2021 FIPA model – Summary of main changes
National treatment (NT) and Most-Favoured-Nation Treatment (MFN): NT and MFN are obligations that a Party cannot discriminate against foreign investors in favour of domestic investors or investors from another country.
- The new FIPA model features clarifications, including that the treatment accorded by a sub-national government can only be compared with treatment by that same government, and that investors cannot “treaty shop” by accessing the provisions of other treaties through MFN.
Minimum Standard of Treatment (MST): An obligation requiring a Party to provide a minimum standard of treatment to foreign investments in accordance with customary international law.
- While the scope of the obligation remains the same, the MST article in the new FIPA model clarifies the treatments that amount to a breach of the article, which is consistent with the content of the customary international law minimum standard of treatment as understood by Canada.
Performance Requirements (PR): An obligation that prohibits a Party from placing conditions on investments that favour domestic industry, such as requirements that the investor purchase local goods.
- The new FIPA model includes disciplines on requirements that prohibit or restrict the cross-border transfer of information, similar to commitments from Electronic Commerce chapters in Canada’s recent FTAs (e.g. CPTPP, CUSMA).
Investor-State Dispute Settlement (ISDS): FIPAs include a mechanism to resolve disputes between States and investors in an impartial and timely manner. The new FIPA model features multiple technical changes to modernize the ISDS mechanism and make it more inclusive. This includes, but is not limited to:
- Strengthened alternatives to resolve an investment dispute without having recourse to ISDS, such as:
- mandatory consultations prior to submitting a claim;
- enhanced mediation provisions, which suspend the ISDS process and deadlines at any point to allow the disputing parties to meaningfully engage without being pressed by competing ISDS timelines; and
- an extension of time-limits for submitting a claim to arbitration when the claimant is actively pursuing remedies under domestic laws.
- Obligations for claimants to disclose third-party funding.
- Enhanced transparency provisions.
- The explicit ability of tribunals to appoint their own experts on issues such as the rights of Indigenous peoples, scientific matters and other factual issues.
- An encouragement for disputing parties to nominate women to tribunals.
- An arbitrator code of conduct to prevent conflicts of interest and ensure that they have appropriate qualifications.
- A consent-based expedited arbitration mechanism for claims under $10 million. This mechanism will significantly reduce the cost of dispute resolution by simplifying and shortening the arbitration process.
- A commitment to consider using a permanent first instance investment tribunal or an appellate mechanism, should it be developed under other institutional arrangements.
Right to regulate: The new FIPA model includes an additional clause reaffirming that each Party maintains its right to regulate to achieve legitimate policy objectives, such as health, the environment, gender equality, rights of Indigenous peoples and cultural diversity.
Transparency of ISDS proceedings: The new FIPA model includes additional transparency provisions related to ISDS proceedings, including a stipulation that hearings and documents from the proceedings must be open and available to the public.
Gender equality and diversity: The new FIPA model includes a number of new provisions that aim to help women and other groups benefit more from the agreements, and to ensure that investment protections do not impede policies promoting gender equality. For example, the new FIPA model stipulates that Parties should encourage enterprises to consider greater diversity in senior management positions, which may include requirements to nominate women. Similarly, the model includes a new provision encouraging the Parties to promote gender equality when appointing arbitrators in ISDS cases.
SMEs: The new FIPA model proposes several features for SMEs to better access the benefits of the agreement. This includes the following:
- Investment facilitation provisions to improve transparency and streamline administrative procedures.
- Consent-based expedited arbitration process for claims under $10 million, which represents a more accessible low-cost alternative to traditional ISDS.
- Other cost-reduction options within the traditional ISDS mechanism, such as the possibility to hold consultations through videoconference and to have a single arbitrator hear the claim. These rules will especially benefit Canadian SMEs investing abroad.
Indigenous peoples rights & participation: The new FIPA model aims to better reflect Indigenous peoples rights and participation through a number of clarifications, exceptions and new provisions, including:
- Incorporating a general exception from the agreement for any measure necessary to fulfill the constitutional rights of Indigenous peoples of Canada, and those set out in self-government agreements.
- Requiring the Parties to make their laws and regulations pertaining to Indigenous peoples easily accessible to foreign investors.
- Clarifying that the concept of “public purpose”, with regards to an expropriation, can have a different meaning for Indigenous peoples.
- Providing that an ISDS tribunal may appoint its own experts to report on issues concerning the rights of Indigenous peoples.
- Incorporating a new provision that makes clear that each Party should encourage foreign investors to undertake and maintain meaningful engagement and dialogue with both Indigenous peoples and local communities where they operate. This should be done in accordance with international standards on responsible business conduct.
- Confirming that Parties shall not relax measures relating to the rights of Indigenous peoples to encourage investment. A Party can request consultations if it considers that the other Party has breached this obligation.
Responsible Business Conduct (RBC): The new FIPA model considerably expands the existing RBC provisions (formerly called “Corporate Social Responsibility (CSR)”), including by promoting internationally recognized RBC standards, an obligation to encourage enterprises to incorporate these standards into their internal policies, and encouraging enterprises to engage with local communities and Indigenous peoples.
Tobacco: The new FIPA model has an exclusion to ensure that all present or future tobacco control measures are automatically excluded from dispute resolution and, therefore, cannot be challenged by investors under ISDS or State-to-State dispute settlement.
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