Canada–China Foreign Investment Protection Agreement

The Foreign Investment Protection Agreement (FIPA) between Canada and China is a Bilateral Investment Treaty which came into force on October 1, 2014.[1] It provides important protections for Chinese and Canadians investing in the other country, and is the most recent of China's investment treaties.

Features

The FIPA is noteworthy in that it provides important safeguards to Canadian investors in the Chinese economy, and it is one of China's first investment treaties with such comprehensive dispute settlement provisions.[2] As per Article 22 of the FIPA, investors may submit claims either to UNCITRAL or to ICSID. Additionally, the FIPA is the first of China's investment treaties to provide for full post-establishment National Treatment (subject to any regulations and practices which were already in place, as per Article 8.2(a)(i)). China's investment agreement with Seychelles included full post-establishment national treatment prior to the FIPA, but it has not yet entered into force.[3]

Criticism and controversy

The Harper government held out on finalizing the text and ratifying the agreement due to diplomatic differences and concerns about Chinese human rights abuses.[4] Negotiations lasted around 20 years. Criticism was especially high after the treaty was signed in 2012 because FIPA negotiations had been somewhat secretive, and because some terms were considered unfavourable to Canadian investors.[5]

Controversy mainly centred around the FIPA's provisions on Investor-State Dispute Settlement.[6] Article 15 provides that investors of one country are permitted to sue the government of the other county through an international tribunal; however, many consider the risk of such lawsuits arising to be relatively higher for Canada because Chinese foreign direct investment in Canada is roughly three times the amount of Canadian investment in China.[7]

Some commentators have also criticized the provision for national treatment in Article 6 because the FIPA did not provide for pre-establishment national treatment (a right of entry into the Canadian or Chinese markets for investors of the other country). This could disproportionately favour Chinese investors in Canada because China places more onerous requirements on foreign investors for the registration and approval of new enterprises than does Canada,[8] and because government screening in China involves numerous levels of bureaucracy for new companies.[9]

Impact of the FIPA

The FIPA has been in force since October 1, 2014. In Canada, there appears to be little public knowledge of the FIPA, even among investors; however, the agreement does provide considerable certainty and willingness to invest in China for those investors who are familiar with it.[10]

References

  1. ↑ "Agreement Between the Government of Canada and the Government of the People's Republic of China for the Promotion and Reciprocal Protection of Investments". Foreign Affairs Canada. Retrieved 23 December 2017.
  2. ↑ Riyaz Dattu; Eric Morgan. "Landmark Canada-China Investment Treaty Comes Into Force". Osler. Retrieved 23 December 2017.
  3. ↑ Zhang, Sheng; Gallagher, Norah; Shan, Wenhua (2012). "National Treatment for Foreign Investment in China: A Changing Landscape". Foreign Investment Law Journal. 27 (1): 136.
  4. ↑ Fekete, Jason (8 February 2012). "Canada, China Tighten Trade Ties". Financial Post. Retrieved 23 December 2017.
  5. ↑ May, Elizabeth. "Elizabeth May: Canada-China Agreement is a Threat to Canada's Sovereignty". Elizabeth May MP. Retrieved 23 December 2017.
  6. ↑ Walker, Lauren (15 September 2014). "New Treaty Allows China to Sue Canada to Change its Laws". Newsweek. Retrieved 23 December 2017.
  7. ↑ van Harten, Gus (2015). Sold Down the Yangtze: Canada's Lopsided Investment Deal with China. Toronto: James Lorimer and Company, Ltd. p. 23.
  8. ↑ Huang, Jie (2015). "Challenges and Solutions for the China-US BIT Negotiations: Insights from the Recent Development of FTZs in China". Journal of International Economic Law. 18. Retrieved 23 December 2017.
  9. ↑ van Harten, Gus (2015). Sold Down the Yangtze: Canada's Lopsided Investment Deal with China. Toronto: James Lorimer and Company, Ltd. pp. 12 and 48.
  10. ↑ Kutulakos, Sarah; Dobson, Dr. Wendy; Hejazi, Dr. Walid; Stratulativ, Daniela (25 April 2017). "Canada China Business Survey 2016". Canada China Business Council Rotman Institute for International Business: 6.
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