J Cameron Mowatt - Canadian International Council

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Canada’s FIPAs and FTAs with Latin America:
Serving Canadian Interests?
J Cameron Mowatt
Borden Ladner Gervais, LLP
Vancouver, B.C.
May 26, 2011
Canada’s FIPAs and FTAs in the Americas
FIPA: Foreign Investment Protection Agreement
A bilateral investment treaty (BIT) containing specific
types of protection for the investors of the two
contracting parties when investing in each other’s
territory, usually providing investors with the right to
submit claims for damages to investor-state arbitration
FTA: Free Trade Agreement
A treaty containing mutual commitments to promote
and facilitate two-way trade in goods and services
between the contracting parties, sometimes
incorporating the typical provisions of a FIPA or BIT
Basic Features of FIPAs and BITs
• FIPAs and BITs typically contain:
– protection against direct or indirect expropriation;
– entitlement to fair and equitable treatment and full
protection and security;
– entitlement to national treatment;
– most-favoured nation treatment for compensation for
losses suffered due to war or civil strife; and
– freedom to make transfers of investment returns
– the right to submit claims for damages arising from a
breach of the treaty to binding arbitration
Investor-State Arbitration
• Claim for Damages: Investors are entitled to seek awards
monetary compensation for losses arises from treaty
breaches, such as uncompensated expropriations
• Direct Access to Arbitration: Instead of submitting to the
courts of the host state, the foreign investor initiates an
investor-state arbitration under a FIPA, BIT or FTA.
Diplomatic espousal is no longer required
• Independent Tribunal: Two of the three members of the
arbitral tribunal will be independent of the host state – the
arbitrator appointed by the disputing investor and the chair
of the tribunal cannot be a national of the host state or of
the investor’s home state
Canada’s FIPAs
• Canada was a relative late-comer to the international investment
treaty regime
• When Canada began negotiating FIPAs in 1989, the major capital
exporting states such as the United Kingdom and the Netherlands
already had a very wide network of BITs with capital importing states
• Canada now has 18 FIPAs in force, 8 new FIPAs awaiting entry into
force and 8 FIPAs under negotiation, plus three FTAs (including the
NAFTA) that contain NAFTA-style investment protection, plus 2
further FTAs with investment protection provisions pending, for a
total of 39 when all pending treaties have entered into force
Canada’s FIPAs and FTAs
(Illustrative List)
Latvia (amended)
Poland (amendment under negotiation)
Russian Federation
Romania (amended)
Hungary (recently concluded)
Czech Republic (amended)
Slovak Republic
Croatia
Armenia
Bahrain (under negotiation)
Lebanon
Israel
Jordan (recently conc.)
NAFTA
Canada
United States
Mexico
Barbados
Trinidad and Tobago
Venezuela
El Salvador
Costa Rica
Panama
Ecuador
Peru
Chile
Argentina
Uruguay
China (under negotiation)
India (recently concluded)
Mongolia (under negotiation)
Philippines
Thailand
Vietnam (under negotiation)
Egypt
Madagascar (recently concluded)
South Africa
Tanzania (under negotiation)
Tunisia (under negotiation)
In force
Signed but not yet entered into force
Recently concluded negotiations
Under negotiation
Bilateral Investment Treaties of the United
States
(Illustrative List)
Latvia
Estonia
Lithuania
Poland
Belarus
Russia
Croatia
Albania
Czech
Republic
Slovak
Republic
NAFTA
Canada
United States
Mexico
El Salvador
Honduras
Nicaragua
Panama
Ecuador
Peru
Bolivia
Chile
Argentina
Uruguay
Haiti
Jamaica
Grenada
Trinidad and
Tobago
Tunisia
Morocco
Senegal
Zaire
Cameroon
Congo Democratic
Republic
Congo Republic
Mozambique
South Africa
Romania
Hungary
Bulgaria
Moldova
Ukraine
Turkey
Lebanon
Israel
Egypt
Jordan
Bahrain
Armenia
Georgia
Azerbaijan
Kazakhstan
Uzbekistan
Kyrgyz
Bangladesh
Thailand
Sri Lanka
Philippines
Bilateral Investment Treaties of the United Kingdom
(Illustrative List)
Mexico
Belize
Honduras
Nicaragua
Costa Rica
Panama
Colombia
Venezuela
Guyana
Ecuador
Peru
Bolivia
Chile
Paraguay
Argentina
Uruguay
Latvia
Estonia
Lithuania
Poland
Belarus
Czech
Russia
Republic
Slovak
Republic
Croatia
Bosnia and
Herzegovin
a
Albania
Malta
Cuba
Dominican
Rep.
Haiti
Tunisia
Jamaica
Morocco
Antigua and
Senegal
Barbuda
Zaire
Grenada
Dominica
Trinidad and
Senegal
Tobago
Sierra Leone
Cote d’Ivoire
Ghana
Benin
Nigeria
Cameroon
Angola
Congo Democratic Republic
Burundi
Congo Republic
Mozambique
Zimbabwe
Lesotho
Swaziland
South Africa
Romani
a
Hungary
Bulgaria
Moldova
Ukraine
Turkey
Lebanon
Israel
Egypt
Jordan
Armenia
Georgia
Azerbaijan
Kazakhsta
n
Uzbekistan
Kyrgyz
Bahrain
United Arab
Emirates
Yemen
Oman
Nepal
Pakistan
India
Banglades
h
Hong Kong
Vietnam
Laos
Thailand
Sri Lanka
Philippines
Malaysia
Singapore
Indonesia
Mongolia
China
Korea
Papua
New
Guinea
Vanuatu
Canada’s FIPAs and FTAs with Latin American States
FIPAs by year of entry into force:
•
•
•
•
•
•
•
Argentina
Ecuador
Venezuela
Panama
Uruguay
Costa Rica
Peru
1993
1997
1998
1998
1999
1999
2007
FTA’s by year of entry into force:
• NAFTA
1994
• Chile
1997
• Peru
2009
(Columbia - pending)
Growth of Investment Treaty Claims
(worldwide)
Investment Treaty Claims in North America
• Canada, the United States and Mexico have experienced a similar
volume of claims, ranging from 12 to 15 claims that have been
submitted to arbitration
• United States: has successfully defended 9 claims and has 3 claims
pending
• Canada: has successfully defended 4 claims, paid 2 awards, settled
2 claims and has 4 claims pending
• Mexico: has successfully defended 7 claims, paid 7 awards and has
1 claim pending
Investment Treaty Claims in Central America
• Costa Rica: 5 claims – 1 dismissed, 1 award for expropriation, 1
stayed for non-payment of fees, 2 pending – both by resort owners
affected by restrictions for the protection of breeding sea turtles
• Honduras: 3 claims – 1 settled, 2 pending – all arising from highway
projects
• Guatemala: 3 claims – all pending, 2 arising from electricity
distribution concessions and 1 from the termination of a railroad
development concession.
• Panama: 1 claim – successfully defended – arising from investment
in a power generation project – (annulment proceedings pending)
• Nicaragua: 1 claim – resolved and withdrawn - arising from a dispute
concerning the recognition of a trademark
Investment Treaty Claims in South America - Group 1
• Chile: 3 claims – 1 claim successfully defended, 1 award in favour of
frustrated property developer, 1 award in favour of a newspaper
publisher (annulment proceedings pending)
• Paraguay: 3 claims – 1 successfully defended, 1 settled, 1 pending
– 2 arising from service contacts with government entities and 1
from alleged negligent supervision of a financial institution
• Peru: 6 claims – 2 successfully defended, 1 settled, 3 pending –
arising from power generation projects, food manufacturing facilities,
a gold mining venture and a highway construction project
• Uruguay: 2 claims – 1 award, 1 pending – a claim by Phillip Morris
arising from requirements for oversized warning labels on cigarettes
Investment Treaty Claims in South America - Group 2
• Argentina: at least 54 claims – 6 successfully defended, 5 final
awards, 16 settled or withdrawn, 34 pending – most arising from
investment in public service concessions rendered inutile by
“pesification” and other fiscal measures imposed during the 20002001 financial crisis
• Venezuela: 18 known claims – 1 dismissed, 2 awards, 4 settled or
withdrawn, 11 pending – most arising from direct expropriation of
investments in oil and gas, mining and other strategic industries
• Ecuador: 18 known claims – 3 successfully defended, 3 awards, 4
settled or withdrawn, 8 pending – most arising from taxes on windfall
profits in the energy sector and from power generation projects
• Bolivia: 4 known claims – plus 14 new oil and gas expropriations
plus threatened cancellation of 2 mining joint ventures – 2 settled or
withdrawn, potentially 18 are pending
Current Concerns for Canadian Investors
• Argentina: Canada-Argentina FIPA in force since 1993 – no known
claims by Canadian companies arising from the 2000-2001
economic crisis
• Venezuela: Canada-Venezuela FIPA in force since1998 – at risk are
investors in the oil and gas, mining and financial services sectors; at
least one Canadian mining company has a claim pending
• Ecuador: Canada-Ecuador FIPA in force since1998; at risk –
investors in the oil and gas and mining sectors – one Canadian
investor has sued and lost in connection with retroactive changes to
the VAT law
• Bolivia: Canada has no FIPA with Bolivia – at risk are investors in all
natural resource sectors
Concluding Remarks
• Investor-State arbitration should be seen as remedy of last resort for
Canadian investors who face unwarranted government interference
with their business activities in Latin America
• Although time consuming and expensive, in certain situations
investor-state arbitration may be the only realistic means of
obtaining compensation for losses arising from arbitrary,
discriminatory or confiscatory measures
• With the notable exception of Bolivia, Canada has adequate
investment treaty coverage with Latin American states where the
economic and/or political landscape presents a significant risk
• Canadians contemplating investment in Bolivia or other states that
have no FIPA with Canada should consider investing through a third
state that has treaty coverage and/or obtain political risks insurance
J Cameron Mowatt
Partner, Borden Ladner Gervais, LLP
1200 Waterfront Centre, 200 Burrard Street
Vancouver, British Columbia, V7X 1T2, Canada
Direct: 604.640.4178 - Email: [email protected]
www.blg.com
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