Bill C-9 (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

[Charlie Angus, NDP, Timmins—James Bay, ON]

Mr. Speaker, I was asking myself, given that the panel has been around for 40 years, why is there a rush now? Why are we suddenly at a great trade disadvantage.

I think the answer was actually given to us just a few minutes ago by my Conservative colleague. At the beginning of my speech I said the whole scheme is predicated on two suppositions. One is that we believe that the World Bank is somehow an arbiter of international credibility and second, that we believe that chapter 11 and all its failings somehow will be transformed into a bonus to help average Canadians.

What we have seen with the Conservative response is that those members have their knickers in a knot over comments about Paul Wolfowitz. So clearly, we are at a distinct disagreement about what the World Bank's role is and second, we are being told, in fact to our face, chapter 11 is great.

If a corporation wants to go dump toxic waste in Mexico the corporation's right should be protected. If we want to go after a country that is trying to stop toxic chemicals being sprayed on lawns, we should be protected. If we want to go after a government in Canada to stop medically harmful additives in gasoline and we are corporate investors, we should be protected.

As for the rest of folks back home, they can just sit back and lump it. That is the Conservative vision that is actually being backed by the Liberals. And our friends in the Bloc seem to be saying, as long as they can sign onto the treaty, the Parti Québécois will sign on to anything.

However, folks back home will understand that a trade deal that takes away the ability of the public to participate, that takes away legal precedent in the country to examine and cross-examine, and a trade agreement that takes away any ability for appeal is not in the interests of folks back home, average people and neither is it in the interest of our sovereignty as a nation.

[Penny Priddy, NDP, Surrey North, BC]

Mr. Speaker, the fact is that there is no means by which a sovereign state, in which an investment is being made, can make an appeal on behalf of its citizens. I wonder about my colleague's comment about the Conservative member who earlier talked about protecting companies not being allowed to invest in some countries and that it would be discriminatory. On the other hand, there could be discrimination against all the citizens who live there--

[The Acting Speaker, Royal Galipeau]

The hon. member for Timmins--James Bay, a 30 second response.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Mr. Speaker, clearly look at the track record of the World Bank. Who has it targeted? It targeted for relief after hurricane Mitch, privatizing Telecom, and it has gone after privatizing water systems in places like Tunisia. This is what it sees as its role in trade.

That is obviously the opposite of what we see in trade and so we will stand against the bill, continue to fight against the bill, and work with non-governmental organizations that are looking to bring some democratic reform to these trade agreements.

[John Maloney, Liberal, Welland, ON]

Mr. Speaker, I stand to speak today to Bill C-9, An Act to implement the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).

This bill implements the international convention on the settlement of international disputes between states and nationals of other states which was open for signature in Washington back on March 18, 1965. It generally creates a set of rules for mutually agreed upon arbitration hearings between investors and foreign state governments. It ensures that the courts in any of the signatory countries have the legal means to enforce any decisions in the ICSID hearings.

As a trading nation, Canada and Canadian and international investors require protection, stability and confidence. Should disputes arise, and they do, it is essential that fair, equitable and judicious treatment is available when necessary.

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 ICSID convention entered into force, as I said, on October 14, 1966 and my understanding is that 156 countries have signed the agreement with Canada signing on December 15, 2006. As of January 2007, 143 states have 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.

Investment disputes brought under the convention are administered by the international center for settlement of investment disputes located in Washington, D.C. In the last few years the activity of the centre has soared due to increased flows of cross-border investment and the number of investment treaties referred to ICSID arbitration.

While the centre had over 110 arbitrations in total during the first 40 years of its existence, there are currently 105 proceedings underway. Since its inception, the centre has established itself as a reliable and effective organization for resolving investment disputes.

Once ratified the convention will provide additional protection to Canadian investors abroad by allowing them to include in their contracts with foreign states the option of arbitration under ICSID convention. In addition Canadian investors doing business in the country with which Canada has a foreign investment promotion and protection agreement will have recourse to ICSID arbitration for violations of that agreement as well.

Becoming a party to the ICSID convention will also make Canada a more attractive destination for international investors and that will mean jobs for Canadians.

The most significant advantage of the convention is the enforcement of arbitral awards. Unlike awards issued by other arbitral 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 a final judgments of the courts in that state.

The tremendous growth in investment and investment-stated disputes has made Canada's failure to ratify ICSID the focus of attention by Canadian business, the Canadian legal community and our trading partners. As I have indicated, to date 143 states have ratified the ICSID convention. The majority of our major trading partners are parties to it except for Mexico, India and Brazil. Ratifying the ICSID would bring Canadian policy into line with our OECD partners.

In a survey conducted by the ICSID centre in 2004, 79% of the respondents said ICSID plays a vital role in their country's legal framework and 61% said ICSID membership has contributed to a positive investment climate. Those are significant numbers.

The ICSID regime provides several important advantages, and compared to other arbitration mechanisms, the ICSID regime provides better guarantees regarding enforcement of awards and more limited local court intervention. Any arbitral award rendered under the auspices of ICSID is binding and any resulting pecuniary obligation must be enforced as if the award were a final domestic court judgment.

Moreover, all ICSID contracting states, whether or not parties to the dispute, are required by the convention to recognize and to enforce ICSID arbitral awards. Investors often prefer to rely on such arbitrations rather than on local courts of the country whose measures are in dispute to ensure an independent resolution of the dispute.

ICSID's relationship to the World Bank assists investors in obtaining compliance with ICSID awards and its roster of arbitrators gives investors access to well-qualified arbitrators at ICSID controlled rates, with extensive experience in international investments arbitration. ICSID also provides important institutional support for litigants.

The ICSID convention is a well-known tool for the settlement of investment disputes. Therefore, the interpretation of the convention and its usefulness are predictable.

Canada already has numerous links with ICSID. Provisions consenting to ICSID arbitration are commonly found in contracts between governments of other countries and Canadian investors. The NAFTA in chapter 11, the Canada-Chile free trade agreement, and most of our bilateral foreign investment protection agreements, or FIPAs, provide for ICSID as a dispute settlement option that can be chosen by an investor if both the state of the investor and the host state for the investor are parties to the ICSID.

Obviously Canada must become a party to the ICSID because Canada and Canadian investors cannot benefit from the choice if Canada is not a member. This is an increasingly important problem. Within Canada the use of ICSID would be consistent with the policy of supporting the use of the alternative dispute resolution mechanisms for investor-state disputes. While ICSID is less expensive and more efficient than current alternatives, it is not expected to lead to increased litigation against the government.

Under a government whose recent record is one of stifling international participation by Canadian companies, it is important that we pass a bill that protects the rights of our investors in other jurisdictions. With hugely increased trade with emerging giants, such as China, and other countries with governance structures much different from our own, it is important, in fact it is essential, that Canada be a part of the international convention on the enforcement of investors' rights.

[Paul Dewar, NDP, Ottawa Centre, ON]

Mr. Speaker, it is interesting to note the member's comments about where the dispute would be settled. The crux of our concern is that this will take away the decision making from what it used to be or exists now, a dispute resolution within the confines of our own borders, and transfer it to the World Bank. Some would say that is fine and I would concur if there was some measure of transparency that we would all agree with. Earlier in his comments with one of his colleagues, he assured us that was the case, that as of April 2006 there is absolute transparency. But that is not the case. I quoted from the blues in committee where it was brought forward in witness evidence that it is not the case that it would have absolute transparency. It is contingent. The problem with this process is that there are so many contingencies. It is contingent when a tribunal is put together.

What happens if someone wants to appeal? We learn in this agreement that the appeal process is not something we would expect in Canada in terms of being able to appeal a decision of a court. He intimated in his comments that the decisions are final, that everyone has to abide by the decisions and that is it.

When we talk about the transfer of decision making, a lack of accountability, as I have already mentioned, or these contingencies and we underline the fact that there are countries presently that are not signatories to this, the question is what is the benefit for everyday Canadians. What would Canadians really get from this deal? The answer is not a lot, and what they get is a lot of questions.

In light of the fact that we are handing over decision making to a third party, in this case the World Bank, in light of the fact that all decisions are not fully transparent and in light of the fact that we are depending on a tribunal in Washington without the ability to make decisions in Canada, how can the member support this bill?

[John Maloney, Liberal, Welland, ON]

Mr. Speaker, I would point out that this is an option. Companies have the right to use this possibility, or they could sue within the country where the situation happened. There is a right of appeal. Other members have pointed out section 52, and perhaps on some very narrow grounds, a creative litigant could probably amplify those grounds.

The business community today wants an answer and it wants it quickly. Businesses are not about to be ground into submission after 10 years of litigation at a huge cost. They are prepared to use this procedure to get a quick and efficient decision and one that is enforceable.

Admittedly, not all countries around the globe are signatories to this agreement, but I suggest this will change as more and more people sign on and more and more ratification takes place.

[Penny Priddy, NDP, Surrey North, BC]

Mr. Speaker, I wonder if the member could speak briefly, or extensively as he wishes, about article 71 which is about the termination of contracts. Perhaps he could speak to why he sees that as being helpful and how that would work.

[John Maloney, Liberal, Welland, ON]

Mr. Speaker, I would like to review article 71 which states, “any contracting state may denounce this convention by written notice to the depository of this convention. The denunciation shall take effect six months after receipt of such notice”.

If things do not work as we anticipate they will, if it is not a positive outcome in becoming a signatory and having it ratified, then we have the ability to opt out. There is an escape mechanism which is very prudent and very beneficial, but I would anticipate that this country would not exercise its rights under article 71.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Mr. Speaker, it should not come as a surprise to any of us that the Liberals are so enamoured with Bill C-9. The bill has all kinds of flaws, dutifully pointed out by many in the House and by organizations which are expert in this whole area. It comes as no surprise given the fact that it was the Liberals who tried to slip through Parliament and into public policy the multilateral agreement on investment. Thank goodness there were Canadians who said it was dangerous and problematic. Thank heavens there was enough pressure to bear to stop the MAI.

Today we have this proposition before us through Bill C-9 which has problems of the same nature that we identified with respect to the MAI. We also have on our plates the SPP, the security and prosperity partnership agreement, which evokes all kinds of images about lack of transparency and accountability, executive power and power by the international corporate elite.

Is there a pattern here? If the Liberals were in support of the MAI, and in fact they propelled the issue of the multilateral agreement on investment onto the public agenda, if they are in support of Bill C-9, which is clearly problematic in terms of the power of the World Bank, are they also in favour of the SPP?

[John Maloney, Liberal, Welland, ON]

Mr. Speaker, I certainly respect my colleague's comments on the Liberals' position on the MAI. The Liberal Party is always open to suggestions and constructive comments. Following a review of the possibility of entering into it, they withdrew it and that was a good move.

To suggest that the ratification of this agreement is the same as the MAI, I would suggest it is not. I look at the business community and the trading community, all of whom are very supportive of this agreement. I would suggest that if the worker on the street or in the factory were given the option, if he had the choice between arbitrating disputes under this agreement or not having a job, he would welcome the assurance of stability in his employment and would also endorse it.

[Larry Bagnell, Liberal, Yukon, YT]

Mr. Speaker, given what the member said, that we do not want Canadian companies to be prejudiced overseas when they invest, does he believe that can create a lot of jobs in Canada? Obviously Canada has investments around the world which create jobs and he would like to give some certainty through this mechanism so that a lot of union jobs and other jobs are maintained in Canada and not lost by some frivolous action against which there was no protection.

[John Maloney, Liberal, Welland, ON]

Mr. Speaker, job creation and job maintenance are so important for this country. It is certainly one of the issues of the day. It is my position that this would provide for stability and would provide new jobs. We are a trading nation. It would also protect existing jobs. As such, we should be endorsing this unanimously, all the parties in this House.

[Paul Dewar, NDP, Ottawa Centre, ON]

Mr. Speaker, it is interesting to note that we have heard the positions of all the parties on this bill and our party has taken the view that this bill is not up to speed on where Canadians are at and on how to protect Canadians in terms of investments, institutionally speaking.

I would concur with those who say it is not the end of the world if this treaty goes through, that other countries have passed it and therefore it is just something we can go ahead and agree to, no problem, thanks very much. I would agree that it would not be the end of Canada as we know it. It would not wreck or destroy our economy.

Let me start off with those measured comments, but we need to be very vigilant on what we are actually deciding and what potential pitfalls there are. If we look at the International Centre for Settlement of Investment Disputes, we will see that it is one of those groups within the World Bank that is not very well known. If we were to ask our constituents about it, or if I went out here on Bank Street and asked people if they were aware of the ICSID, most of them might look at you quizzically.

There is a reason for that. It is an investor dispute mechanism that provides multinational corporations with powers to sue governments when they impose domestic laws or regulations that have a significant detrimental effect on corporate profit-making. In other words, what is critical here is to understand why this is in place. Who does it benefit? Then it comes back to us as legislators. What does it do for everyday people?

I would submit that this is something that benefits multinational corporations and large investors, but I cannot make the argument that this benefits everyday Canadians. In fact, it has the potential to see us give up our sovereignty. I say that because this arrangement agreement has been around, as has been mentioned already, for more than 40 years, but it seems we now have a rush to sign on to this.

I find that a little strange. It is of concern to me when we see a major sell-off of resources, particularly here in Canada, a major sell-off of our resources, of companies that have been Canadian from the beginning, we might say, and certainly companies that have been around for more than 20 or 30 years, and we note that there is not a problem in terms of foreign investment in Canada.

The dilemma we have is in making sure that we have some hold on the economic reins, that we in fact get to determine our financial pathway, that we are able to have an economy that is a mixed economy for sure, a pluralistic economy absolutely, but one in which there is a balance.

When we take a look at this agreement, we see that what this agreement will do is allow multinational corporations powers to sue governments when they believe they have been wronged. We have already heard some examples from my colleague from Timmins about the perils of that.

We know that the World Bank organized the international body in 1966. Historically, capital-exporting countries have used a variety of these kinds of carrots and sticks to protect the economic interests of their major corporations abroad. They use these as a vehicle, as a tool, so to speak. If they cannot get what they want in a forum that is agreed upon between states, they use this forum.

While many might say it is fine, that if we look at some of the decisions we can see that they were amicable and there were no problems, we also have to take a look at the potential for this to be a negative situation for Canadians and, for that matter, for Canadian investors.

For instance, the United States has a long history of using these kinds of tools to its benefit, so we have to take a look at how the mechanism works. What we find is that in the way the tribunal is set up, we have what I think is really an imbalance in the structure. We know that the way the panellists are chosen and put forward is that they are agreed upon by members of the treaty. That sounds fine until we get to the point of asking this question: what if there is a problem with a decision that has been made by the tribunal?

We know there is no satisfactory appeal process, not in my opinion. The decisions are pretty final once they are made, once we have entered into the process. If someone thinks that a decision was not fair or that not all the evidence was brought forward, unless it can be proven there was corruption or unless there is a smoking gun, an appeal is not permitted.

In fact, let us look at article 52. To be clear, the appeal process is actually an annulment. It says to get rid of the whole decision. That is really not an appeal in my books. Article 52 lays out the annulment. It kind of reminds me of how the Catholic church dealt with marriages at one time, when a divorce would not be recognized but there would be an annulment, meaning the marriage did not happen.

However, the annulment may be permitted only if the following criteria are met. One is that “the Tribunal was not properly constituted”, but one agrees to the tribunal from the get-go so one would have to prove that somehow one did not agree. Another is that “the Tribunal has manifestly exceeded its powers”, but if one agrees to the agreement, one agrees to the powers and the decision-making. That one would be hard to prove.

Another is that “there was corruption” on the tribunal. My colleague from Timmins pointed out the problems the World Bank has had in that area. I am not sure that the tribunal would have a very non-jaundiced view of its own operations and it is the tribunal that would determine this. Another is that there was a breach in the rules of procedure. That would be when one filed and what time periods were involved.

The final criteria is that the award “has failed to state the reasons on which it is based”. We are talking about agreements that are in the millions and tens of millions of dollars. It would be very unusual to have an award that would not state the reasons on which it was based. Both sides have lawyers, if not teams of lawyers, who certainly would have provided the reasons why they were in the dispute.

Therefore, what we have here in article 52 is a train to nowhere. It is not an appeal process. It is an annulment process. It does not allow a window on the decision-making and therefore I think is a flaw. It is very difficult for anyone to be able to challenge things. We know that about four countries now are trying to get out of this agreement, but it is very difficult.

I will mention one of the reasons why it is difficult. If I may turn to article 71, in terms of being able to get out of this agreement it sounds good, in that one gives notice and gets out of the agreement. The problem is that we can have companies and corporations that have in fact signed on to these agreements and will tell their respective governments that if they pull out of an agreement it will harm them and there will probably be some legal action from those corporations against their very own governments. Sometimes this can mean corporations that are not centred in their respective countries but have business in those countries.

What does that mean? It means that notwithstanding the fact that article 71 allows a nation-state to withdraw from the agreement, it is much more difficult than that. This is not unusual. We know that with some of the trade agreements we have signed on to it is one thing to see there is an escape clause to get out of an agreement that we do not believe is in our best interests, which is easily stated in an agreement, but it is another thing to actually do.

Why? Simply put, when we get into these trade agreements, they become intertwined. Corporations do their business based on those agreements. If they feel they will lose out, it is their right to take their respective governments to court. It is important to note that and to note as well that there are nation-states right now that are trying to withdraw from this treaty and are encountering challenges and difficulties.

It is important to note that this is not in isolation. Recently the government built on the work that was done by the previous government on the Security and Prosperity Partnership of North America. As I said at the beginning of my remarks, I am not suggesting that this treaty will be the end of our country or that we will be giving up all of our sovereignty, but--and I underline “but”--it is one of the threads that is undoing the fabric that we have to be a sovereign state, to decide how investment is done and certainly how to challenge when unfair investment is taking place.

I would say the same with the security and prosperity partnership. It was really interesting when the previous government brought forward the security and prosperity partnership. The Liberals said it was something they had to do to streamline procedures and processes and we should not worry. They said we should just trust them because it was something that would be good for Canadians.

Most recently we have seen that partnership extended when the SPP talks were held not far from here with Mexico, the United States and Canada. What is disturbing about that agreement and also this particular treaty is that most Canadians are unaware of what the consequences will be for them.

When people talk about the security and prosperity partnership, they always say that it is a very dense kind of document, the little bit that is available, and they ask why it is something they should be concerned about. I simply ask them if they are concerned about what is on their table. Who decides the regulations around pesticide residue? Who decides the degree to which additives are put into our food supply and what kinds? Who decides what kinds of security arrangements we have at our border? If we are concerned about those things, we should be concerned about the security and prosperity partnership.

The Liberals said they just wanted to streamline procedures and regulations. This government says the same thing. Why would they be concerned about bringing these changes in procedure to this place, to Parliament, to allow Canadians, through their members of Parliament, to understand what they are?

It is a matter of how we think government should work. Is this something that governments should have a role in? Should they decide, in an open forum, how food quality and security arrangement procedures are done? Should that be done in the full light of day or should it be done behind closed doors? If we believe the previous government and this government, they have said that we elected them to do that, that we should just trust them and just not worry about it.

When we look at this particular treaty and some of its pitfalls and at the security and prosperity partnership and the lack of transparency there, we come to the conclusion that our governments simply do not want to share this information with Canadians. As I mentioned, in this particular treaty there are problems in article 52. There are also problems in article 71.

We also have to evaluate what it is that Canadians are going to receive from this. When I asked at committee what benefits would accrue to Canadians, even those who were supportive of the treaty said it was something that would actually help business. That is fine. That is good. We want to have a healthy business sector, as I mentioned before, and a mixed economy, one that creates investment opportunities. However, I asked one of the witnesses if this is something we are lacking right now, as a result of which we are not receiving investments, and the answer was clearly no. It is not something we need to have in any way, shape or form to entice people to invest in Canada.

People have probably noted, by looking at the business pages of late, two things. One is the manufacturing jobs, which have been the foundation of many of our communities, are falling apart. They are basically bankrupt or are going down the highway. The other thing people will note is that the businesses doing well are the ones that are taking our resources, be it bitumen and the oil sands or natural resources on the west coast, forestry, et cetera, but not having that value added.

We are not getting the kind of investment that would help those in our cities, town and villages to build a better life and a better community. Why? I think it is because the government is more focused on standing up for corporations and streamlining things for them. Let us be honest about it, the government is not really concerned about the investments that go to help in the communities, villages, towns and cities across the country.

I give the forestry sector as an example. This will not help the forestry sector in any way, shape or form. The $14 billion in tax cuts, the great tax cut swindle this past fall, will not guarantee key investments in the forestry sector or in the auto sector. In fact, we are waiting on the government to give some sense that it is there to help everyday Canadians, but it has said only if we pass its budget.

These kinds of treaties, the SPP kind of process, are a clear indication to Canadians of where the present government, the previous government and opposition parties stand on this bill. The government is more concerned about making sure things are nice and streamlined, thanks very much, for multinational corporations. However, when it comes to the person who gets up every morning, goes to work, does his or her best, contributes and builds through the individual's community, the government says sorry that is does not have much for them.

Ask people who have been laid off in the forestry and manufacturing industries. There is nothing there for them. All they have been given is a cent off the GST. That is great. I am sure they are very thankful of their government for that.

When we look at the cost benefits of the bill and what the government has done for working families and everyday Canadians, one has to say not much. By changing the dynamics and how we settle investment disputes through the international tribunal process on lawsuits by foreign investors against governments over alleged violations and protections, Canadians understand whose side the government is on, and I guess we can now say the Bloc and the Liberals, and who is on the side of Canadians.

I think most Canadians would want their government to say that in the area of investment dispute settlement what should matter is how it benefits citizens. I can guarantee that by passing the bill, we will be telling corporations that they now have a nice, streamlined procedure so if they need to sue someone, it is no problem, not to worry, to be happy. They will be happy. We heard it in committee.

What I have not heard from government or opposition members is that old adage of what is in it for us, the “us” meaning Canadians. I can say there is not a lot. What seems to be there for everyday Canadians is essentially taking our accountability mechanisms and outsourcing them, in this case to the World Bank.

I will end where I began. This is not the end of our country and giving up all our sovereignty, but it is a very disturbing thread that we have seen from the present government and the previous government. When we add it up with the SPP and some of these trade agreements, what it tells Canadians is that the government is on the side of multinational corporations, that it is there for them. We saw it with the government's budget and we see it with this bill.

[Larry Bagnell, Liberal, Yukon, YT]

Mr. Speaker, I have a quick question for the record. I think the member mentioned that four countries were trying to get out of this agreement. Could he list those countries so we have it on the record?