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

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I am pleased to take part in this debate on Bill C-53.

Although the bill is extremely technical, it does not change much for Canada. However, it still offers an opportunity to ask ourselves about the nature of the investment agreements that have been signed by the Canadian government, and more specifically the bilateral agreements, and about the content of the North American Free Trade Agreement.

The problem lies not so much in Bill C-53 as in the agreements that we are signing, that are arbitrated under that convention.

I would note that if this bill is enacted, it will make it possible for Canada to ratify the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, and will also make it possible for Canada to become a member of the International Centre for the Settlement of Investment Disputes.

As we can see, this means incorporating the requirements of the ICSID Convention into domestic law, to ensure that arbitral awards can be enforced and to provide the necessary immunities for the centre and its personnel.

The International Centre for Settlement of Investment Disputes was created, we should remember, by the World Bank, under a treaty referred to as the Washington Convention of 1965. As of today, 156 countries have ratified the convention and are members of ICSID. The purpose of the convention and the centre is to arbitrate disputes between a state and a foreign investor.

There are two possible kinds of disputes between a state and a foreign investor. There are disputes relating to compliance with bilateral foreign investment protection agreements. For example, and I believe this was mentioned earlier, we recently signed an agreement with Peru. However, hardly anyone in the government alerted us to the signing of a new bilateral investment agreement. That agreement was very quietly signed between Canada and Peru. If it results in challenges, they can be arbitrated under this convention, and by this centre.

There is a second possible type of dispute. Disputes arise regarding agreements signed by governments with foreign investors. The government of Quebec regularly signs these kinds of agreement to generate foreign investment, for example by promising to supply electricity at an agreed price.

One can think of a number of major projects carried out on the North Shore. Discussions were held and commitments were made concerning electricity rates for the aluminum sector in exchange for commitments from the companies with respect to economic benefits from second and third processing, or future investments.

As I said, Canada's membership will not have any impact on the provinces. Only the federal level will be affected, although the provinces also will have the possibility of including in agreements they might enter into with investors provisions providing for the use of the centre and the convention.

Quebec has negotiated in the past, and could do so again in the future, agreements with foreign companies involved in the exploitation or processing of natural resources for competitive electricity rates under certain conditions. In such cases, it will be necessary to ensure that the endeavours of the Government of Quebec, whose good faith I never doubt, meet all the criteria in the agreement.

I have mentioned the bilateral treaty between the federal government and Peru. This treaty already provides for the use of arbitration or the ICSID process. Canada not being a member of the ICSID, it does not have access to the regular process because it has not ratified the convention. Additional facility arbitration rules apply under such circumstances.

As we can see, nothing much will change, except that we will be able to use the regular process.

In fact, Canada's adherence to the centre and the convention will enable it to take part in negotiations to amend the convention or the centre's rules, and ensure its ability to participate in appointments to arbitration tribunals.

I believe that this is important, because we know that this centre and this sort of convention will be increasingly important not only to the economic future, but to the overall future of trading nations such as Canada and Quebec.

In the final analysis, the centre is just a tribunal, and in that respect, we do not have a problem with Bill C-53. What we have a problem with is not the tribunal, but the poor treaties Canada has signed to protect investments. In our view, it is only natural that there should be investment protection agreements, provided that those agreements protect certain rights, especially the sovereign rights of the states involved, whether the agreements are between states or between states and companies.

It is only natural for investors to try and make sure that they will not be divested of their property and that they will not become victims of discrimination. This is the sort of situation that foreign investment protection agreements are meant to cover. They are not a new phenomenon, but have been around for more than two centuries now. In 1788, France and the United States signed an agreement to protect foreign investments. Today, there are 2,400 bilateral investment protection agreements in the world. If we add tax treaties covering the tax treatment of foreign investments and foreign source income, there are roughly 5,000 bilateral treaties relating to foreign investments.

I spoke yesterday about Bill C-33 on foreign trusts, and I will come back to that.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Mr. Speaker, I understand the concerns raised by the hon. member.

With respect to free trade and investment, I think the member understands full well that we are a trading nation with a population of 32 million and to ensure our quality of life we need to trade with other nations. However, make no mistake about it, we are also the party of fair trade. We will do everything in our capacity to ensure we promote that in every aspect where we have an opportunity to do so.

We have the South Korean free trade agreement that is potentially being negotiated right now, which the minister has indicated he wants to sign. It is our party that will ensure we stand up for Canadians and ensure there is a level playing field for Canadian companies trying to do trade investment abroad.

Bill C-53 is a very important tool and, as he has indicated, it has been around since the 1960s. Not only has it been around for a long time, it has also been implemented at the provincial levels. It is about time the federal government shows some leadership or at least follows the direction given by the provincial governments.

This is a very simple, straightforward process. It is very transparent. It is a very fair arbitration process. I think the member would agree that this is the tool we need for investment purposes that will generate Canadian jobs and Canadian wealth so Canadians can have a good quality of life.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Mr. Speaker, I find it rather ironic to hear the member for Mississauga—Brampton South talking about free trade agreements, particularly when his party opposed the free trade agreement under Mr. Turner in 1988.

When Mr. Mulroney put in free trade we all know that 525,000 manufacturing jobs were lost in Ontario alone during the first two years of the agreement. In 1993, under Mr. Chrétien, that party again opposed NAFTA. Since then, we have seen the ongoing devastation of our manufacturing sector. Therefore, to hear the promotion of free trade from that member is ironic.

It is my understanding that the process under the ICSID Convention, which Bill C-53 would implement, has been here since 1966. Since it has been in place that long, I am very curious as to why it has taken this long for the need to arise.

My party has strong concerns with the bill, particularly under transparency. It is a consent based process. People from labour, who will talk to us about arbitration, will also tell us that, overall, their sense of binding arbitration is that settlements seem to be coming down one-sided.

I cannot understand why the member opposite would use free trade in the supporting arguments for this bill.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Mr. Speaker, I would like to thank you for allowing me to speak today to Bill C-53, An Act to implement the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).

To begin with, it is interesting that the Conservatives are introducing a bill to promote cross-border investment at a time when they are demonstrating their complete lack of competence on this very important subject matter.

It was only yesterday, the finance minister was forced by the Liberal opposition, may I add, to make a complete reversal on his ill-advised interest deductibility proposal in the budget.

Despite the government's mishandling of the Canadian economy at the domestic and international levels, it is important that Canada join the vast majority of countries in the world that have ratified ICSID. With increased trade with emerging giants such as China, India and other nations where the government structure is different from our own, it is critical that Canada be part of an international convention on the enforcement of investors' rights.

Allow me to provide a bit of historical background on ICSID to clarify the importance of this convention. I am sure my colleagues in the past have talked about this during debate, but I think it is very important to highlight this description.

The ICSID convention is an international instrument, sponsored by the World Bank, to facilitate and increase the flow of cross-border investment. The convention establishes a mechanism to resolve investment disputes between foreign investors and the host state in which they have made their investment.

Countries agreeing to the hearings do so voluntarily on the part of each party. However, once they have agreed to a hearing, neither one can unilaterally withdraw from the process or refuse to pay damages awarded by the tribunal. Thus, no longer can we be in dispute and have one side just get up from the table and walk away.

These hearings are unbiased and to ensure this, the arbitrator is selected by the contesting parties themselves. The ICSID then provides the hearings with a venue and the administrative support required to facilitate the specific meetings.

The ICSID convention entered into force on October 14, 1966. As of January 2007, 143 states had ratified the convention, making it one of the most ratified instruments in the world. The majority of Canada's trading partners are party to the convention.

Over the past decade, there has been an increasing number of bilateral trade and/or investment treaties. Since most parties involved in bilateral investment treaties refer present and future investment disputes to the ICSID, the case load of this particular process has substantially increased.

As of June 30, 2005, ICSID had registered 184 cases; more than 30 of which were pending against Argentina. As many know, Argentina's economic crisis in the late 1990s and subsequent Argentinian government measures led several foreign investors to file a case against Argentina.

Investment disputes brought under the convention are administered by the International Centre for the Settlement of Investment Disputes located in Washington, D.C.

In the last few years, the activity at the centre has soared due to increased flows of cross-border investment and the number of investment treaties that refer to ICSID arbitration. While the centre has handled 110 arbitrations in total during the first four years of its existence, there are currently 105 proceedings under way. Since its inception, the centre has established itself as a reliable and effective organization for resolving investment disputes.

Once ratified, the convention would provide additional protections to Canadian investors abroad by allowing them to include in their contracts with foreign states the option of arbitration under the ICSID convention.

In addition, Canadian investors doing business in a country with which Canada has a foreign investment protection agreement will have recourse to ICSID arbitration for violations of the agreement. Becoming a party to the ICSID convention will also make Canada a more attractive destination for international investors.

The most significant advantage of the convention is the enforcement of the arbitral awards. Unlike awards issued by other arbitration institutions, domestic courts cannot refuse to enforce decisions issued under the ICSID convention. Rather, such awards are enforceable in any country that has ratified the convention as if they were the final judgments of the courts in that state.

Canada signed the ICSID Convention on December 15, 2006, becoming the 143rd country to do so. British Columbia, Newfoundland and Labrador, Nunavut, Ontario and Saskatchewan have already adopted their own implementing legislation.

I mentioned that some provinces and territories have adopted their own implementing legislation because in order to ratify this bill all provinces and all territories must support the convention and take the necessary action to facilitate this.

It has become known that all provinces and territories have voiced their support with the principles and guidelines outlined in Bill C-53.

What is truly the best part of this convention, though, is the fact that it is not open to interpretation. It is simple, straightforward legislation that not only our major trading partners, by and large, already agree upon, but it is the type of understanding and guidelines that many of our potential trading partners are looking for us to agree with.

By passing Bill C-53, Parliament sends a strong signal to other countries, as well as our own investors, that Canada is serious about honouring its commitment to international treaties and trades.

In my role as the critic for international trade in the opposition, I must emphasize how important the passing of this legislation is right now. Canada, as many people have read in the newspaper, is most likely being taken to arbitration by the United States over several complaints within the softwood lumber agreement.

Despite the strength of Canada's legal position, supported by numerous decisions of international trade law tribunals and domestic courts in both Canada and the United States, the Conservative government rushed negotiations with artificial timelines to maximize political value of the agreement for the Conservative Party of Canada and not the Canadian public.

The Conservatives' electoral agenda was put ahead of the interests of the industry that is a significant element of the Canadian economy in every region of this country. It is an industry that exports over $7 billion. It is an industry that represents thousands of jobs, approximately 300,000 jobs, that are directly impacted by this particular industry.

In fact, there is a possibility that the U.S. may now use the dispute resolution mechanism to their advantage. It is possible that these consultations may not result in a satisfactory resolution. In this case, the U.S. can ask that the matter be referred to the London Court of International Arbitration. In addition, under the softwood lumber agreement, the U.S. has the immediate and unconditional right to terminate, whenever it wants, the softwood lumber agreement.

The government signed an agreement with the United States to bring an end to long-standing disputes regarding a very important and key subject matter in softwood lumber. When it did so, it agreed to throw out previous rulings from NAFTA and the WTO courts and tribunals. The current Minister of International Trade then said that this agreement would provide predictability and stability.

Who would have predicted that seven months into a seven year agreement we would be going to arbitration because the U.S. is knit-picking on issues like what constitutes a surge mechanism in B.C. and why Canada is not collecting more export charges than they should?

This is the start of consultations and possibly arbitrations. Will the U.S. next have issues with stumpage fees in Alberta as it has indicated? Is that stability? I can almost predict the next seven years of stability based on the trend of the first seven months, and it is not looking good.

With any agreement there needs to be predictability and stability, and I agree with that. While it is regrettable, and it is too late to turn back the clock on the softwood lumber agreement, now is the time that we should move forward on protecting Canadian investors.

Because Canada is not an ICSID member, Canadian investors are unable to use ICSID arbitration rules in their disputes with other foreign states, including those where Canadian investors might lack confidence in the court system.

I would not be doing my job as a critic if I did not point out that the government, in implementing this convention, would go a long way to instilling a bit of confidence in its investors. They have certainly been knocked around in the past several months by the government.

As I mentioned earlier, the government had to reverse its decision to eliminate the interest deductibility policy, which, by the way, was the worst policy to come out of Ottawa in over 35 years. It has been widely condemned across the business community by economists. The implications of doing this would have been disastrous to investors if the minister had not reversed the policy.

As bad as that was, we should not forget how much the income trust reversal hurt Canadian investors, particularly seniors. The decision to tax income trusts wiped out more than $25 billion in savings overnight and reversed a key Conservative campaign promise, a promise they had in their platform. Canadians invested their money based on this promise and their trust cost them tens of thousands of dollars on an individual basis of their hard-earned savings. Not only did the income trust reversal impact Canadian investors but it also affected our international competitiveness.

All that aside, Bill C-53 is an effective tool to help protect Canadian investors and should help to mitigate the damage done by recent government flip-flops.

As we know, the government has been slow on signing free trade agreements. According to the Department of Foreign Affairs and International Trade, China will not sign a free trade agreement or do business with a country that is not a member of ICSID. India has also ratified the convention and has entered into investment dispute settlements under the ICSID Convention with 11 countries.

As I am sure many are aware, China and India are not only the two largest countries in the world in terms of population, but they are also the fastest growing economies. As these two economies continue to grow and their labour forces become more and more skilled, greater investment will flow into these economies. China is emerging as a world player in terms of manufacturing, while India is gaining notice for its knowledge based services. As their economies become more sophisticated, they in turn will increase investment outside their borders, including investment in Canada.

Over the past 11 years, China has been the largest recipient of foreign direct investment among developing countries. Cumulative investment in China has reached almost $750 billion over the past 11 years.

Since 1991, India has embarked on a wide-ranging economic reform program that has seen increased developments in terms of trade, investment and monetary and exchange rate policies. One of the highlights of India's economic reform is its trade policy. India has systematically reduced its customs tariffs from 150% in 1991-92 to 25% in 2003-04.

Both China and India have become very forward-looking in their approaches to foreign investments. By ratifying the ICSID Convention within their respective countries, they have taken a proactive approach to protecting their investors internally and abroad.

I urge the House to pass this bill so that as a country we can move forward with signing investment treaties and trade deals that will make Canada and Canadians more prosperous and so Canadians can enjoy a high quality of life for generations to come. I think this is a very important initiative and it is well overdue.

I have expressed my concerns with the government with respect to its legacy and the first 13 months of broken promises, of hurting and damaging our competitiveness and of impairing our ability to be productive. This is one small step toward that direction and I hope the government proceeds with this in a timely fashion.

[Vivian Barbot, Bloc, Papineau, QC]

Mr. Speaker, we want to make it clear that because of certain poorly worded bilateral agreements, we find ourselves having to deal with the possibility of certain companies dealing directly with foreign governments as though they were themselves a government. In reality, the problem does not lie with the convention proposed in Bill C-53, but with previous agreements. We are asking the government to review them because they contain real problems and may lead to abuses. Companies have powers that far exceed those of the government if they can act as though they were a government when dealing with foreign governments. In our opinion, this is not right.

[Vivian Barbot, Bloc, Papineau, QC]

With respect to Bill C-53 more specifically, we can note the following. While it may appear complex because the Convention on the Settlement of Investment Disputes between States and Nationals of Other States is appended to it, also called the Washington treaty, Bill C-53 is relatively simple. It is only a dozen clauses on three pages, integrating into domestic law the requirements under the provisions of the Washington treaty.

Regarding arbitration and conciliation proceedings commenced after its coming into force, the bill provides, in clause 4, that the International Centre for Settlement of Investment Disputes and its personnel have the privileges and immunities, even fiscally, that it needs to operate in Canada. In clause 8, it provides for the legal recognition of arbitration awards rendered by the centre. Clause 7 prohibits, as required under the convention, proceedings before national tribunals on the substance of matters that have already been determined by the ICSID. Under clause 9, they are further prohibited from determining matters under arbitration.

These provisions may be startling in that they take away from national legislation. They are, however, pivotal to the functioning of international arbitration tribunals. Indeed, in many countries, the judicial system is not separate and independent from the political system. That is precisely why investment agreements call for neutral arbitrators.

If national tribunals were allowed to reverse arbitration awards or to have parallel proceedings on matters already under arbitration, it would be pointless to have international arbitration tribunals, and the safeguards in investment protection agreements would hardly be worthwhile.

Under clause 6, the bill makes awards binding on the federal government. This means that Ottawa would be bound by an arbitral award that might require it, for example, to provide compensation to an injured investor. Only the federal government is bound by the bill, not the provinces. In fact, apart from chapter 11 of NAFTA, which is binding on the provinces because they joined NAFTA, no bilateral agreement to protect investments is binding on the provinces.

If, for example, a province passed a measure that injures a foreign investor who is covered by an agreement to protect investments and ICSID ordered that he should be compensated, Ottawa would be responsible for paying. It may seem absurd, but that is how it is under the Constitution. The provinces are fully sovereign in their areas of jurisdiction and Ottawa cannot unilaterally arrogate one of their powers or impose obligations on them by concluding an international treaty. Anything else would amount to depriving them of powers conferred on them by the Constitution, and the courts have refused to do that.

That is why Quebec has always insisted on being closely associated with all stages of the entire process for concluding international treaties. That is the basis of the Gérin-Lajoie doctrine.

The federal government’s refusal to respect the logic of the division of powers and its wrongful arrogation of exclusive control over international relations not only hurts Quebec but is frankly dysfunctional. Once Canada ratifies this convention and joins ICSID, the provinces can do the same if they want. If they want, they can include clauses in the contracts they sign with investors providing for recourse to ICSID. Ottawa’s ratification does not impose any obligations whatsoever on Quebec or the provinces, although it does add further arrows to their quiver in their search for foreign investment.

Finally, it was the Uniform Law Conference of Canada consisting of representatives from the justice departments of all the provinces, including Quebec, and from the federal government that recommended five years ago that the federal government should join ICSID, ratify the convention and implement it. That would be the effect of Bill C-53.

In clause 11, Bill C-53 gives the government the power to designate conciliators and arbitrators in cases involving it that fall under ICSID.

There are generally three people on the arbitral tribunals. Each country that is party to a dispute appoints an arbitrator and these two arbitrators then agree on a third, who acts as the president.

It is in light of these considerations that the Bloc Québécois supports Bill C-53.

[Vivian Barbot, Bloc, Papineau, QC]

Mr. Speaker, it is my pleasure to rise in this House to express the Bloc Québécois' support for Bill C-53.

This bill will enable Canada to ratify the Convention on the Settlement of Investment Disputes between States and Nationals of Other States and to become a member of the International Centre for Settlement of Investment Disputes.

Bill C-53 integrates the requirements of the international convention in the laws of a country, in particular to ensure that arbitral awards are respected and to provide for the immunities required by the centre and its staff. ICSID was created by the World Bank by the Washington Treaty in 1965. There are currently 156 member countries.

ICSID is responsible for arbitrating disputes between States and foreign investors. There may be two types of disputes: disputes related to compliance with bilateral foreign investment protection agreements and disputes related to agreements between governments and foreign investors. The Government of Quebec regularly signs the latter type of agreement when eliciting foreign investment with the promise, for example, of providing electricity at an agreed price.

Canada’s membership will not have any impact on the provinces, except that they too may have recourse to the ICSID when they conclude agreements with investors. As for bilateral treaties binding the federal government, they already provide for recourse to ICSID arbitration by the additional facility rules rather than the regular process, which is available only to countries that have ratified the convention.

In fact the only thing that Canada’s membership in the centre will change is that Canada will be able to intervene in negotiations to amend the convention or the rules of the centre and it will enjoy the assurance of being able to join in the appointment of arbitration tribunals. Ultimately, the ICSID is only a tribunal. The problem is not the tribunal, but rather the poor investment protection treaties concluded by Canada.

The Bloc Québécois supports the conclusion of investment protection agreements, as long as they are good agreements. It is completely natural for investors, before making an investment, to try and make sure they will not be divested of their property or that they will not become victims of discrimination. This is the sort of situation that foreign investment protection agreements are meant to cover.

This is not a new phenomenon. The first known agreement that includes foreign investment protection provisions was reached between France and the United States in 1788, or over 200 years ago. There are now over 2,400 bilateral investment protection agreements around the world. If we include tax treaties, which have to do with the tax treatment of foreign investments and revenues, that would mean some 5,000 bilateral foreign investment treaties.

The Bloc is in favour of concluding such agreements and recognizes that they promote investment and growth. Almost all these agreements rest on the same principles: respect for property rights regardless of the owner’s nationality; no nationalization without fair and prompt financial compensation; prohibition against treating property located on one’s territory differently depending on its owner’s origins; free movement of capital arising from the operation and the disposal of the investment.

In all cases, if there is non-compliance, states can submit a dispute respecting compliance with the agreement to an international arbitration tribunal. In most cases, investors themselves can submit disputes to an international tribunal, but only once they have got the state’s consent. In many cases, the international arbitration provided for under the agreement takes place before the ICSID. Belonging to it, as is provided for under Bill C-53, also means belonging to the international order in the area of investments.

In the investment protection agreements they have signed, only two countries, Canada and the United States, systematically give investors the right to apply directly to the international tribunals.

This is a deviation from the norm. By allowing a company to operate outside government control, it is being given the status of a subject of international law, a status that ordinarily belongs only to governments.

The agreements that Canada signs contain a number of similar deviations that give multinationals rights they should not have and that limit the power of the state to legislate and take action for the common good.

We say no to chapter 11 of NAFTA. The investments chapter of NAFTA, chapter 11, provides that a dispute can go to ICSID. That chapter is a bad agreement in three respects.

The definition of expropriation is so vague that the slightest government action—other than a general tax provision—can be challenged by a foreign investor if it reduces its profits from its investment.

For instance, a plan to implement the Kyoto Accord that paid large amounts to the oil companies, big polluters that they are, could be challenged under chapter 11 and result in the government paying compensation. The Alberta oil companies are in fact mainly owned by American interests. Chapter 11 opens the door to the most abusive proceedings.

The definition of investor is itself so broad that it includes any shareholder. This means that virtually anyone can bring proceedings against the state and seek compensation in relation to a government action that allegedly reduced a company’s profits.

The definition of investment is so broad that it even includes the profits an investor hopes to earn from its property in future. In expropriation cases, not only is the state then forced to pay the fair market value, but it must add the amount of the income that the investor anticipated earning in future. In that case, it would no longer be possible to nationalize electricity as was done in Quebec in the 1960s.

Take the example of SunBelt, a company composed of a Canadian shareholder and a Californian shareholder. The business closed down when the Government of British Columbia eliminated the right to export water in bulk that it had been given. The Canadian shareholder, relying on Canadian laws, received compensation equivalent to the value of its investment: $300,000. The American shareholder, relying on chapter 11 of NAFTA, included in its claim all of its potential future earnings: $100 million. The case was settled out of court for an amount that was not disclosed.

Given the amounts of money in issue, chapter 11 is a deterrent to any government action, particularly in relation to the environment, whose effect would be to reduce the profits of a foreign-owned corporation.

As well, the dispute resolution mechanism allows corporations to apply directly to the international tribunals to seek compensation, without even getting the consent of the state.

How is it conceivable that a multinational could, on its own authority, create a trade dispute between two countries? And yet this is the absurd situation that the investment chapter of NAFTA permits.

Given these flaws, chapter 11 of NAFTA reduces the state’s capacity to take action for the common good, to legislate about the environment, and is a Damocles’ sword that could come crashing down at any moment on any legislative or regulatory measures whose effect was to reduce corporations’ profits.

In 2005, the United States changed some of the provisions in their standard form investment protection agreement. In 2006, Canada followed suit.

Since both countries have now acknowledged the harmful and extreme nature of chapter 11 of NAFTA, the time is ripe for the government to move quickly to enter into discussions with its American and Mexican partners to amend chapter 11 of NAFTA.

We say no to bad investment protection agreements. In addition to chapter 11 of NAFTA, and although its extreme nature has been widely decried, the government has entered into 16 other bilateral foreign investment agreements, carbon copies of chapter 11.

All of these foreign investment agreements are faulty and should be renegotiated. In 2006, the government recognized to some degree that these agreements were bad. Copying the amendments made by the Bush administration the previous year, the Conservative government made changes to its FIPA program to correct the most obvious shortcomings.

It clarified the concept of expropriation by specifying that a non-discriminatory government measure that is intended to protect health and the environment or to promote a legitimate government objective should not be considered as expropriation and should not automatically generate compensation. It is too soon to evaluate the real impact of that clarification, but at first glance, it looks like an improvement.

Moreover, it restricted the concept of investment by specifying that the value of property is equal to its fair market value. That put an end to the folly of adding together all the potential profits that an investor might hope to earn from an investment.

As for the rest, the standard investment protection agreement continues to be based on chapter 11 of NAFTA. The government must continue to improve this standard agreement, particularly in terms of dispute settlement mechanisms. Multinational corporations must be brought under the authority of the state, like any other citizen.

It is important that the government submit international treaties and agreements to the House of Commons before ratifying them. At the start of the year, the government sent out a news release to announce that it had just ratified a new foreign investment protection agreement with Peru. It was only by reading that news release that parliamentarians and the public became aware of this agreement. Parliament was never informed and never approved it. That is completely anti-democratic.

Yet, the Conservative platform in the last election was clear: the Conservatives made a commitment to submit all international treaties and agreements for approval before ratifying them. Since the Conservatives came to power, Canada has ratified 24 international treaties. Except for the amendments to the NATO treaty, which were the subject of a mini-debate and vote at the last minute, none of these international treaties was submitted to the House.

International agreements today have an impact on our lives that is comparable to the impact that legislation can have. Nothing can justify the government’s going over the heads of the representatives of the people and quietly and unilaterally entering into these agreements.

In the past, the Bloc Québécois has introduced bills to restore democracy and ensure that the jurisdictions of Quebec and the provinces are respected in negotiating international treaties. Given that the government has committed to doing that, we have not taken that step this time.

We can see today that the Conservatives' commitments are not worth the paper they are written on. The Bloc Québécois will therefore start bringing forward again proposals to restore democracy in the making of international treaties, including the obligation on the government to submit to the House any international treaty or agreement it enters into, before it is ratified; the obligation on the government to publish every international agreement it is involved in; approval and vote in the House on any major treaty, following consideration by a special committee on international agreements, before the government can ratify it; respect for the jurisdictions of Quebec and the provinces at every stage of the treaty-making process: negotiations, signing, and ratification.

Am I running out of time, Mr. Speaker?

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Mr. Speaker, I am honoured to speak in support of Bill C-53, the settlement of international investment disputes act.

The International Convention on the Settlement of Investment Disputes between States and Nationals of Other States, the ICSID convention, is an international instrument sponsored by the World Bank to facilitate and increase the flow of cross-border investment. The convention establishes a mechanism to resolve investment disputes between foreign investors and the host state in which they have made their investment.

The convention entered into force on October 14, 1966. As of January 2007, as the previous speaker mentioned, 143 states had ratified the convention, making it one of the most ratified instruments in the world. The majority of Canada's trading partners are party to this convention.

Once ratified, the convention will provide additional protection to Canadian investors abroad by allowing them to include in the contracts with foreign states the option of arbitration under the convention. In addition, Canadian investors doing business in a country with which Canada has a foreign investment promotion and protection agreement will have recourse to arbitration for violations of the agreement. Becoming a party to this convention will also make Canada a more attractive destination for international investors.

As a small businessman and entrepreneur myself, I recognize that these sorts of multilateral agreements promote stability, the rule of law and confidence in the local economy.

With hugely increased trade with emerging giants such as India, Brazil, China and other countries with governance structures different from our own, it is important that Canada be part of this international convention.

I have travelled extensively to China, India, eastern Europe and elsewhere in Europe. I can see that the developing countries still have a lot of work to do when it comes to honouring those agreements. That is where this is going to be of real importance and an essential tool for Canadians who want to invest in those countries.

This is also true for Canadian investors abroad and for those international investors who choose to invest their money in Canada. I am glad that the government is moving forward with this bill.

However, the government is introducing a bill to promote cross-border investment, while at the same time it is demonstrating its complete lack of competence on this very issue. Let me summarize the government's failure to manage our economy.

There is the betrayal on income trusts. Since April 18, 2007 there have been 16 income trust takeovers, many of which have been bought by large U.S. private equity firms. Private companies will ensure that not only are these businesses no longer paying Canadian taxes, but Canadian investors will no longer receive distributions on which they are taxed.

This is of particular shame in the energy trust sector. One of the most effective investment vehicles in this country was the income trust. Over the past 20 years Canadian energy trusts have been active in buying foreign interests and repatriating foreign capital to Canada. This trend has now been reversed.

Even worse is the impact it has had on ordinary working Canadians. When we talk about ordinary working Canadians we are talking about $35 billion lost, an average of $25,000 per Canadian. My heart goes out to those seniors who are past their prime earning years, and those working families who saw their investments reduced by a staggering 25% overnight. I think people will not make their decisions based on the Conservative leader's word ever again.

The flip-flop on deductibility of interest incurred on loans used to invest overseas is another major example of how lost the Conservative Party is when it comes to managing the economy of our country.

On April 16, 2007 our Liberal Party leader along with our finance critic, the member for Markham—Unionville, called on the Conservatives to reverse these disastrous policies before more Canadian companies and jobs were lost and long term damage was caused to Canada's competitiveness in the global marketplace. The Conservatives pretended that their interest deductibility proposal was about eliminating tax havens but that is false. It was too late for the finance minister to realize it.

This policy is taking away a legitimate tool from Canadian industries that increases their competitiveness on the world stage. The Minister of Finance tried to ignore the calls from the Liberal Party to reverse this disastrous policy but he ignored us. However, he was unable to ignore his unhappy friends on Bay Street who made it clear that the Liberal Party was right and that the Conservatives should reverse the decision.

At least the Minister of Finance is demonstrating some judgment by flip-flopping for the good of the Canadian economy. I suppose the people of Canada have not discovered what the people of Ontario already knew when it comes to the minister's stewardship of the economy. We all remember that it was the Minister of Finance's provincial--

[Steven Blaney, Conservative, Lévis—Bellechasse, QC]

Mr. Speaker, I want to thank the hon. member for his question. That is precisely what we are doing in the parliamentary debate today. In order for Bill C-53 to come into force it has to be passed by the House of Commons and then go through the parliamentary process at the Senate, during which time all parliamentarians have the opportunity to speak to the bill. If the hon. member wants to make constructive comments on the bill, I invite him to do so now.

Nearly 153 countries have signed this convention that will allow numerous foreign companies that do business abroad to get better legal assurances that the contracts they sign with other parties in other countries are respected.

In Quebec, this has even more significance because in 2008 there will be a conference of the leading experts on the matter in order to continue to improve the arbitration process. We have to recognize that in many cases this is better than having lengthy, expensive legal disputes in foreign courts.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Speaker, I would like my colleague from Lévis—Bellechasse to elaborate.

As I mentioned earlier, the Bloc Québécois supports Bill C-53 because it is a good thing to have recourse to the International Centre for Settlement of Investment Disputes when dealing with international treaties between governments or agreements between corporations and foreign governments. We are pleased with this and we will support Bill C-53.

However, there is a problem. Treaties signed by the Government of Canada with other countries are not submitted to this House for review. I would like my colleague for Lévis—Bellechasse to elaborate on this and tell us if he is prepared to undertake that, in future, the Conservative government will not sign an international treaty with any country without submitting it to Parliament for examination. This will avoid potential errors. In fact, 308 individuals are better than 100.

This will allow us to ask all the necessary questions in order to avoid making mistakes and finding ourselves before the International Centre for Settlement of Investment Disputes.

Will my colleague from Lévis—Bellechasse show us the authority he is capable of and assure this House today, on behalf of his party, that, in future, no international treaty will be signed without being submitted for review to this chamber of Parliament?

[Steven Blaney, Conservative, Lévis—Bellechasse, QC]

Mr. Speaker, it gives me great pleasure to rise today in this House to express my support for the bill that was described so well by my friend from Simcoe—Grey, the Secretary of State for Foreign Affairs, International Trade and Sport, and also by my friend from Calgary East, the Parliamentary Secretary to the Minister of Foreign Affairs.

Bill C-53 implements, in Canadian law, an international convention of the World Bank, the ICSID Convention. The purpose of Bill C-53 is therefore to implement the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. This convention covers arbitration and international conciliation between governments and foreign investors, what is commonly called investor-state dispute settlement.

These disputes can arise in a variety of situations, for example, when the country where the foreign investor is located passes laws that discriminate against the investor or in case of nationalizations.

International arbitration is a proven method for resolving disputes. It is a way of resolving them without resorting to the legal system. It has long been acknowledged that the parties to a dispute can resort to arbitration and the results of the arbitration process will be recognized by the courts. For example, commercial arbitration awards in Canada, that is to say between businesses, are recognized and enforced by the courts.

It is up to the parties to decide whether they want to resort to arbitration or the legal system. The flexibility that this provides is often much appreciated. In the case of the convention implemented by Bill C-53, which we are debating today, one of the great advantages of relying on arbitration is that it denationalizes the process. I will explain what is meant by that.

When a dispute arises between a foreign investor and the host country, the investor has the option of pursuing the matter before the courts of the host country. Usually—and this would be the case in Canada, in Quebec, or anywhere else in the country—the foreign investor would be entitled to a fair and equitable hearing. The host country’s courts would not be prejudiced against the foreign investor and would reach a decision under the law. Sometimes, though, this would not happen. The court might well lean in the direction of its own government at the expense of the foreign investor, which, in a case of interest to us, could well be a Canadian company doing business abroad. I should say as well that another advantage of the arbitration process is that the parties choose the arbiters. When the matters in dispute are highly specialized, for example petroleum development or marine issues, choosing arbiters who are experts in the field can make the process more effective and result in better decisions.

The arbitration process in the ICSID Convention is therefore one of the processes that are most often used for settling disputes between investors and states. My colleagues pointed out that more than 150 countries have already signed on to this arbitration process. The Convention has been ratified and is one of the international instruments to which the largest number of states belong. What distinguishes the convention to be implemented here in Canada by this bill is the mechanism for enforcing arbitration awards. It is an effective mechanism and that will help to protect investors. This is a key advantage of the ICSID Convention.

In the great majority of cases, the losing party in arbitration will pay the award of an arbitral tribunal without the need for the successful party to take any enforcement proceedings. The same is true for investor state arbitration.

In Canada, arbitral awards, including investor state arbitral awards, are currently enforced pursuant to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This New York convention permits a limited review of an arbitral award by domestic courts. It allows a court to refuse to enforce an award if to do so would be contrary to public policy. In addition, it permits a state to exclude certain subjects from the application of the convention and thus from enforcement.

ICSID provides a better enforcement mechanism. It does not permit a state to exclude from dispute settlement any matter which the state has consented to submit to arbitration. ICSID awards are enforceable as if they were final decisions of a local court. This simple, efficient mechanism guarantees better protection for Canadian investors abroad.

We can also think of companies like Bombardier, the mining companies, the large consulting engineering firms and SNC Lavalin, whose head office is in Montreal.

Here are a few of the elements or clauses that make this bill an advantageous one for our businesses in Quebec and Canada.

For example clause 8 in the bill provides for the automatic recognition and enforcement of an award given by an ICSID tribunal. Such an award is recognized and deemed to be a final judgment by a superior court of Canada.

Under the same clause, any superior court of Canada may recognize and enforce awards coming under the law. The superior courts include the Federal Court. The Federal court will have the necessary jurisdiction to hear requests for recognition of awards involving the Government of Canada and awards involving foreign governments and their political subdivisions.

This same convention provides explicitly that awards are binding on the parties and cannot be subject to any judicial appeal or remedy.

Thus a foreign tribunal cannot hear a request to the effect that an ICSID arbitral tribunal has gone beyond its jurisdiction or was not properly constituted. These cases, when they are undertaken for awards other than those of the ICSID, delay resolution of the dispute and payment of damages. The convention does not allow such dilatory remedies.

Clause 7 of the bill provides that an award under the convention is not subject to any remedy, such as appeal, review and annulment in a Canadian court of justice. From this we can infer the very final effect of awards given under the convention. The decision to seek arbitration is entirely voluntary, but once the parties have agreed to it they cannot seek remedy from any other body, such as a court of justice.

The only remedies allowed in erroneous decisions are those laid down in the convention. Requests for review, interpretation or annulment of an award are heard, should the case arise, by the Secretary-General of ICSID.

Thus questions of error concerning awards cannot be submitted to national tribunals, but there remains a guarantee that erroneous awards will be remedied.

The ICSID Convention provides a good mechanism for resolving disputes and enforcing awards efficiently. This is an international instrument promoting arbitration and fair solutions for international investment disputes. This is why our government is presenting for second reading Bill C-53, which implements the ICSID Convention here, in Canadian law.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Speaker, people who are watching sometimes have difficulty understanding complicated bills. I must admit that Bill C-53 is rather complex. It deals with the Convention on the Settlement of Investment Disputes between States and Nationals of Other States.

My question is for my colleague. The Bloc Québécois will support Bill C-53 so that disputes over bilateral agreements can be handled by the International Centre for Settlement of Investment Disputes, which I think is a good thing.

Will my colleague agree that the problem does not lie in supporting an international dispute settlement centre, but in the fact that the conventions signed by the Government of Canada are often bad conventions?

Can my colleague promise in this House that his government will no longer sign bilateral treaties without first bringing them before Parliament for discussion with the elected members here in this House?

[Deepak Obhrai, Conservative, Parliamentary Secretary to the Minister of Foreign Affairs]

Mr. Speaker, I will be splitting my time with my colleague, the member for Lévis—Bellechasse.

I am pleased to have the opportunity to further explain Bill C-53, which implements Canada's obligation under the Implementation of the Convention on the Settlement of Investment Disputes.

Canada signed the ICSID convention on December 15, 2006. That signature was a public undertaking that Canada intended to pass legislation so we could ratify the convention. This bill is the fulfillment of that undertaking. I will say more later in my speech about the ratification of the convention.

The ICSID is an important convention for protecting investment around the world. ICSID awards can already be enforced in 143 countries. It is time to provide the benefit of ICSID to Canadian investors. However, to gain that protection for Canadian investors, Canada needs legislation to ensure that ICSID awards, wherever they are made, can be enforced in Canada.

Canada also needs to provide the privileges and immunities needed for ICSID to function in Canada. We need to ensure that persons using conciliation under the convention cannot abuse that process. Canada needs to ensure that it can appoint qualified persons to ICSID panels.

Previous speeches have provided an overview of the bill and its provisions dealing with enforcement. I will focus in this speech on privileges and immunities, conciliation and appointments to the panel.

Let me begin with privileges and immunities. The privileges and immunities provided for in this bill do not deal with the privileges and immunities of the foreign governments against which an award is made. Those privileges and immunities will continue to be governed by the Foreign Missions and International Organizations Act.

Instead, clause 5 of the bill deals with the privileges and immunities of the ICSID and of individuals working for the centre or engaged in ICSID arbitration. Generally, clause 5 simply faithfully incorporates into Canadian law the privileges and immunities which the convention requires.

ICSID is provided with the legal capacity of a private person. This means it will be able contract, acquire property and institute legal proceedings. ICSID will be immune from legal process except when it waives this immunity.

Officers and employees of ICSID and people acting as conciliators or arbitrators will also be immune from legal process, but their immunity is limited. They will have immunity only for acts they have done in the exercise of their functions and only if the ICSID does not waive this immunity.

If they are not Canadians, these people are entitled to the same immunities and immigration restrictions, registration requirements and national service obligations as Canada extends to representatives, officials and employees of comparable rank of other states. The same rules apply to foreign exchange and travel restrictions.

These rules would also apply to people appearing in ICSID proceedings as parties, agents, counsel, advocates, witnesses or experts. However, this immunity is generally limited to the period when they are travelling to and from the place where the proceedings are held and for the period of their stay there.

There is nothing new or unusual in the privileges and immunities which the convention and the bill provide to individuals. Immunity from legal process is limited to functional immunity. As to other privileges and immunities, Canada only needs to provide them on the same basis as it provides to officials of other states.

All Canada's policies that apply to the extension of such privileges and immunities to officials of foreign states will also apply to the privileges and immunities provided to people under this bill.

I should also note that ICSID does not have to pay taxes or customs duties. Canadian may also not levy taxes on the salary or benefits of ICSID staff members who are not Canadians. Similarly, Canada will not tax ICSID conciliators or arbitrators who do their work in Canada if the only basis for such tax is that the work was done in Canada.

These tax privileges, like other privileges and immunities, are exclusively related to ICSID and its activities. They do not limit Canada's ability to tax Canadians. Indeed, if ICSID arbitrations and conciliations are not conducted in Canada, these tax privileges have almost no revenue impact.

I turn next to clause 10, the portion of the bill that deals with conciliation.

In addition to arbitration, ICSID also provides a conciliation process for investor state disputes. Conciliation is a process in which the parties to the dispute use a third party to clarify issues and to try to bring about agreement between them on mutually accepted terms. If the disputing parties reach agreement, the third party prepares a report explaining the issues and the agreement reached by the parties.

Conciliation can only work if both the investor and the state can speak honestly and openly to the conciliator, but conciliation can break down. For conciliation to work, the parties and the conciliator have to be able to say things that might be damaging admissions in any subsequent court action or arbitration.

The convention deals with this problem by requiring parties to the convention to ensure that what is said or written in an ICSID conciliation process will not be used in any subsequent proceeding. Clause 10 implements this obligation.

I now turn to clause 11, which provides for the governor in council to designate persons to the ICSID panel of conciliators and the ICSID panel of arbitrators.

Articles 12 to 16 of the convention set up two panels, one for conciliators, one for arbitrators. Each state party to ICSID may designate four persons to each panel and the ICSID secretary general may also appoint ten. Panel members serve for renewable terms of six years, but continue in office until their successors are designated. People designated to panels must have recognized competency in the fields of law, commerce, industry or finance.

Articles 31 and 40 of the convention provide that if the secretary general of ICSID is required to appoint the chairman of a conciliation commission or an arbitral tribunal, he must select the chairman from the relevant panel. However, the parties to the dispute are free to appoint conciliators or arbitrators from outside the panel and may well agree on a chairman.

Being named to the panel provides no remuneration. Historically, the chances of a panellist actually being asked to arbitrate or conciliate a case are quite small. This is because there have only been 118 cases decided by the ICSID arbitral tribunals and 5 conciliation reports issued over the last 40 years. Therefore, only 118 arbitrators have been appointed to chair arbitral panels and only 5 conciliators have been selected to chair conciliation commissions. Remember as well that the parties can appoint a chairman from outside the panel.

Once this bill is declared in force in Canada, Canada will be in a position to ratify the ICSID convention. The convention also permits us to designate provinces and territories as entities that could use ICSID arbitration.

Some provinces with an interest in the convention still have concerns about the implementation and operation of the convention. We are working with the provinces and territories to resolve such concerns.

Canada can designate a province or a territory under the convention at the same time as the ratification or at any time later.

I urge the House to consider this bill on an expeditious basis. One hundred and forty-three countries are already party to the ICSID convention. Canadians with investments abroad are asking us to make the ICSID option available to them. It is time to act.

[Alexa McDonough, NDP, Halifax, NS]

Mr. Speaker, I do not know whether it will surprise the secretary of state to hear this. I am sure many others will not be surprised to know that the Chamber of Commerce has not approached me, and I am not insulted by that. It is not surprising it has not done so.

There are various arguments in favour of signing on at this time. It is perhaps regrettable because if it had, it would have addressed some of the questions I raised, which I hope the secretary of state will choose to address in her wrap-up on the debate of Bill C-53 at second reading.

I have a great many corporations in my community, for which I have a good deal of regard and respect in terms of how they conduct themselves in a socially responsible way. In fact, it was thrilling for me that the Chamber of Commerce and the Greater Halifax Partnership jointly sponsored a major event on corporate social responsibility. One of the outstanding commentators on this topic came to address the subject, Stephen Lewis. There was a huge turn-out from the corporate community to address the questions of corporate social responsibility, and it made me feel very good about my community.

I do not want to misrepresent that speech and I would not even try to begin to articulate the thrust of the case for corporate social responsibility having been put to the business community in Halifax by Stephen Lewis, but it was well received.

Issues of transparency, accessibility and accountability in such disputed matters would rank very high with responsible corporations that take seriously the need to take responsibility for their actions and to ensure that people understand what kinds of disputes have occurred and then what kinds of decisions have come out of them.

With those comments, I look forward to the secretary of state addressing the question of why now. Other that having cited the Chamber of Commerce. I did not hear her speak about what other kinds of representations from other citizens or corporations were made to the government that brought it to the decision to bring this forward as legislation at this time. I look forward to hearing her comments on that.

[Helena Guergis, Conservative, Secretary of State (Foreign Affairs and International Trade) (Sport)]

Mr. Speaker, I have a couple of comments for the hon. member and perhaps she would want to comment on them.

With regard to the business community in Canada, the Canadian Chamber of Commerce has written to the government and expressed that the business community very much would like to see Bill C-53 proceed. It would like to see Canada join along with the other 143 countries to date that have ratified.

I think what is important for the hon. member to know is that this is one of the most ratified instruments in the world. Of course, the international community is starting to realize the benefits of ICSID.

Perhaps the member would like to comment on whether she has had any conversations with the local business communities across the country. The member was a former party leader and I know that she would have had some connections with the business community. It would be very helpful to know what they have said to her.

I also want to point out that we are negotiating a foreign investment and protection agreement with China right now. I have been advised that having ICSID in place is something that would help us to proceed with this FIPA and go forward with respect to working with China. Does she have any comments on that?