Canada's 22 Foreign Investment Protection Agreements ("FIPAs")1 currently in force.
Currently under NAFTA or a FIPA, claims by Canadian investors against foreign states or claims by foreign investors against Canada can only be pursued through the ICSID Additional Facility Rules, the UNCITRAL rules or ad hoc arbitrations. In all cases, the award is subject to national laws on the recognition of foreign arbitral awards. Moreover, nothing prevents national courts from interfering with arbitral proceedings. For investors, the major advantage of the ICSID system is that it is self-contained. ICSID tribunals have the power to make interim measures and are exempt from the scrutiny or control of domestic courts in contracting states.2 This may well ensure more efficient proceedings. Predictability is also increased because of ICSID's quickly growing body of arbitral case law, both procedural and substantive.
Another major advantage of the ICSID system is that it does not allow parties to seek annulment of an award before a national court.3 Under the Convention, an ICSID award is to be recognized by contracting states as if it were a final judgment of a court of that state.4 The only remedies available are those provided under the Convention and are restricted to a request for interpretation, a request for revision based on a newly-discovered decisive fact and a request for annulment.5 The five grounds for annulment are narrower than the grounds for refusing recognition or enforcement of an award under the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention").6 On the basis of their rights under the New York Convention, states have usually adopted legislation under which recognition or enforcement of a foreign arbitral award can be prevented on the grounds the award is contrary to the state's own public policy.7 This is not a ground for non-enforcement under the ICSID Convention.
Once Canada has ratified the ICSID Convention, investors will be able to choose the ICSID Convention and Rules under all Canadian treaties containing an ICSID option (with the exception of the Canada-Thailand FIPA and claims against Mexico under NAFTA, as neither Thailand nor Mexico8 are parties to the ICSID Convention; though the ICSID Additional Facility Rules will be available). Among the five first-generation FIPAs (1990-1995),9 only the Hungary-Canada and Argentina-Canada treaties have ICSID clauses. However, the 17 FIPAs that entered into force since 1995 are based on NAFTA Chapter 11 and all contain almost identical provisions on applicable arbitration rules. The investor can choose among: 1) the ICSID Convention, if the state and investor's state are both parties to ICSID; 2) the ICSID Additional Facility Rules, if the state of only one of the parties is a party to ICSID, or 3) the UNCITRAL arbitration rules.
As stated, Canada's ratification may still take time because legislation implementing the ICSID Convention is required at both the provincial and federal levels. The practice of the Canadian Ministry of Foreign Affairs and International Trade is that, "Canada will not normally become a party to an international agreement which requires implementing legislation until the necessary legislation has been enacted."10 To date, four of the ten Canadian provinces (Ontario, Saskatchewan, British Columbia and Newfoundland and Labrador) and one of the three territories (Nunavut) have adopted implementing legislation. At the federal level, the implementing legislation (Bill C-9) passed first and second readings in the House of Commons on October 29, 2007. Under its previous name (Bill C-53), the bill gained support from the three largest parties in Parliament, which should ensure a large majority when time comes for adoption.11 Bill C-9 has now been referred for consideration to the Foreign Affairs and International Development Committee before it is to be sent back to the House of Commons for its third and final reading.