Mr. Speaker, the CETA negotiations provided a great opportunity to innovate, especially regarding provisions on investment protection and the mechanism for the resolution of disputes between investors and states. Our government fully seized that opportunity and developed a new and improved approach to investment chapters in Canada's free trade agreements.
Let me tell members today about some of these innovations.
I know that members of this House fully appreciate that the Canadian government and the European Union and its member states have a sovereign and inalienable right to regulate in the public interest. It is, in fact, our solemn responsibility to do so for the benefit of all citizens, especially those among us who are the most vulnerable.
It is also important to know that there are well-recognized principles of international law establishing that such a sovereign right to regulate in the public interest is not affected by provisions in international trade agreements. Nevertheless, to ensure that CETA is clear on that principle, we modified the investment chapter and introduced a dedicated article reaffirming the right of governments to regulate in the public interest, including in such areas as the environment, health, and safety.
Another significant CETA innovation our government is proud of is the transformation of the mechanism for the resolution of disputes between investors and states. CETA is indeed the first international trade agreement that establishes a permanent tribunal to hear claims by investors alleging that states have breached investment-related obligations.
There are currently around 3,000 international investment agreements in force worldwide, and a large majority of those include a mechanism for the resolution of disputes between investors and states. In all of those agreements, including those to which Canada is a party, investment tribunals are constituted on an ad hoc basis and are thus dissolved when a final decision is issued. The members of those tribunals are jurists who are appointed by the parties to the dispute; that is, the foreign investor and the respondent state. Critics of this process have been deeply concerned about arbitrator independence.
The CETA tribunal, in contrast, will consist of 15 members appointed solely by Canada and the European Union. Ethical requirements will be central to the process leading to their appointment. Among others, members of the tribunal will not be allowed to act as counsel or expert witnesses in an investment dispute under any international investment agreement. Members will be appointed for a five-year term that may be renewed only once. Individual cases will be heard before a three-member division of the tribunal, and those members will be selected on a rotation basis, ensuring that the composition of a division is random.
Our government is convinced that such innovations address the concerns about a perceived lack of arbitrator independence and will give greater legitimacy to the dispute resolution process.
Moreover, as the members of a division hearing a specific case will be in a position to consult with the other members of the tribunal, we expect that the coherence of decisions will also, as a result, be much improved.
That is not all, however. In addition to the first-instance tribunal, CETA will establish a permanent appellate tribunal, thus creating another precedent in international investment law. The appellate tribunal will function in a way similar to the first-instance tribunal. Its tasks will be to review decisions that are contested by either the foreign investor or the respondent state.
In time, the first-instance tribunal and the appellate tribunal will develop a body of decisions that will constitute effective jurisprudence. This, in turn, will create greater legal certainty for both foreign investors and governments.
We believe that these innovations regarding dispute resolution are great accomplishments, but our government intends to go even further.
Indeed, our ultimate objective is to establish, with the European Union and other interested trading partners, a multilateral institution for the resolution of investment disputes. Once established, this new institution would take over the resolution of investment disputes under CETA and could become the mechanism for investment dispute resolution for all future Canadian investment agreements with trading partners who agree to sign up with the multilateral institution.
The above innovations regarding the right to regulate and the mechanism for the resolution of disputes are certainly significant ones that our government is proud of.
However, let me now turn our attention to another important innovation of the CETA investment chapter that may be less visible. We have clarified in CETA that, absent a specific commitment made to an investor to that effect, a decision by Canada or the European Union not to issue, renew, or maintain a subsidy does not constitute a breach of CETA's investment protection obligations.
We have closed the doors to shopping by clarifying that investors cannot seek to import provisions from other Canadian or European trade agreements through CETA's most favoured nation treatment article. Canada and the European Union have clarified what constitutes a breach of the fair and equitable treatment standard to ensure the standard is not interpreted in a broader manner than intended.
CETA encourages the use of domestic courts by suspending the timelines for the submission of a claim while domestic remedies are being pursued. We added an article on mediation to encourage early settlement of disputes without recourse to the CETA tribunal. We have provided CETA with a mechanism for the early dismissal of frivolous claims. We have taken small and medium-sized enterprises into consideration and have added provisions that make it easier for them to access the mechanism for the resolution of disputes.
We have made it mandatory for an investor who submits a claim, while benefiting from third party funding, to be transparent and disclose the identity of its funder.
Importantly, we have established a committee that provides a forum for the CETA parties to consult on difficulties that may arise regarding implementation of the chapter, as well as on possible improvements to the chapter, especially in light of experiences and developments in other international fora.
It has been Canada's practice to prevent so-called mailbox companies from benefiting from Canada's trade agreements. CETA is no different. In order to be considered as an investor under CETA, a European Union enterprise that is owned by interests of a third party is required to have substantial business activities in the territory of the European Union. It cannot simply establish a mailbox company in the EU for the sole purpose of gaining access to the dispute resolution mechanism of the CETA.
Finally, the CETA demonstrates Canada's continued leadership with regard to promoting transparency in the dispute resolution process. Under CETA, all hearings are open to the public and all documents submitted to or issued by the tribunal are made available to the public.
Our government is genuinely proud of the progressive investment chapter achieved in CETA. We believe that the progress made here may become the world standard for future investment agreements.
