Canada has recently started bilateral investment treaty negotiations with Tanzania, Mongolia, Madagascar, Indonesia and Vietnam

Canada Has Recently Started Bilateral Investment Treaty Negotiations with Tanzania, Mongolia, Madagascar, Indonesia and Vietnam

Wednesday, April 16, 2008

By: Cyndee Todgham Cherniak

Canada is becoming more engaged in international treaty negotiation and has recently announced that:

- Canada and Tanzania;
- Canada and Mongolia;
- Canada and Madagascar;
- Canada and Indonesia; and
- Canada and Vietnam,

have agreed to begin negotiations towards a Foreign Investment Promotion and Protection Agreement (FIPA). The Canadian Government should be commended for their initiative to improve foreign investment opportunities for Canadian businesses in the target markets selected by Canadian businesses.

Tanzania

Canadian businesses represent one of the largest categories of foreign investors in Tanzania. Given Tanzania’s economic reforms and increasing openness to FDI (Foreign Direct Investment), Tanzania offers significant investment opportunities for Canadian investors in a variety of sectors including mining, telecommunication and infrastructure among others.

Mongolia

Canadian businesses represent the second largest category of foreign investor in Mongolia. Natural Resources Canada estimates that Canadian companies, led by more than 20 mining and exploration firms, have approximately $400 million in assets in Mongolia. Bilateral trade with Mongolia reached $203 million in 2006, an 18 percent increase from 2005.

Madagascar

Canadian businesses represent the largest category of foreign investor in Madagascar. Canadian businesses recently surpassed French businesses to claim this important distinction. Given Madagascar’s economic reforms and increasing openness to Foreign Direct Investment, the country offers significant investment opportunities for Canadian investors in a variety of sectors including mining, agriculture and infrastructure among others.

Indonesia

In 2006, the stock of Canadian direct investment in Indonesia was C$3.12 billion, making Indonesia the fourth largest destination for Canadian direct investment in Asia. Canadian businesses have significant investment opportunities (existing and potential) in Indonesia a variety of sectors including natural resources, infrastructure, and telecommunications, among others.

Vietnam

In 2006, the stock of Canadian direct investment in Vietnam was C$142 million, and more large projects are planned. As a growing and dynamic market, Vietnam is of increasing interest to Canadian investors, with significant investment opportunities in a variety of sectors including manufacturing, natural resources, and financial services, among others.

All New Negotiations May Benefit Canadian Businesses

The negotiations of FIPAs will improve predictability and certainty for Canadian investors considering investment opportunities in these jurisdictions, and reduce risk associated with foreign investment into Tanzania. It is expected that the FIPA will follow Canada’s most recent post-NAFTA model of bilateral investment treaty and provide (1) substantive obligations (e.g., non-discrimination, prohibition of expropriation and indirect takings, requirement for fair and equitable treatment under customary international law, etc.) and (2) an investor-to-state dispute settlement mechanism when a State breaches its substantive obligations. It is the investor-to-state dispute settlement mechanism that will be of great benefit to Canadian businesses. While it is hoped that Canadian investors will not experience any difficulties, the dispute settlement mechanism provide greater transparency, certainty and tools to resolve disputes.

Canada has recently ratified ISCID and, as a result, any investor-to-state dispute may be pursued under the ICSID Convention and enforced under Canada’s newly passed ISCID statute.

It is important to note that Canada often enters into FIPAs prior to commencing free trade agreement negotiations. This may be a signal of the start of many important trading relationships.

Canada is also in the process of negotiating FIPAs with Kuwait and China. Canada has recently concluded its negotiation of FIPAs with India, Peru and Jordan.

Canada has signed FIPAs with the following countries, all of which have entered into force: Croatia. Costa Rica. Lebanon, Armenia, Thailand, Panama, Venezuela, Egypt, Ecuador, Romania, Barbados, Philippines, Trinidad & Tobago; Latvia, Russia, Ukraine, Romania Hungary, Argentina, Czech and Slovak Federal Republic and Poland.