Key Features of the Canada-China FIPA Can Canad ada-China China - - PowerPoint PPT Presentation

Key Features of the Canada-China FIPA

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Dec Decemb ember er 15, 201 15, 2014 Matthew Kronby International Trade and Investment Group Be Bennett J tt Jones s LLP LLP 416-777-4664 kronbym@bennettjones.com

The The Can Canad ada-China China FIPA FIPA in Cont in Contex ext

 Canada:

 28 FIPAs + 5 FTAs with equivalent protections in force  Model since 2003 based on NAFTA experience, balancing state and investor interests  Typically "Pre-establishment" model, offering protection and liberalization

 China:

 More than 100 BITs in force  Major evolution in protections, especially since 1998, reflecting China's growth as a capital exporter  For now: "Admission" model, offering protection only after investment admitted

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Key FIPA Features: Non-Discrimination

 National Treatment: "Admission" model

 Protects investments once made: "expansion, management, conduct and sale or other disposition" (not to establishment

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 Carve out for all existing non-conforming measures:

 National treatment and MFN for new measures  Plus "ratchet" on existing measures – can be liberalized but not made more restrictive

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Key Features: Admission of Investments

 Canada can continue to review and approve investments under Investment Canada Act as can China under its laws

 Decisions not subject to arbitration (ISDS or State-State)

 Therefore does not liberalize market access, but….  China negotiating BITs with US and EU: MFN in FIPA means Canadian investors will gain the benefits if China grants "pre-establishment" rights

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Oth Other er Key Key Pro Prote tect ctions ions

 Expropriation and nationalization

 Forbidden unless:

 For a public purpose  Domestic due process  Non-discriminatory  Fair market value compensation

 Covers measures "equivalent to expropriation" subject to clarification to protect legitimate public welfare measures

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Other Key Protections (II)

 Minimum standard of treatment:

 Fair and equitable treatment  Full protection and security  Tied to international law standard (like NAFTA note)

 Right to repatriate investment returns "freely and without delay"

 "Transfers" defined broadly: includes capital, capital gains, profits, royalties, proceeds of sale, employment earnings

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Other Notable Features

 Transparency of Laws obligation  No "Umbrella" clause - unlike some Chinese BITs  Performance Requirements prohibition limited to those in WTO "TRIMs" Agreement  Broad carve out for taxation measures (other than expropriation)  General exceptions include: national security; health, safety and the environment; and "prudential measures"

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Dispute Settlement

 State-State or Investor-State  Investor-State features:

 Arbitration under ICSID, ICSID AF, or UNCITRAL rules  Transparency: awards public, State party to the dispute can make pleadings public and insist on public hearing  Investments in financial institutions: claims limited to expropriations and transfers (like NAFTA)  "Filters" for:

 Expropriation claims concerning taxation measures  Claims where "prudential" exception invoked

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Thank You!

Matthew Kronby International Trade and Investment Group Bennett Jones LLP 416-777-4664 kronbym@bennettjones.com

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