International Trade Committee on Dec. 5th, 2013

[Dr. Howard Mann]

Because it isn't the governments that initiate the arbitrations. It's purely the investors who have the right to do that, and because they have the right to do that, if they consider a change in the law to have an economic impact on them, and if they consider in some way that change is protected against by the investment treaty, irrespective of the level of environmental protection in their home state—that's simply an irrelevant factor—then they can initiate the arbitration. European companies, if I may say, have initiated over half of the grand total of investment arbitrations today, so they're not strangers to the process and they're not shy about the process.

[Scott Brison, Liberal, Kings—Hants, NS]

We, our companies, are equally capable of initiating processes and obtaining legal representation and fighting those processes.

Would you agree that perhaps in Canada we need to increase our resources in the Department of Justice, that we need to ensure this as a government, and that in terms of our resources invested perhaps other countries are investing more in terms of dealing with these or fighting these type of processes?

[Dr. Howard Mann]

No, I wouldn't agree with that. We are very well-staffed with very competent lawyers in the Department of Justice—

[Scott Brison, Liberal, Kings—Hants, NS]

I'm not questioning their competence.

[Dr. Howard Mann]

We're very well-staffed. I think we'd be much better off to invest the time and energy in being a little more careful in the drafting of the kinds of provisions I talked about.

[The Chair, Conservative, Rob Merrifield]

Sorry, Mr. Brison, your time is gone. We'll move to Mr. Shory.

The floor is yours for seven minutes.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair, and thank you to the witnesses also.

I'll start with Mr. Mann. I read an article from your organization recently and it said:

Canada and the EU agreed to limit the scope of the term “investor” by excluding enterprises without substantial business activities in the alleged home state from its definition. This addresses the issue of ‘treaty shopping’ and misuse by ‘mailbox’ investors, and is a welcome outcome.

My question is, is it your view that by limiting the definition of “investors” to those who have real business interest in Canada, it will ensure that the financial advantages of CETA will benefit the Canadian economy to a larger extent than it otherwise would have?

[Dr. Howard Mann]

I don't think the narrowing of the definition of investor in this case has the impact of altering the financial benefits very much. There are still multiple ways around that. Yes, it's a welcome provision in terms of the technical details of the investor-state process, I agree with that. But I don't think it's going to have very much of an impact on altering the financial equation or the role of the investment chapter in establishing that financial equation of cost benefit.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you.

Mr. Darch, I can't believe you had 300 business-to-business meetings. I don't know how many days or weeks you spent there, how many your organization, your delegation, spent there. It's a lot.

In your presentation, you also talked about how excited the investors there are to invest in Canada and to create jobs, I would say. Then you talked about some measures and why they are attracted to invest in Canada. You talked about immigration and other kinds of things.

I believe one of the reasons also would be the lower tax, corporate tax, regime in Canada this government introduced. I guess you missed on that. But I want to ask you this. While you were there, what kind of groundwork were you able to lay during those meetings for Canadian companies wishing to penetrate into that lucrative EU market?

[Mike Darch]

We worked closely with the Invest in Canada bureau as part of the Department of Foreign Affairs, Trade and Development and we worked closely with the three posts in Europe: the embassies in Madrid, the Hague, Rome, and the consulate in Milan.

All had significant interface with us. We gave the benefits or profiles of our individual cities and the types of businesses we were looking for. They had their own screening processes. They had their own databases. They hired lead generators in some cities. So I think if we look at what kind of groundwork was laid, there was a considerable amount of work done for those meetings.

In addition to the meetings, there was a seminar delivered on Canada and its benefits as a place to invest in each of the three cities. So there was an exceptional amount of work done.

We're keeping going with that work by contacting the individuals who talked to us. A significant number of the companies that met are planning a visit to Canada, and certainly in economic development one of the key things about selling Canada and selling an individual region is to actually get the person there. Everybody says they're the best place in the world with the greatest opportunities, while we actually are.

So there was a lot of commitment made by those companies. Our organizations such as Invest Ottawa have made the commitment to follow up. Our posts have made the commitment, so I think there was a significant amount of work done to lay the groundwork for future activity.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you.

Another area I'm very passionate about is foreign credential recognition. I read a press release in November this year where you talked about infrastructure projects. It says:

To build out these huge projects Canadian cities need help from European engineering services firms, architecture firms, advanced manufacturing tool companies, financial and transportation companies.

So you foresee a great deal of cooperation among professionals in both markets. This committee has heard some evidence relating to foreign credential recognition and the ability of professionals and tradespeople to work on both sides of the Atlantic.

Has this come up in any of your discussions with the Europeans? Do you share our government's concerns about the need to streamline the process of credential recognition by accreditation bodies?

[Mike Darch]

I am an engineer, and I would say there definitely is a requirement. I know some provinces, and also the federal government, have some major initiatives in this area.

I think the whole question of foreign credentials is very important. Everybody looks at foreigners coming to Canada. But we are an exporting company, and we export a lot of services such as engineering and architecture, so it is actually a two-way street.

I think the accreditation of foreign credentials is extremely important, and it is something that has to be worked on. You asked me whether it came up in our talks. Yes, it did.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you.

In your presentation you also said Europe is undergoing fundamental economic change.

I'd like you to expand on that a little bit.

[The Chair, Conservative, Rob Merrifield]

Answer quickly.

[Mike Darch]

When I discussed Europe with the senior trade commissioners in each of our posts, I found that historically most of their activity has been inward-looking. In other words, most of their GDP production is through activity that occurs either directly in the nation they are from, or within the European Union.

Given the state of the European Union at the moment, given the state of individual countries such as Spain and Italy, they are now much more outward-looking. So there's much more activity where they are looking offshore for partners, opportunity, etc.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Davies.

We have two more questioners left. We'll somewhat split the time, and I'll have time for a question at the end.

Go ahead, Mr. Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thanks.

Mr. Mann, I'm glad you clarified Mr. Brison's questions. We're not just talking about most favoured nation provisions that require us to treat European investors the same as Canadian investors. We're also talking about independent sources of rights under the provisions for fair and equitable treatment.

I have a bit of the text here in front of me. One of the things it says is that a “breach of fair and equitable treatment may also arise from any other treatment of covered investments or investors which is contrary to the fair and equitable treatment obligation recognized in the general practice of States accepted as law”.

That sounds to me like we're agreeing to something undefined, in the future, and out of our control.

Who determines the obligations for the general practice of states accepted as law? Where do I go to find out who makes those decisions?

[Dr. Howard Mann]

That's precisely the paragraph I'm most concerned about. In and of itself, it's open-ended drafting, whereas more modern drafting around the world is becoming much more specific and refined.

The standard referred to there is an open-language standard of customary international law. It comes from—to be precise and lawyer-like—Article 38 of the Statute of the International Court of Justice.

But in interpreting similar language in other treaties in the course of over 600 investment arbitrations, we've seen the standards relating to customary international law and FET vary widely. The standards of proving it vary widely. Even within the NAFTA, there were two cases that came out within eight months of each other—the Glamis Gold and Merrill & Ring—that took exactly opposite approaches under the same treaty. So there is no definition.

[Don Davies, NDP, Vancouver Kingsway, BC]

Can I just interrupt you because I have very limited time?

It's common law that would be developed by the administrative tribunals themselves. That's who will determine what the general practice of states accepted by law is. And my question is going to be this. Are there any examples where investors have used the domestic court system, got a negative decision from the highest court in the land—in the case of Canada, the Supreme Court of Canada—and then gotten that decision overridden by an investor-state tribunal?

[Dr. Howard Mann]

Yes, there are. Specifically, there's one in India under a similar jurisdictional set-up to ours in terms of separation of powers, the judiciary and the legislative, and so on. There's a case against India that has done exactly that: a Supreme Court decision in favour of the government and an arbitration decision that reviewed, overrode, and essentially reversed that Supreme Court decision.

[The Chair, Conservative, Rob Merrifield]

Okay, Mr. Hiebert.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Mr. Mann, oftentimes people focus on the potential threat to Canadian companies or Canadian government regulations coming from foreign companies into this jurisdiction. But is it not the case that Canadian companies have reciprocal rights in those jurisdictions as well and would benefit from the same protections that people are fearful in Canada...? Won't we have those same rights in those foreign jurisdictions?

[Dr. Howard Mann]

Yes, but that doesn't make it any better for me. It seems to me that the standard we want is not one that simply amplifies and increases on a continual basis the rights of corporations, whether they're foreign corporations in Canada or Canadian corporations outside Canada. It seems to me the standard we ought to be achieving or striving for is one that's balanced, equitable, and properly reflects the ongoing right to regulate all investors and doesn't provide, let's say, hyper levels of protection to investors just because Canadian investors are also getting those abroad.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

But I haven't been convinced that the Canadian, provincial, or territorial governments would be prevented from regulating in the future, based on the language that you've suggested. There are limitations but nothing that prevents governments from setting environmental standards or labour rights, and so on.

Can you elaborate on that?

[Dr. Howard Mann]

It's correct that there's nothing that forbids or prevents or precludes governments from taking new measures in a legal sense. The problem arises from the risk of increased challenges on increasingly broad investor rights that can lead to more risk of the government having to pay damages, including the Canadian federal government having to pay damages, because Canada is party to the treaty, if a provincial measure is found to be inconsistent with CETA.

So I think it's the risk factor, and that comes back to the issue of whether governments pay attention to it, and yes, they do. Do governments look carefully at the cost benefit or the potential risks? Yes, they do. And do governments not regulate because of the potential risk? And the answer to that again is yes, they do.

So that's where the factor is; that's where the problem is. There's no absolute barrier but the risk equation changes, the cost-benefit analysis changes, and the higher the level of corporate rights, the higher the risk to government and the more difficult it is to balance the regulation with the potential risk.