(FTAA-Intl: an intimate & unmoderated list to share information and discuss strategies and campaigns around the FTAA)
A confidential memo prepared by Canadian trade bureaucrats for the Canadian Cabinet and seen by the editor of INVEST-SD Bulletin sets out a proposed overhaul of Canada's investment negotiating position for future agreements. The memo diverges sharply from the public position of Canada's trade department, insofar as it acknowledges various specific shortcomings with the current negotiating template. This template currently underpins the NAFTA, as well as some 18 bilateral investment treaties - so-called Foreign Investment Protection and Promotion Agreements (FIPAs) - negotiated with various trading partners.
In addition to advising that Cabinet approve a new investment negotiating template, the memo also advocates that treaties "already in force or signed ... be reviewed and amended" so as to conform with the new negotiating template. While acknowledging various concerns with the treaty model currently in force, the document nevertheless strongly endorses the long-standing twin rationales for negotiating so-called bilateral investment treaties: that they provide protections for Canadian investors, and they aid developing countries by serving "as a means of attracting foreign direct investment, vital to their economic growth." Lately, the efficacy of these BITs has come into question, however, as critics have challenged the alleged relationship between treaty-accession and inward investment flows.
The memo to Cabintet proposes a number of changes to the substantive provisions of future FIPAs, including the following: clarification of the minimum standards of international law provision, in line with an agreement reached by the Three NAFTA trade ministers in 2001; greater clarification that a finding of expropriation "requires a substantial deprivation of an investment; mere economic injury, including that which results from regulatory action, does not amount to expropriation."; greater clarity about the territorial scope of the test for National Treatment and Most Favored-Nation Treatment (which was an issue in the SD Myers arbitration under NAFTA); use of a finite, rather than an open-ended, definition of "investment".
The memo also recommends a number of changes to the controversial investor-state arbitration mechanism included in modern FIPAs. Some notable recommendations include: open arbitral proceedings (except for when dealing with confidential business information); prompt release of all documents related to a dispute; institutionalization of a process for amicus-curiae interventions; further formalization of timetables for disputes, including filing deadlines and provision for the dismissal of stale claims.
Notably, the memo does not propose the creation of an appellate mechanism for arbitral decisions rendered under a FIPA, as has been discussed in relation to the proposed Free Trade Area of the Americas (FTAA). However, the memo suggests that such a mechanism might be of "value in the medium to long term". Also absent from the memo is any discussion of the legitimacy of culling arbitrators from the ranks of practicing arbitration lawyers (who may prosecute other cases, thereby having a business interest in seeing broad, expansive interpretations of treaty provisions). The memo is also silent on the practice of allowing each of the parties to a dispute to choose one arbitrator who will sit as part o a three member Tribunal.
Also not addressed by trade officials is the problem of parallel or multiple arbitrations arising out of essentially the same facts, and the broader question of the role of precedent from one arbitral decision to another. As noted in a recent edition of INVEST-SD Bulletin, two parallel bilateral investment treaty arbitrations against the Czech Republic have yielded wholly contradictory decisions, leaving commentators to puzzle over how future arbitral tribunals shall reconcile these divergent interpretations.
Canada is currently involved in investment negotiations with its proposed FTAA partners, Singapore, and four Central American nations.
The memo also notes that Canadian business interests have been lobbying hard for FIPAs with India, Indonesia, Brazil and China. As well, officials claim to have been courted by a number of developing countries interested in concluding FIPAs, including Peru, Guyana, Cuba, Paraguay, Bolivia and several unnamed francophone African nations.
(Sources: Memorandum to Cabinet: Revised Model Foreign Investment Protection Agreement, Minister of Foreign Affairs, Minister for International Trade, Draft 3, Oct. 28, 2002; re: parallel arbitrations under BITs see "Well-Known Arbitrator Warns of "Crisis of Legitimacy" in International Arbitration", Nov. 22, 2002, INVEST-SD Bulletin) INFO FROM: Investment Law and Sustainable Development Weekly News Bulletin, Dec.13, 2002
(A publication of the International Institute for Sustainable Development: www.iisd.org)
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