Author: Lori Waters, MFA, MScBMC
Citizen Journalist

Eighteen years ago, negotiations began for an agreement with China which was announced in February 2012 by Prime Minister Harper, to “facilitate investment flows between Canada and China,” to provide a “more stable investment environment” and “contribute to jobs and growth.”  The Canada-China Foreign Investment Promotion and Protection Agreement (FIPA) was signed on September 8, 2012, in Vladivostok Russia, and tabled in the House of Commons on September 26th, 2012.

By government policy, treaty ratification does not require debate or a vote. Treaties may become law after a twenty-one day waiting period, following tabling. Ratification is completed when Canada agrees, by Order in Council at a cabinet meeting, to be legally bound to treaty terms. Notice is then provided to the other treaty party. However, legal action such as an injunction can halt ratification, and opposition to the treaty with China has resulted in calls for provinces to sue the federal government, and lawsuit threats from First Nations.

FIPA has also sparked protests and caused controversy amongst various stakeholder groups. David Suzuki has argued that the 31 year term of the agreement is too long, that FIPA risks too much in return for too little, that Canadians could be liable for millions or billions of dollars, with little protection for Canadian rights, social services, or the environment. The government continues to defend FIPA, amid accusations that FIPA is “undemocratic” and a “protection racket.”

But it is not only environmental groups or pro-democracy groups that oppose FIPA. Canadian investors don’t necessarily agree that FIPA will protect Canadian investments in China.  A Saanich investment counsellor told SVO, “There is no guarantee that the Chinese will treat Canadian investors the same way our laws require that we treat them.”  The lack of Chinese reciprocity is seen by other investors as “a serious shortcoming of this agreement.”

FIPA’s constitutionality is also in question, because it removes control over important portfolios that are enshrined within Canada’s Constitution Act (1867) as being under provincial authority. The federal government might claim that it has authority to make treaties, however, the Supreme Court of Canada has ruled previously that while “decisions about foreign affairs fall naturally and properly to the executive” (i.e. PM and cabinet), executive prerogative is still “subject to review under the Charter.”

First Nations groups and legal organizations  question FIPA constitutionality as an abrogation of First Nations rights. Under Section 35(1) of Canada’s Constitution, the Crown owes a “constitutional duty” to engage in “honourable negotiations” to lead to “just settlement of Aboriginal claims.” However, provision of preferential treatment to foreign investors such as Chinese State-Owned Enterprises (SOE’s) with respect to lands and resources may eliminate the opportunity for honourable negotiations if lands and resources in question are already sold. Several First Nations have demanded their rights be honoured(including the government’s constitutional duty to consult). Groups including the Union of BC Indian Chiefs, and Council of Ontario Chiefs have threatened to sue over FIPA. Modern Treaty First Nations, including Maa’Nulth and Tsawwassen have explicit treaty clauses legally requiring the federal government to consult with them on any new International treaty such as FIPA.

Interestingly, although a province would have legal standing to argue the constitutionality of FIPA, no province has yet expressed legal opposition. While the provinces may consider that under FIPA’s terms as a federal agreement they would have limited financial liability if action was taken to defend their constitutional jurisdiction (such as the environment), the provinces may wish to reconsider. Following the costly $130M Abitibi-Bowater judgement, the Prime Minister promised to “put the provinces on the hook,” saying: “in future, should provincial actions cause significant legal obligations for the government of Canada, the government …will create a mechanism so that it can reclaim monies lost through international trade processes.”

His claw-back desire is understandable. Arbitration costs and awards can cost millions or billions, directly from taxpayers pockets, at the expense of basic public services such as health and education. As a result, governments globally are reconsidering entering these agreements. A recent report by Corporate Europe Observatory and the Transnational Institute notes that investment agreements primarily benefit arbitrators and lawyers, allowing them to “profit from injustice.” According to Elizabeth May, MP for Saanich-Gulf Islands, “A new European report blows a hole through the idea that the arbitration is impartial and unbiased. In fact, there is an elite group of international lawyers, who are making millions out of being global ambulance chasers. They seek the cases, talk governments into entering into FIPAs and reap the rewards of $1,000 an hour as they serve on these cases.”

Here in BC, an earlier Special Committee on Investment treaties issued two reports providing ample reasons and recommendations to suggest reconsideration of ratifying any investment agreement which sacrifices: democratic principles, transparency, human rights, labour standards, protection of health, education, social services, environmental protection and conservation, and other resource matters. Also recommended was elimination of investor state arbitration mechanisms such as FIPA’s, that allow foreign investors to bypass domestic court systems and challenge governmental measures before an international arbitration panel.

Spanish arbitrator Juan Fernandez-Armesto says: “When I wake up at night and think about arbitration, it never ceases to amaze me that sovereign states have agreed to investment arbitration at all” … “Three private individuals are entrusted with the power to review, without any restriction or appeal procedure, all actions of the government, all decisions of the courts, and all laws and regulations emanating from parliament”

Canadians may wish to consider if the FIPA controversy is because it puts Canadians at risk of losing our sovereignty, democracy, governance, laws, and control of our own resources. While the flawed Environmental Assessment and “Public Consultation” process for FIPA would be a lengthy topic for another article, FIPA’s underlying lesson may be that it is time for Canadians to demand that our government consider giving priority to our constitutional rights in any treaty negotiations. With FIPA’s 31 year term, and with Chinese investors and SOE’s already eyeing resource extraction and export businesses like Alberta oil and Vancouver Island logging, it’s entirely possible that FIPA could help Harper’s prediction come true: that “Canadians won’t recognize Canada” by the time Prime Minister Harper is done with it.

* “Some of the more important to British Columbians include: the management and conservation of natural resources; health care, education, and other social services; the regulation of property and civil rights in the province; and municipal institutions and governments.”