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Canada strengthens its ties with Africa by concluding negotiations of bilateral investment treaties

Emery Mukendi Wafwana & Associates PC | April 8 2013

Canada strengthens its ties with Africa by concluding negotiations of bilateral investment treaties

Paul Fortin and Jonathan van Kempen

Canadian mining companies have already a strong presence in Africa. As of March 2013, there are about 185 Toronto-Stock-Exchange-listed mining companies active in Africa with about 684 projects in 35 African countries according to MineAfrica[1].

On March 4, 2013 during the Prospectors and Developers Association of Canada (PDAC) event in Toronto, the Minister of International Trade of Canada announced the conclusion of the negotiations of Bilateral Investment Treaties (BIT)[2] also known in Canada as Foreign Investment Promotion and Protection Agreement (FIPA) with Cameroun and Zambia home of iron ore, copper and other mineral deposits. In its strategy to increase its ties with Africa, Canada has already concluded BIT negotiations with Benin, Madagascar, Mali, Senegal and Tanzania. In addition, Canada is currently in BIT negotiation with Burkina Faso, Ivory Coast, Ghana and Tunisia.

Canada began negotiating BITs in 1989 to secure investment and protection on the basis of the model agreement developed by the Organization for Economic Cooperation and Development (OECD). Canada learned from its experience in the NAFTA chapter and updated its FIPA model in 2003. The main features of the new generation of Canadian FIPA model are the following:

 International minimum standard: each party shall accord to a covered investment treatment in accordance with the customary international minimum standard of treatment of aliens, including fair and equitable treatment and full protection and security.

 National treatment and most-favored nation treatment: each party shall treat to an investor of the other party treatment no less favorable than it treats, in like circumstances, to its own investors or to investors of a non-party with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of an investment in its territory.

 Expropriation: a party may not nationalize or expropriate a covered investment either directly or indirectly through measures having an effect equivalent to nationalization or expropriation except for public purpose, in accordance with due process of law, in a non-discriminatory manner and on payment of compensation which must be equivalent to the fair market value of the expropriated investment immediately before the expropriation took place and must not reflect a change in value occurring because the intended expropriation had become earlier known.

- Transparency: each party shall insure that its laws, regulations, procedures, and administrative rulings of general application respecting a matter covered by the BIT are promptly published or otherwise made available in such a manner as to enable interested persons and the other Party to become acquainted with them.

 Corporate Social responsibility: each party should encourage enterprises operating within its territory or subject to its jurisdiction to voluntarily incorporate internationally recognized standards of corporate social responsibility in their practices and internal policies, such as statements of principle that have been endorsed or are supported by the Parties. These principles address issues such as labor, the environment, human rights, community relations and anti-corruption.

 Health, safety and environmental measures: investment protection should not be pursued at the expense of other public policy objectives (health safety or environment) and it is inappropriate to encourage investment by relaxing health, safety of environmental measures.

 Settlement of disputes between and investor and host party: investor may under certain precedent conditions submit a claim to arbitration under the International Center for Settlement of Investment Dispute (“ICSID”) provided that both parties are parties to the ICSID, the Additional Facility Rules of ICSID, if only one Party is a party to the ICSID Convention and the United Nations Commission on International Trade Law Arbitral Rules (“UNCITRAL Arbitral Rules”). Although the ICSID Convention entered into force in Cameroun on February 02, 1967 and in Zambia on July 17, 1970, Canada has signed the Convention on December 15, 2006 but not yet ratified. Therefore, arbitration claims can only be submitted under the Additional Facility Rules of ICSID or the UNCITRAL Arbitral Rules unless the investment is structured in a different way.

Access to international arbitration is a key investment protection device for investors who thus can escape from the host state control over domestic courts. Before any investment in natural resources, investors should always consider the availability of BITs and structure their investments in such ways to receive protection from the most appropriate BIT available. Investments in natural resources are sensitive topics for host countries and require heavy capital with long term commitments exposed to an extent to pressures from changing events such as change of politic regimes that do not exist in contracts for sales of equipment, services or commodities. Therefore, BITs offer access to international arbitration even for junior companies with less bargaining power to negotiate an arbitration clause in the mining convention.

As of today, Cameroun has currently BITs in force with Belgium-Luxembourg, Germany, Netherlands, Romania, Switzerland, United Kingdom, Northern Ireland and the United States of America. Zambia has currently two BITs in force with Germany and Switzerland.

Canadian companies have already a strong present in Cameroun and Zambia home to iron ore and copper and other mineral deposits. According to Foreign Affairs and International Trade Canada, Canadian mining assets in Zambia were worth in excess of US$6 billion, while Cameroon’s were valued at more than US$35 million in 2011. The conclusion of Foreign Investment Promotion and Protection Agreement (FIPA) with Cameroun and Zambia may certainly have a positive impact on Canadian investment and also encourage junior mining companies to invest in Cameroun and Zambia as it reflects a willingness to create a favorable investment climate.

We shall now wait to see whether the final versions of the two FIPAs will be substantially similar to the 2003 FIPA model.

 source: Lexology