It was reported recently that Canada may be close to ratifying the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). Though Canada signed the Convention in 2006 and passed federal ratifying legislation two years later, according to most accounts all provinces must also ratify the Convention, which to date only Ontario, Newfoundland and Labrador, Saskatchewan and British Columbia have done.
Over the coming days, the Council of Canadians will be writing those provinces that haven’t ratified the ICSID Convention to find out when we can expect legislation to be tabled, and to urge provincial governments to allow for adequate public input and debate in the legislature and at committee.
Though Canada is already bound by many investment treaties (ex. in NAFTA and other free trade agreements, and in Canada’s Foreign Investment Promotion and Protection Agreements), ratifying the ICSID Convention would remove one of the last stop-gaps available to Canada and the provinces to contest arbitral awards against the state in investment disputes: the judicial review.
According to lawyers Martin Valasek and Azim Hussain:
by virtue of its distinctive self-enclosed procedural system, the Convention excludes the possibility of court intervention in the arbitral process and provides for the direct enforceability of a final arbitral award in favour of the foreign investor, without there being any need for the investor to engage domestic laws on the recognition of arbitral awards and without there being the possibility on the part of the host state to invoke grounds to annul or refuse to recognize the award before a domestic court.
You can read more about the difference between what options investors have now under Canadian treaties and how those options would change under the ICSID Convention here. For more on ICSID in general, there are some good resources on the Transnational Institute website.
There are other reasons to worry about the full ICSID model, as explained to me by Gus Van Harten at Osgoode Hall Law School. If Canada ratifies the ICSID Convention, arbitration awards against Canada would be subject to review only by other arbitrators and not by any national or international court. The arbitrators lack the hallmarks of judicial independence and may reasonably be perceived as beholden to appointing bodies that are dominated by the United States, major Western European states, or the international business community. Ratification would be a further significant step in the concession of Canada’s judicial sovereignty to international arbitration processes that are not independent, public, and accountable in the manner of courts, suggested Van Harten, and thus a step back from Canada’s historical commitments to fair and independent processes of international dispute resolution.
Quite simply, the elimination of judicial reviews of arbitral awards tilts the balance even further in favour of corporate interests over the public interest in the already problematic investor-state dispute settlement process.
Take the recent NAFTA investment panel decision in favour of Murphy Oil and Exxon Mobil for example. Here a tribunal has apparently agreed with the firms that a requirement to invest a portion of their offshore profits in provincial research and development in Newfoundland and Labrador breaches NAFTA Chapter 11 investment protections, notably its prohibition on performance requirements. This was despite the province and federal government exempting the measures in question from NAFTA at the time of signing. The firms are demanding as much as $65 million in compensation.
Three Canadian courts had already upheld the legality of the R&D measures when the firms initiated their joint NAFTA investment proceedings. The possibility of a judicial review of the final award, the amount of which is yet to be decided, is the least amount of protection any province should expect from this process, which has already resulted in over $157 million worth of settlements or payouts to foreign (mostly U.S.-based) investors. As a full party to the ICSID Convention, Canada would be automatically bound by arbitral decisions and fines with no further recourse to the courts.
Canada is already the sixth most-sued country under the investor-state dispute settlement regime. Acceding fully to the ICSID Convention is sure to increase the legal and financial burden on Canada and the provinces, putting often completely legitimate environmental, public health or sustainable development policies at risk. For these and other reasons, Venezuela, Ecuador and Bolivia are removing themselves from the ICSID Convention while the Australian government decided last year to discontinue the practice of negotiating investor-state dispute settlement into its trade agreements.
A legal blog from 2010 by Andrew de Lotbinière McDougall and Perley-Robertson of Hill & McDougall LLP guessed why it was taking so long for the provinces to ratify the Convention:
It is suspected by some that implementing legislation is being used as a bargaining chip in federal-provincial negotiations on other issues. Another possibility is that putting forward ratification legislation on an international treaty such as ICSID in the face of crowded legislative agendas is not a priority. And a reality may be that treaty ratification is not a vote-getting issue.
We also confirmed with Canada’s lead CETA (Canada-EU trade deal) negotiator this year that the provinces are offering to absorb the full cost of investor-state arbitral awards in the future in exchange for a permanent seat at international trade negotiations. They’re biting off more than they can chew and somebody’s got to stop them.
Our letter to premiers and opposition party leaders in the provinces will let these governments know that ratifying legislation for the ICSID Convention will not pass without some controversy, that we are watching and expecting public dialogue, and that we don`t think it`s a good idea. How these governments respond will inform what we have to do next.