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Canada Ratifies the ICSID Convention

Canada has ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).  Canada’s ratification of the ICSID Convention will enter into force on December 1, 2013, nearly seven years after Canada initially signed the Convention.

Canada’s ratification should enhance the rights of investors under Canada’s many investment agreements.  These include the North America Free Trade Agreement (NAFTA), Canada’s 24 Foreign Investment and Promotion Agreements, and the recently-completed Canada-EU Comprehensive Economic and Trade Agreement.  Canada also is participating in the negotiation of the Trans-Pacific Partnership, which includes an investment chapter.

ICSID Convention Background

The ICSID Convention entered into force in 1966.  The ICSID Convention currently has 158 signatories, and 150 of those countries have ratified the Convention.  Notable exceptions include Mexico, Russia, India, Thailand, Vietnam, South Africa, and Brazil.  The ICSID Convention’s jurisdiction is limited to disputes where the host state and the investor’s home state have both signed and ratified the Convention.

Important Consequences of Canadian Ratification

Canadian investors and investors in Canada now have recourse to ICSID.  For example, because the United States and Canada have both now ratified the Convention, NAFTA Chapter 11 disputes between Canadian investors and the United States or U.S. investors and Canada may be brought under the ICSID Convention.

In addition, Canada’s ratification enables Canada and its investors to use ICSID’s core arbitration rules, as opposed to only the ICSID Additional Facility Rules.  Many previous investor-state cases involving Canada or its investors were conducted under the ICSID Additional Facility Rules, which allow for access to ICSID when only one side of the dispute is a party to the ICSID Convention or a national of a party to the ICSID Convention. The Additional Facility Rules, however, have potential drawbacks, including not allowing post-award challenges under the ICSID Annulment process (i.e., limiting appeals to the national courts).