A Canada-China investment deal is drawing fire from critics, who contend that the deal opens Canada up to lawsuits from disgruntled Chinese investors. As of press time, the agreement was scheduled to be finalized November 1.
Gus Van Harten, an associate professor at Osgoode Hall Law School, said Canada has already paid out approximately $160 million in damages over complaints that it has broken NAFTA rules.
Van Harten said that by signing a foreign investment and protection agreement (FIPA) with China, Canada will expose itself to “a potentially massive fiscal risk.”
Don Davies, federal trade critic and member of Parliament for Vancouver Kingsway, has been a vocal opponent of the deal. Davies hit national headlines at the end of last week over a spat with Conservative MP Bev Shipley, who forwarded thousands of emails to Davies after he encouraged deal opponents to email their objections to the Tories.
Davies told Business in Vancouver that besides the liability risk, he’s concerned the deal won’t give Canadian firms an equal playing field in China because it allows the Asian country to keep existing “non-conforming measures” that might hurt Canadian investors.
“The bottom line is China has far more non-conforming measures than Canada does – they have a state-controlled economy, a command economy,” Davies said.
“Canada’s got a market economy that has been pursuing a liberalized trade agenda for 30 years, so we have very few conditions now on Chinese investors but they have many more. So it’s not fair to Canadian investors.”
But supporters of the deal say the critics are blowing the risks out of proportion.
Jock Finlayson, executive vice-president at the Business Council of B.C., said he hopes Parliament will approve the deal soon.
“[The deal] is very similar to the FIPAs that Canada has developed with other countries – and, indeed to FIPAs that the U.S. and other advanced economies have negotiated with various emerging market economies over the past several years.”
Finlayson added that the deal is a boon to Canadians doing business in China. “It provides greater protection for the rights of Canadian investors in the huge and rapidly growing Chinese marketplace. The investor-state dispute settlement provisions of the agreement should help to resolve conflicts that may emerge.”
Keith Head, a professor at Sauder School of Business, agrees.
“It’s unlikely to be very risky given that we’ve got something like 24 of these agreements already in force with other countries, and one doesn’t read a lot about huge problems in the past.”
Jeffrey Horswill, a commercial litigator with Davis LLP, said Canada’s liability risk under the FIPA is limited because the deal sets a significant threshold before a claimant can win damages.
“The [state’s] conduct has to be quite egregious before a claimant can make out a violation,” he said. “They’re breaches of international law, so it’s not just, ‘You’ve been denied a permit’, for example. It’s, ‘You’ve been denied a permit because you’re Chinese and we’re giving it to the Canadian company that’s exactly like you.’” •
