Mr. Speaker, it is with great pleasure that I speak at second reading of Bill C-53, An Act to implement the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. The convention is an international treaty establishing the International Centre for the Settlement of Investment Disputes, ICSID. Bill C-53 will implement the ICSID convention for Canada.
Allow me to give hon. members of this House, first, a description of what ICSID is, second, an overview of the bill and what it does, and lastly, an explanation of the benefits of this convention for Canada and Canadian businesses.
ICSID is an organization devoted to the resolution of international investment disputes between states and nationals of other states through arbitration and conciliation.
ICSID provides mechanisms for arbitration and conciliation of such disputes provided that both the state of the investor and the host state are parties to ICSID. This means that once Canada ratifies ICSID, a Canadian investor abroad in any of the 143 countries that have already ratified ICSID may have recourse to ICSID to resolve disputes that may arise with the country in which it is doing business.
ICSID is a highly reputable World Bank institution based in Washington, D.C., and one of the most frequently used institutions for investment arbitrations.
ICSID and international investment arbitration have traditionally been used in cases of expropriation or nationalization. A hypothetical example is a takeover by a host government of a Canadian business exploiting natural resources such as oil or minerals. Such an expropriation may represent a substantial loss for the investor and fair compensation is not always easily obtained.
However, the Canadian investor may have insisted on an investment agreement with an ICSID arbitration clause before investing, or Canada may have an investment treaty with the host government making reference to ICSID arbitration. If so, once Canada ratifies ICSID, the Canadian investor owning the business will have the right to use ICSID arbitration to pursue fair compensation for its losses before an independent arbitral panel.
ICSID provides an efficient, enforceable mechanism for such dispute resolution. This is why our government believes ICSID is a good way to protect Canadian business and its investment in foreign countries. It also complements our investment protection treaties and existing arbitration clauses in investment contracts of Canadian businesses.
Bill C-53 will implement this convention. This bill needs to be passed before Canada can ratify the convention. This bill will make an ICSID award enforceable in a Canadian court. It will ensure that persons using conciliation under the convention cannot abuse that process. This bill also provides for governor in council appointments of persons to ICSID lists of potential panellists and it provides privileges and immunities as required by the convention.
The key provision making ICSID awards enforceable is clause 8, which states:
(2) The court shall on application recognize and enforce an award as if it were a final judgment of that court.
This provision will apply to an ICSID award for or against Canada or a foreign government. This provision is the key to the ICSID system for enforcing arbitration awards.
An ICSID award is reviewable by an ICSID tribunal, but not by national courts. Once final, an ICSID award will be recognized and enforced in Canada as if it is a final judgment of a Canadian court.
While Canada will be giving full effect to awards, in turn the convention guarantees similar enforcement in all states that are party to ICSID. Thus, Canadian businesses with an ICSID award in their favour have a very powerful tool to ensure the award is paid. This ensures the protection of their rights and interests in foreign countries.
There are three important related provisions. Clause 6 makes the act binding on the Crown. This ensures that awards against the federal government can be enforced.
Clause 7 prevents a party from seeking court intervention by way of judicial review applications or applications to a similar effect. A party cannot therefore attack the validity of a final ICSID award.
Clause 8 also gives all superior courts, including the Federal Court of Canada, jurisdiction to enforce ICSID awards.
The provisions with respect to conciliation are brief. Clause 10 ensures that the ICSID conciliation process can be conducted in a manner that is without prejudice to the rights of the parties. In other words, testimony given during conciliation cannot be used in other proceedings. This gives investors a further option to ensure their rights are respected.
I should also mention that the bill proposes provisions ensuring the required privileges and immunities for the centre, its employees and its arbitrators. Such immunities guarantee the independence of the tribunal when seated in Canada.
As I indicated before, once adopted, the settlement of international investment disputes act will allow Canada to ratify the ICSID Convention. In today's world, there are many situations where Canadian businesses could be significantly harmed by foreign governments' activities or decisions.
Canadian businesses are increasingly active in foreign markets. They invest in foreign countries by buying plants, establishing new businesses or acquiring rights to natural resources, for example. While disputes with foreign governments affect only a small portion of the $465 billion in assets owned by Canadian investors abroad, when disputes do arise, mechanisms such as ICSID are necessary to ensure that the dispute is resolved fairly and efficiently.
We as a government have worked hard to promote Canada abroad, facilitate the free flow of international investment and help Canadian businesses succeed abroad.
To date, Canada has negotiated 22 foreign investment protection and promotion agreements, or FIPAs, and is actively negotiating others. These agreements provide for investor state dispute settlement by means of arbitrations.
ICSID arbitration is an option under these agreements but only if both countries are party to ICSID. These agreements create a more predictable and transparent climate for Canadian investors abroad by setting out rules for the treatment of investors and offering dispute settlement to adjudicate claims when their rights have been violated.
Canadian investors who need to use dispute settlement to enforce their rights, whether those rights exist pursuant to a FIPA, an FTA or an investment contract with an arbitration clause will welcome this bill. Promoting fair trade rules and equitable treatment for our businesses must go hand in hand with efficient dispute resolution mechanisms that allow investors to obtain redress.
We have proposed this bill today to pave the way for ratification of the ICSID Convention. Canadian businesses demand that Canada join this important convention to ensure protection of their investments abroad and because it is consistent with our foreign trade investment policy.
This convention entered into force in 1966, over 40 years ago, and 143 states have ratified the convention, including most of our major trading partners. This represents virtually three-quarters of all the states in the world. By way of comparison, there are 191 states that are members of the UN.
The ICSID Convention represents one of the most ratified treaties in the world and Canada is not yet a party to it.
This government is committed to fair international trade rules. We are committed to protecting Canadians' interest throughout the world and this is why we take action today for the implementation of the ICSID Convention.
Canadian businesses support the adoption of this convention. The convention is good for investment in this country, as well as Canadian investors abroad. It ensures efficient resolution of disputes between governments and foreign investors. Those are the reasons that our government presents Bill C-53 for second reading.