House of Commons Hansard #154 of the 39th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was icsid.

Topics

Sales Tax Amendments Act, 2006Government Orders

10:35 a.m.

NDP

The Deputy Speaker NDP Bill Blaikie

The question is on the motion.

Is it the pleasure of the House to adopt the motion?

Sales Tax Amendments Act, 2006Government Orders

10:35 a.m.

Some hon. members

Agreed.

Sales Tax Amendments Act, 2006Government Orders

10:35 a.m.

NDP

The Deputy Speaker NDP Bill Blaikie

I declare the motion carried.

(Motion agreed to, bill read the third time and passed)

Settlement of International Investment Disputes ActGovernment Orders

10:35 a.m.

Conservative

Carol Skelton Conservative Saskatoon—Rosetown—Biggar, SK

Settlement of International Investment Disputes ActGovernment Orders

10:35 a.m.

Simcoe—Grey Ontario

Conservative

Helena Guergis ConservativeSecretary of State (Foreign Affairs and International Trade) (Sport)

Mr. Speaker, I wish to split my time with the member for Macleod. I would ask for unanimous consent.

Settlement of International Investment Disputes ActGovernment Orders

10:35 a.m.

NDP

The Deputy Speaker NDP Bill Blaikie

Is there unanimous consent?

Settlement of International Investment Disputes ActGovernment Orders

10:35 a.m.

Some hon. members

Agreed.

Settlement of International Investment Disputes ActGovernment Orders

10:35 a.m.

Conservative

Helena Guergis Conservative Simcoe—Grey, ON

Mr. Speaker, it is with great pleasure that I speak at second reading of Bill C-53, An Act to implement the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. The convention is an international treaty establishing the International Centre for the Settlement of Investment Disputes, ICSID. Bill C-53 will implement the ICSID convention for Canada.

Allow me to give hon. members of this House, first, a description of what ICSID is, second, an overview of the bill and what it does, and lastly, an explanation of the benefits of this convention for Canada and Canadian businesses.

ICSID is an organization devoted to the resolution of international investment disputes between states and nationals of other states through arbitration and conciliation.

ICSID provides mechanisms for arbitration and conciliation of such disputes provided that both the state of the investor and the host state are parties to ICSID. This means that once Canada ratifies ICSID, a Canadian investor abroad in any of the 143 countries that have already ratified ICSID may have recourse to ICSID to resolve disputes that may arise with the country in which it is doing business.

ICSID is a highly reputable World Bank institution based in Washington, D.C., and one of the most frequently used institutions for investment arbitrations.

ICSID and international investment arbitration have traditionally been used in cases of expropriation or nationalization. A hypothetical example is a takeover by a host government of a Canadian business exploiting natural resources such as oil or minerals. Such an expropriation may represent a substantial loss for the investor and fair compensation is not always easily obtained.

However, the Canadian investor may have insisted on an investment agreement with an ICSID arbitration clause before investing, or Canada may have an investment treaty with the host government making reference to ICSID arbitration. If so, once Canada ratifies ICSID, the Canadian investor owning the business will have the right to use ICSID arbitration to pursue fair compensation for its losses before an independent arbitral panel.

ICSID provides an efficient, enforceable mechanism for such dispute resolution. This is why our government believes ICSID is a good way to protect Canadian business and its investment in foreign countries. It also complements our investment protection treaties and existing arbitration clauses in investment contracts of Canadian businesses.

Bill C-53 will implement this convention. This bill needs to be passed before Canada can ratify the convention. This bill will make an ICSID award enforceable in a Canadian court. It will ensure that persons using conciliation under the convention cannot abuse that process. This bill also provides for governor in council appointments of persons to ICSID lists of potential panellists and it provides privileges and immunities as required by the convention.

The key provision making ICSID awards enforceable is clause 8, which states:

(2) The court shall on application recognize and enforce an award as if it were a final judgment of that court.

This provision will apply to an ICSID award for or against Canada or a foreign government. This provision is the key to the ICSID system for enforcing arbitration awards.

An ICSID award is reviewable by an ICSID tribunal, but not by national courts. Once final, an ICSID award will be recognized and enforced in Canada as if it is a final judgment of a Canadian court.

While Canada will be giving full effect to awards, in turn the convention guarantees similar enforcement in all states that are party to ICSID. Thus, Canadian businesses with an ICSID award in their favour have a very powerful tool to ensure the award is paid. This ensures the protection of their rights and interests in foreign countries.

There are three important related provisions. Clause 6 makes the act binding on the Crown. This ensures that awards against the federal government can be enforced.

Clause 7 prevents a party from seeking court intervention by way of judicial review applications or applications to a similar effect. A party cannot therefore attack the validity of a final ICSID award.

Clause 8 also gives all superior courts, including the Federal Court of Canada, jurisdiction to enforce ICSID awards.

The provisions with respect to conciliation are brief. Clause 10 ensures that the ICSID conciliation process can be conducted in a manner that is without prejudice to the rights of the parties. In other words, testimony given during conciliation cannot be used in other proceedings. This gives investors a further option to ensure their rights are respected.

I should also mention that the bill proposes provisions ensuring the required privileges and immunities for the centre, its employees and its arbitrators. Such immunities guarantee the independence of the tribunal when seated in Canada.

As I indicated before, once adopted, the settlement of international investment disputes act will allow Canada to ratify the ICSID Convention. In today's world, there are many situations where Canadian businesses could be significantly harmed by foreign governments' activities or decisions.

Canadian businesses are increasingly active in foreign markets. They invest in foreign countries by buying plants, establishing new businesses or acquiring rights to natural resources, for example. While disputes with foreign governments affect only a small portion of the $465 billion in assets owned by Canadian investors abroad, when disputes do arise, mechanisms such as ICSID are necessary to ensure that the dispute is resolved fairly and efficiently.

We as a government have worked hard to promote Canada abroad, facilitate the free flow of international investment and help Canadian businesses succeed abroad.

To date, Canada has negotiated 22 foreign investment protection and promotion agreements, or FIPAs, and is actively negotiating others. These agreements provide for investor state dispute settlement by means of arbitrations.

ICSID arbitration is an option under these agreements but only if both countries are party to ICSID. These agreements create a more predictable and transparent climate for Canadian investors abroad by setting out rules for the treatment of investors and offering dispute settlement to adjudicate claims when their rights have been violated.

Canadian investors who need to use dispute settlement to enforce their rights, whether those rights exist pursuant to a FIPA, an FTA or an investment contract with an arbitration clause will welcome this bill. Promoting fair trade rules and equitable treatment for our businesses must go hand in hand with efficient dispute resolution mechanisms that allow investors to obtain redress.

We have proposed this bill today to pave the way for ratification of the ICSID Convention. Canadian businesses demand that Canada join this important convention to ensure protection of their investments abroad and because it is consistent with our foreign trade investment policy.

This convention entered into force in 1966, over 40 years ago, and 143 states have ratified the convention, including most of our major trading partners. This represents virtually three-quarters of all the states in the world. By way of comparison, there are 191 states that are members of the UN.

The ICSID Convention represents one of the most ratified treaties in the world and Canada is not yet a party to it.

This government is committed to fair international trade rules. We are committed to protecting Canadians' interest throughout the world and this is why we take action today for the implementation of the ICSID Convention.

Canadian businesses support the adoption of this convention. The convention is good for investment in this country, as well as Canadian investors abroad. It ensures efficient resolution of disputes between governments and foreign investors. Those are the reasons that our government presents Bill C-53 for second reading.

Settlement of International Investment Disputes ActGovernment Orders

10:45 a.m.

Liberal

Roy Cullen Liberal Etobicoke North, ON

Mr. Speaker, it sounds like a good idea to ratify this convention with Bill C-53. I initially think, of course, of Canadian oil companies in a country like Venezuela, for example, where Mr. Chavez has gone on a rampant nationalization program. I am not sure if we have Canadian companies in Venezuela but I think it would be a good thing to be part of that if the compensation is fair.

However, another thought occurs to me. What would happen if foreign countries, through state-owned enterprises, were to come to Canada to try to nationalize some of our energy assets or some of our national resource companies? What comes to mind is the case of China Minmetals, a state-owned enterprise in the People's Republic of China, that made a proposed takeover bid of Noranda but which did not proceed.

With the failed policies of the government with respect to energy trusts and with respect to the non-deductibility of interest, many energy and natural resource companies will become subject to takeovers.

The more preferred way, certainly from my perspective, would be to make changes to the Investment Canada Act so that the government would need to deal with these in terms of the national interest. However, the government has been totally silent on that issue.

Will this convention at least help with the nationalization of Canadian companies by foreign and state-owned enterprises?

Settlement of International Investment Disputes ActGovernment Orders

10:45 a.m.

Conservative

Helena Guergis Conservative Simcoe—Grey, ON

Mr. Speaker, to be truthful, the question is irrelevant to the bill that we are discussing today.

I will say that Canada respects its international obligations. This bill does underscore that Canada is open for business but we have always respected our international obligations. When the Government of Canada has been at fault with a foreign investor, we have always lived up to our obligations so it will not change anything. What it will do is protect our businesses abroad.

I have a couple of very important supportive, positive quotes for Canada ratifying this convention, which I would like to read for the hon. member. The first one is by Michael Murphy, the executive vice-president for policy, from the Canadian Chamber of Commerce. He states, “For Canadian businesses investing abroad, ratifying the ICSID Convention is an effective way for the Government of Canada to provide these investors with a means of protecting their investment: an efficient avenue for seeking a remedy should their investment be compromised”.

He also said that “Canadian businesses investing abroad would finally be afforded the same level of protection as our competitors. In addition, ratification of the ICSID Convention would enable the Government of Canada to conclude its foreign investment and protection agreement for the negotiations with China much sooner, allowing the government to produce real benefits for Canadian businesses”--

Settlement of International Investment Disputes ActGovernment Orders

10:45 a.m.

NDP

The Deputy Speaker NDP Bill Blaikie

I think there is another question. The hon. member for Mississauga South.

Settlement of International Investment Disputes ActGovernment Orders

10:45 a.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, I am surprised that the secretary of state either would not or could not answer a straight question. I will give her a simpler question.

This will not be in effect for Canada until all of the provinces and territories sign on. I understand that the other provinces have expressed interest but I wonder if there is a timeline in which the other provinces will be signing on to this treaty so that it can be in effect for Canada.

Settlement of International Investment Disputes ActGovernment Orders

10:45 a.m.

Conservative

Helena Guergis Conservative Simcoe—Grey, ON

Mr. Speaker, as it is right now, five provinces have implemented legislation to proceed with this convention. All the provinces have been in ongoing negotiations with the federal government for many years.

I would note again that this has been on the table for over 40 years, since 1966, so it has been a couple of decades that the federal government has been working and negotiating with the provinces. The provinces actually want us to proceed with this federal legislation. It does not mean that a province must participate. In fact, if a province chooses not to, it does not need to put legislation in place.

However, five provinces do want to proceed and in order for them to do so, we must have federal legislation. I cannot see any province wanting to hold back another province.

Settlement of International Investment Disputes ActGovernment Orders

10:50 a.m.

Macleod Alberta

Conservative

Ted Menzies ConservativeParliamentary Secretary to the Minister of International Trade and Minister of International Cooperation

Mr. Speaker, it is a pleasure to speak to Bill C-53, An Act to implement the Convention on the Settlement of Investment Disputes between States and Nationals of Other States.

The convention is also known as the ICSID Convention. We are renowned in the House for using acronyms but it is far simpler to use that when we are referring to the International Centre for the Settlement of Investment Disputes established by the convention.

I was first made aware of ICSID by a constituent of mine, a Mr. David Haigh, an internationally renowned dispute settlement arbitrator and a lawyer with Burnet, Duckworth and Palmer in Calgary, who has long advocated for Canada to bring ICSID into force. This gentlemen brought this to my attention back in my dark days when I was in opposition. We tried at that time to bring it forward at that time but were unsuccessful. However, now that we have a new government in this country we are actually able to get on with creating a business environment that is friendly to businesses.

I know that David, along with many Canadian investors, will be pleased that the government is moving forward with Bill C-53, and it is my pleasure to take part in the debate today.

Before a country can ratify the ICSID Convention, it needs to pass legislation providing for ICSID awards to be enforceable in its courts. For Canada, this means that it must pass and bring the act into force. In addition, any province or territory that is designated a constituent subdivision must bring similar legislation into force.

I would first like to discuss some of the pressing reasons for hastening Canada's ratification of the convention. I hesitate to use “hasten” because, as my hon. colleague just raised, we have been working on this since 1966.

There are three reasons why Canada should become a party to the ICSID Convention. It would provide additional protection to Canadian investors abroad by allowing them to have recourse to ICSID arbitration in their contracts with foreign states. It would also allow investors of Canada and foreign investors in Canada to bring investment claims under ICSID arbitral rules where such clauses are contained in our foreign investment protection agreements and free trade agreements. Also, it would contribute to reinforcing Canada's image as an investment friendly country.

I will tell the House more about the other advantages. When Canada ratifies the ICSID Convention, Canadian businesses investing abroad would finally be afforded the same level of protection as their competitors. There are numerous disadvantages associated with the absence of Canada from this convention. Canadian businesses are hurt. Even though Canadian investment abroad continues to rise, the ability of Canadian businesses to arbitrate investor state disputes is hurt by the fact that they must arbitrate without the infrastructure that ICSID would and could afford them.

Investors prefer ICSID to other arbitration mechanisms for many reasons, such as: the ICSID regime is an extremely efficient mechanism for the resolution of investment disputes; it provides better guarantees regarding enforcement of awards and more limited local court intervention; and ICSID's roster of arbitrators gives investors access to well-qualified arbitrators at ICSID at controlled rates and with extensive experience in international investment arbitration.

Since Canada has not ratified ICSID Convention, we are not granted a voice on ICSID's administrative council and cannot vote on changes to the ICSID arbitral rules.

I will turn now to the second advantage of ICSID: improving the dispute settlement process available under our treaties.

NAFTA and Canada's foreign investment protection agreements, or FIPAs, provide for ICSID dispute settlement as one of several options. However, up to now this option could not be used. Ratification of ICSID will provide investors with the option to use ICSID to resolve certain investor state disputes.

Chapter 11 of NAFTA provides that ICSID arbitrations may be used in cases where both the state of the complaining investor and the state complained against are party to ICSID. The U.S. is party to ICSID but not Mexico.

In the case of FIPA, most of our FIPA partners are already party to the ICSID convention. Consequently, when Canada ratifies the ICSID convention, arbitration using ICSID will become available under those agreements.

My final point is a simple one. Canada's absence from ICSID does little to augment our international image as a country which is open to free trade and foreign investment.

Already, as earlier mentioned, 143 countries are party to ICSID. It is time for Canada as well to become a party to ICSID. I will now explain why ratification is increasingly urgent.

First, we do not know when an investment dispute might arise in which Canadian membership in ICSID might be an important factor in preserving a Canadian investor's rights. Periodically, and again this year, we have been approached by investors who could have benefited significantly if Canada had already ratified the convention.

Second, some states that have ratified ICSID restrict enforcement of investor state arbitral awards unless such awards are made by an ICSID tribunal. It is difficult to persuade such a state to modify this practice when a solution is as simple as Canadian ratification of ICSID. Yet, until there is a solution, Canadian investors lack the protection provided by the availability of effective investor state dispute settlement mechanisms.

The Canadian business and legal communities support Canada's ratification of the ICSID convention.

The provinces and territories support ICSID. The convention allows Canada to designate provinces or territories as constituent subdivisions that will also be able to use the ICSID arbitration for disputes with international investors.

The Chamber of Commerce passed a policy resolution unanimously. Over 200 local chambers of commerce from coast to coast, at their AGM in September of 2006, passed a resolution which calls on the Government of Canada to ratify this convention.

I urge the House to listen to the call of Canada's investors, legal community and constituents like Mr. Haigh, and give expedient consideration to the bill in the interests of Canada's continuing international stature and healthy economy.

Settlement of International Investment Disputes ActGovernment Orders

10:55 a.m.

Liberal

Maurizio Bevilacqua Liberal Vaughan, ON

Mr. Speaker, I was really struck by something that the hon. member said in reference to reinforcing Canada's image abroad and making indeed Canada an investment friendly country and giving a positive image to the world.

As a member of a government that inherited a $42 billion deficit that we had to eliminate; that provided Canadians with the largest tax cut in Canadian history of $100 billion, both personal as well as corporate; and that made investments in R and D and innovation, it really gave an image to the world that in fact Canada was no longer a country threatened by the IMF knocking on its doorstep but was rather a country that was able to have great economic growth through the wise investments that were made.

While I of course support the principle of the bill, I do want to express, after conversations with individuals particularly in the business community, a concern I have about recent measures taken by the government. It relates to, for example, the tax on income trusts. How does that bring greater confidence to the investment markets, not to mention the issue of interest deductibility?

While this measure that we are talking about today is indeed a positive measure, I must say that we as a country and the Conservative government need to be aware of the fact that these types of measures will not give confidence to foreigners to look at Canada as a friendly investment place.

There has to be greater consistency. I am just wondering whether or not the hon. member shares the concern that I have on income trusts, the billions of dollars that seniors lost as well as the issue of interest deductibility that really hinders Canadian companies to further expand in a world that is truly globalized.

Settlement of International Investment Disputes ActGovernment Orders

11 a.m.

Conservative

Ted Menzies Conservative Macleod, AB

Mr. Speaker, I guess there was a question in there. I do appreciate the fact that the member recognizes how important it is to our investor companies to have a piece of legislation like this in place.

This government has had to make some difficult decisions mainly because no difficult decisions were made in the previous 13 years, and I think we all recognize that. When a country has been left behind, it is always a challenge for it to catch up.

I might share with the hon. member some of the messages that we have been receiving at our trade committee from the business community in this country. It told us not to bring up the issue of income trusts, but the fact that it felt it had been abandoned.

Businesses are glad that they have a government now that recognizes the fact that they need an environment in which they are able to expand and in which they are able to compete on a level playing field with companies around the world. It is important that we provide a safe investment environment not only here in Canada for companies that want to invest here but for our companies that wish to grow and become investors in the world.

Settlement of International Investment Disputes ActGovernment Orders

11 a.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, the member may not want to listen to members of Parliament as we talk about foreign investment and what people have to say. As the secretary of state likes to read out quotes, I will read a couple of quotes to the member and see his response. Here is one:

Allan Lanthier, a retired senior partner of Ernst & Young said “I've been practising tax for 35 years--this is the single most misguided proposal I've seen out of Ottawa in 35 years”.

Tom d'Aquino, CEO of the Canadian Council of Chief Executives said, “We are worried that the change...undermines the competitiveness of Canada's homegrown champions.”

That is how they feel. How does the member respond to leaders who deal in foreign investment?

Settlement of International Investment Disputes ActGovernment Orders

11 a.m.

Conservative

Ted Menzies Conservative Macleod, AB

Mr. Speaker, I travelled with Mr. d'Aquino to India a few weeks ago and that comment was never made to me. Mr. d'Aquino and the other members of the Council of Chief Executives said what a wonderful idea it was for this new government to be actually looking at trade opportunities for Canadian businesses. He was very supportive of the fact that we introduced them to some companies in India that are looking for partners and investors. It was a great opportunity.

Settlement of International Investment Disputes ActGovernment Orders

11 a.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, I am pleased to participate in the debate on Bill C-53, the settlement of international investment disputes act.

Should this bill pass, it will bring Canada one step closer to becoming a signatory country of the 1965 World Bank convention on the settlement of investment disputes. The convention is designed to facilitate the settlement of investment disputes between governments and foreign investors, thereby improving the conditions for international investment, which is what has been discussed today and certainly has been reflected in the questions that hon. members have posed to the government.

Any such disputes are argued before a tribunal at the International Centre for Settlement of Investment Disputes or ICSID, as members have been referring to it. Canada signed the treaty last December in Washington and in so doing, as has been mentioned, became the 143rd country in the world to sign on.

It will not come into effect until all the provincial and territorial governments have also signed on. Five have already done that, including Ontario in 1999. It is my understanding and the government's representation that the remaining provinces and territories have expressed approval in principle and interest, and are hopefully going to be signing in the near future.

Essentially, what the ICSID convention does is ensure that the domestic courts and any of the signatory countries have the power to enforce any arbitration amounts awarded by this tribunal. Although agreeing to the hearings is voluntary on the part of each party, once they have agreed to a hearing neither one can unilaterally withdraw from the process or refuse to pay any damages awarded by the tribunal.

In order to ensure an unbiased hearing, the arbiters are selected by contesting parties themselves. The ICSID then provides the hearings with a venue and the administrative support required to facilitate them.

At this time we in the official opposition will be supporting this bill. We believe it will help to provide recourse for Canadian investors who are sometimes hurt by the actions of foreign governments when those actions violate existing trade or investment treaties.

It will also let investors around the world know that Canada is committed to honouring its international treaties on trade and investment. This sentiment was expressed by the Minister of International Trade who said in his press release of March 30:

The ICSID Convention will contribute to Canada’s prosperity by providing additional protection to Canadian investors and reinforcing Canada’s investment-friendly image abroad.

With regard to the last part of that quote, the Conservative government has kept itself very busy over the past year doing just the opposite and in fact tarnishing Canada's investment image abroad. The most glaring example was the broken promise on income trusts. This particular event caused the largest meltdown in the financial markets in the history of Canada. There was $25 billion of investment value wiped out by a broken promise.

To remind members, it was the promise of the government not to tax income trusts. In fact, the Prime Minister himself said that the greatest fraud is a promise not kept. That promise was not kept to Canadians. During the election campaign the Prime Minister said that he will never, never, never tax income trusts.

That gave assurances to the marketplace and particularly seniors, 70% of whom do not have defined pension benefit plans and, as a consequence, were looking for investment instruments that would emulate a pension plan, and that was income trusts. That meant that they could receive regular cashflows from these investments in income trusts to pay their bills. On Halloween of last year, $25 billion worth of wealth was wiped out simply by that broken promise.

This has to do with the credibility of Canada. It has to do with foreign and bilateral investment. Investors feel secure dealing with a country when they know the rules of the game and they know they are not going to be arbitrarily changed at the whim of a government for whatever reason.

I had the opportunity to participate in the public hearings before the finance committee. It was clear that foreign investment issues were very key in this regard. The change of the rules of the game in the middle of the program had damaged the credibility of Canada in terms of foreign investment.

There is no question that there will be more on this subject. Over 2 million Canadians are very angry with the government.

The finance committee heard from some of the seniors. Some members would say that they were paper losses. However, that is like me saying I paid $50,000 for my house, which is now worth $300,000. However, if my property taxes go up 31% and my house value goes down that is okay because I still have the $50,000 value or more than that. The appreciation in the house price is not a paper gain.

Anyone who held an income trust lost that kind of money. One of my own constituents lost $125,000. An 82-year-old veteran has no way of recouping that lost investment value. The credibility of the financial markets of Canada is extremely important in terms of foreign investment.

There is also another angle to this issue that has not been discussed as much in the House. I am speaking of the damage that has been done to Canada's international reputation as a safe place to invest. In the weeks following the announcement many investors were likening Canada's Conservative government to a banana republic.

I realize the term “banana republic” gets thrown around a bit. If we take the time to consider it in this instance, there are some striking parallels. The term is considered to have been coined to describe Honduras in the late 19th century and the early 20th century. At that time the Honduran government was eager to encourage as much foreign investment as possible in its agricultural sector in the hopes of improving the nation's overall economy. In particular, the government sought out investment in its burgeoning banana sector and in new railroads to support that growth.

In 1893, in order to protect local farmers, the government unveiled a new tax on banana exports that caught all those foreign investors off guard. It was the new 2¢ tax levied on every banana exported from the country. That would be almost 50¢ per banana in terms of 2007 dollars.

Needless to say, investors, particularly American investors who had invested millions of dollars in the industry under one set of rules, were not very happy when the Honduran government changed the rules in mid-game. It is exactly what I described with regard to the income trust decision in Canada, a broken promise.

This is not the 19th century in Honduras. This is Canada and we have a 21st century G-7 economy. When the leader of a G-7 country promises never to tax something, a lot of people around the world will believe him and make their investment decisions accordingly.

When the Prime Minister promised arbitrarily that he wanted to levy a 31.5% tax hike on the trust sectors that affected particularly seniors. It undoubtedly raised questions about Canada's image as a safe and secure place to invest. That is the crux of this. It is nice to be part of treaties, but if people break their word, if promises are broken, if the rules of the game are changed in midstream, then their credibility and integrity certainly come into question.

That is one example of where the government has dropped the ball involving foreign investment.

Let us not forget the finance minister's ever changing story on interest deductibility. We can talk about relevant issues to the security of foreign investment and the implications to that investment, the credibility of that.

Earlier when I asked a question and I wanted to put a couple of quotes on the table. I should take the opportunity to do this now.

The question of interest deductibility is another flip-flop. It is to announce one thing, disrupt the marketplace and then all of a sudden change the story. It is a moving target. It is not will I tax it, will I allow the deductibility of interest on foreign investments or will I not. Now we are talking about double-dipping and double deductibility of interest in an offshore tax haven. We are talking about tower schemes.

There is more smoke and mirrors on the interest deductibility issue simply to confuse Canadians about the facts. The facts are the government, the finance minister particularly, did not do the homework. When we look at the reaction of the market and of the key leaders in the investment community, the retired senior partner of Ernst & Young and immediate past president of the Canadian Tax Foundation, Mr. Allan Lanthier, said, “this is the single most misguided proposal I've seen out of Ottawa in 35”.

Thomas d'Aquino, president and chief executive officer of the Canadian Council of Chief Executives said:

—we are worried that the change announced in the budget may seriously undermine the competitiveness of Canada’s homegrown champions—the companies that are most active and most successful in building global businesses from head offices in Canadian communities. It may also damage Canada’s standing as an international centre for financial services.

Nancy Hughes Anthony, president of the Canadian Chamber of Commerce, said:

The proposal appears to be driven by revenue enhancement rather than a desire to build a competitive advantage....It's a real step in the wrong direction.

How about Len Farber, senior adviser at the law firm of Ogilvie Renaud, who said:

I thought this government was interested in Canadian companies having a competitive edge...This takes away that competitive edge.

What can I say? If members of Parliament cannot have their words accepted by the government, we have to look at the words of those who are responsible, the leaders within the business community, the leaders who look to having a competitive economy, to making Canada a real force not only domestically but certainly abroad.

In his March 19 budget, the minister said that he was intending to end the deductibility of interest incurred on loans to invest overseas. The budget was very clear that he meant all interest deductibility on foreign investment would come to an end by 2009.

We have gone through a litany of changes and the minister has flip-flopped on many occasions, saying that he is open to changes to the measure and the next day saying that there will not be any changes. At some point in time we have to take a decision, but when we keep changing direction, it makes it very difficult for the investment community to understand where we are.

On May 14, this past Monday, we saw the finance minister in full retreat in Toronto. He was taking advice in fact from the Leader of the Opposition. We even had an opposition day to encourage and to urge the government to fix this serious mistake that would damage competitiveness in Canada. He came up with a cute slogan. He said that today the budget was known as the anti-tax haven initiative.

We can keep calling things by different names, but the fact is there is back pedalling going on, and we need some clarity. That is really important in this issue.There has to be some clarity on these important matters on which Canadian businesses make decision.

There is something particularly interesting about how this issue has played out over the past six weeks. As legislators, we know that on every decision we can always find a number of interest groups or experts who are able to support a point of view or attack a point of view. In this case, however, everyone in the country, every serious commentator on this issue, were unanimous in their condemnation of the measure. In fact, as I read in some of the quotes, they basically said that this was the single most misguided policy Ottawa had seen in 35 years.

The chair of the task force, Jack Mintz, also backed away from the government on this one. As I indicated, the president of the Canadian Council, the chief executives and the chair of the Canadian Chamber of Commerce were quick to tell the government it made a mistake and to fix it before the damage is irreparable.

A minister stood alone defending the merits of the policy until last week when he said he would clarify his position. It turns out, according to the minister, that every CEO, every commentator and journalist in the country had simply misunderstood his intentions. It is hard to make that argument when the statement in the budget is as clear as clear can be.

I think it is pretty clear to all Canadians that the finance minister is in full retreat from his original plan, thanks largely to the efforts of the leader of the official opposition who saw this was a bad policy for Canada.

It is absolutely clear, once again, that the finance minister did not think things through before acting. He tried to change the very complicated area of tax policy with a very simplistic blanket solution.

This is key. There is a pattern of not thinking things through. There are consequences and they are not linear, they are multi-dimensional. When we get situations, for instance, on income trusts, where there is a gap between the tax paid by income trusts compared to dividend-paying corporations and we close that gap so there is some equity, we want to be sure that there are no other consequences. What were the consequences? It was to tax the income trusts and not only close that gap, but actually tax it so much that we had a $25 billion meltdown.

It even gets worse than that when we look a little further down the road. Ever since the Halloween massacre of income trusts, there have been 20 or more takeovers of income trusts by private equity, a couple Canadian, but mostly foreign. Why? Because the value of these income trusts were driven down enormously. Private equities can purchase these at fire sale prices. They can structure their affairs so they do not pay taxes to Canada.

Now it gets more complicated. In fact, those 20 income trust takeovers, because their structure permits them to no longer pay Canadian taxes, will pay in a foreign jurisdiction. What is the loss of tax revenue to the Canadian government, in fact, to the taxpayers of Canada? It is $6 billion per year of tax hemorrhaging, lost revenue to the Government of Canada. The problem the finance minister said he was trying to fix was that there might be about $5 billion of tax leakage over six years. This seems to indicate the minister did not think it through.

That is the issue. We cannot take a nuclear bomb to every problem. Sometimes it takes a little thinking and a little consultation before these snap decisions are made, which have such devastating consequences not only to Canadians, but to Canada's credibility and integrity in terms of foreign investor relations.

Settlement of International Investment Disputes ActGovernment Orders

11:20 a.m.

Liberal

Brian Murphy Liberal Moncton—Riverview—Dieppe, NB

Mr. Speaker, could the member comment on the following proposition?

The current Minister of Finance having had such a deleterious effect on the finances of Ontario while he was there, does the member feel that in his current capacity perhaps he is wilfully replicating his role or reprising his role as the destroyer of a once proud economy? Could he not compare that $6 billion a year are more than $5 billion over five years?

Could explain how the current Minister of Finance has not taken his own simplistic advice?

Settlement of International Investment Disputes ActGovernment Orders

11:20 a.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Mr. Speaker, the member is quite right. We are talking about history. The history is that we have three ministers in the current federal government who were ministers for Mike Harris.

Settlement of International Investment Disputes ActGovernment Orders

11:25 a.m.

Liberal

Brian Murphy Liberal Moncton—Riverview—Dieppe, NB

Repeat offenders.

Settlement of International Investment Disputes ActGovernment Orders

11:25 a.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Repeat offenders, there you go. I think the member probably has coined it.

Notwithstanding that there was a $6 billion deficit, today's Minister of Finance, who was the minister of finance in the province, continues to deny. He says that he did not leave any problems back there. How does one deny history? How does one deny the facts?

In fact, they left roadkill behind them as they left and disappeared from Ontario. They are coming here and the pattern is clear. The same things that happened in Ontario with this finance minister, the same kind of draconian and poorly thought out policies and practices--

Settlement of International Investment Disputes ActGovernment Orders

11:25 a.m.

Conservative

The Acting Speaker Conservative Andrew Scheer

The hon. secretary of state is rising on a point of order.

Settlement of International Investment Disputes ActGovernment Orders

11:25 a.m.

Conservative

Helena Guergis Conservative Simcoe—Grey, ON

Mr. Speaker, when the Liberals and other members in the House rise to speak about Bill C-53, which is about protecting our Canadian businesses abroad, I would hope that they at least could use the words “business” or “foreign investment” at some point and at least keep some of the debate relevant to what we are talking about today, just a small attempt--