Bill C-53 (Historical)

Settlement of International Investment Disputes Act

An Act to implement the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention)

This enactment implements the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, opened for signature in Washington on March 18, 1965.

Settlement of International Investment Disputes Act

[Carol Skelton, Conservative, Saskatoon—Rosetown—Biggar, SK]

moved that Bill C-53, An Act to implement the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), be read the second time and referred to a committee.

[Helena Guergis, Conservative, Secretary 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.

[The Deputy Speaker, Bill Blaikie]

Is there unanimous consent?

[Some hon. members]

Agreed.

[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.

[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?

[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”--

[The Deputy Speaker, Bill Blaikie]

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

[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.

[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.

[Ted Menzies, Conservative, Parliamentary 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.

[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.

[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.

[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?

[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.