What does the CPTPP mean for Investment?
- The CPTPP offers Canadian investors improved protection, predictability and transparency for their investments, as well as greater access to fast growing CPTPP markets.
- Canada maintains policy flexibility in sensitive areas such as IndigenousFootnote 1 and minority affairs, culture, fisheries, social services (including health and public education) and certain transportation services, among others.
How the CPTPP benefits investors
The CPTPP investment chapter is innovative and modern, establishing high-standard protections for investors while upholding the Parties’ right to regulate to achieve legitimate public policy objectives. The core obligations of the chapter include:
- National treatment: trading partners should not discriminate against each other’s investors to favour their own investors
- Most-Favoured Nation treatment: trading partners should not discriminate against each other’s investors to favour investors from any other country
- Minimum standard of treatment: trading partners should treat investments based on customary international law, including fair and equitable treatment, due process, and full protection and security
- Expropriation and compensation: covered investments are protected from expropriation or nationalization, except in specific circumstances and where accompanied by adequate compensation
- Performance requirements: conditions are prevented from being placed on covered investments that favour domestic industry, such as requirements that the investor purchase local goods, export a certain percentage of goods the investment produces or transfer technology to the host country, and
- Transfers: investors are able to freely transfer capital and profits related to an investment into and out of the host country, subject to some exceptions (for instance, in the event of a financial crisis).
These obligations are backed up by a fair, impartial and effective investor-state dispute settlement (ISDS) mechanism. Where Canadian investors feel they have been discriminated against or treated unfairly, the CPTPP’s ISDS mechanism allows them to resolve the dispute without relying on the host government’s domestic court system. However, this isn’t a blank cheque: investors are only able to claim damages where the specific obligations of the treaty have been breached. These obligations are coupled with careful carve-outs that preserve Canada’s policy flexibility in important areas (see “non-conforming measures” section below). ISDS tribunals are never able to overturn a Party’s domestic measures – they can only provide investors with compensation for damages that result from breaches of the treaty.
In the CPTPP, Canada maintains policy flexibility to regulate in the public interest through reservations known as “non-conforming measures”. Non-conforming measures allow governments to maintain exceptions to the CPTPP services and investment chapters, transparently identifying measures, activities or sectors where the chapters’ obligations do not apply. This helps ensure that governments can continue to keep measures on services and investment in place, based on domestic priorities. These non-conforming measures are identified in Annexes I and II of the Agreement.
In Annex I, each CPTPP country has a list of non-conforming measures affecting services and investment that existed in the country at the time the CPTPP was concluded, and which the country intends to maintain. These measures do not need to be changed even if they are inconsistent with certain obligations in the Agreement. Countries also made the commitment that the non-conforming measures listed in Annex I would not become more restrictive in the future.
In Annex II, each CPTPP country has reservations for sectors or activities where it wishes to retain complete policy flexibility, now and in the future. This allows Canada to maintain policy flexibility in sensitive areas such as Indigenous and minority affairs, culture, social services (including health and public education), and certain transportation services. This commitment allows Canada to introduce, in the future, new measures in these reserved areas based on domestic priorities, irrespective of Canada’s commitments in the CPTPP.
In addition, there are general exceptions found under the CPTPP exceptions and general provisions chapter that apply to CPTPP countries, including exceptions for national security purposes.
Following the United States’ departure from the Trans-Pacific Partnership (TPP), Canada and the other CPTPP members agreed to suspend certain TPP obligations that would have expanded the scope of ISDS beyond Canada’s past approach. These suspensions bring the CPTPP in line with Canada’s preferred approach to ISDS in Free Trade Agreements, which balances clear and enforceable rights for investors with flexibility for governments to regulate in important areas.
In the CPTPP, the Parties agreed to suspend provisions related to “investment agreements” and “investment authorizations”. This prevents foreign investors from bringing forward a case under investor-state dispute settlement 1) for reasons of breach of an investment contract, or 2) when the government amends or revokes authorization to invest under the Investment Canada Act.
The Parties also agreed to suspend application of investor-state dispute settlement to minimum standards of treatment provisions in the financial services chapter.
- Footnote 1
Consistent with Canada’s approach to previous FTAs, the CPTPP includes reservations and exceptions allowing the Government of Canada to adopt or maintain measures conferring rights or privileges to Indigenous peoples in Canada. In the CPTPP, these reservations and exceptions are made under the area of “Aboriginal affairs”, with the term “Aboriginal peoples” bearing direct legal reference to Section 35 of the Constitution Act, 1982, and with all rights therein being “aboriginal and treaty rights”.
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