Embassy | 17 February 2016
Canada re-opens investment talks with India
by Peter Mazereeuw
Canada’s government has officially re-opened negotiations with India over a bilateral investment treaty the two sides nearly agreed upon almost a decade ago.
Negotiations on the Canada-India foreign investment promotion and protection agreement, or FIPA, technically concluded in 2007, but the deal was never signed. India’s government put the brakes on any foreign investment agreements that included investor-state arbitration mechanisms in 2013.
Canada’s government listed negotiations on the India FIPA as “concluded” as recently as Oct. 16, archived copies of a Global Affairs Canada website show, but the same page now lists the talks as “ongoing.”
“Canada and India have agreed to begin negotiations towards a Foreign Investment Promotion and Protection Agreement. The parties have pledged to work together to finalize the agreement on a priority basis,” reads the current Global Affairs Canada website.
When asked whether Canada was prepared to sign the FIPA with India as it had been negotiated in 2007, Global Affairs Canada spokesperson Tania Assaly wrote that “while the negotiations under the previous [Conservative] government did not proceed any further, we are looking at all avenues to further deepen our trade and investment relationship with India.”
The move comes weeks after India released its “model” for negotiating investment treaties going forward.
‘Heavy lifting’ on FIPA is finished
India put investment treaties with Canada and 83 other countries on hold because of clauses that gave rights to investors to sue the state in a commercial dispute, the finance minister for India’s previous government, Palaniappan Chidambaram, said at an April 2013 breakfast event in Toronto, according to a report in the Economic Times of India.
India’s government made that move after several companies started legal action against the Indian state through investment treaties, starting in 2011.
However, last month India’s government released its “Model BIT”, the product of a review of its process for negotiating bilateral investment treaties. That document is intended to serve as a template for how it would negotiate those treaties going forward. The Model BIT requires investors to pursue disputes in domestic courts for at least five years before moving on to international arbitration.
Canada has also been engaged in free trade negotiations with India since 2010, and held the ninth round of the talks in March, 2015. However, the Hindu newspaper reported last month that Canadian officials had frozen the ongoing talks until it agreed to sign the FIPA. The Hindu cited an unnamed official as the source of this information.
“Certainly I would have been given direction to say exactly that as well,” said Gerry Ritz, the Conservative trade critic and former agriculture minister.
India’s High Commissioner to Canada Vishnu Prakash—working on behalf of India’s current BJP government—declined to address the Hindu’s report directly, but confirmed that FIPA and free trade negotiations with Canada were ongoing.
“Certainly [the FIPA] is not concluded, and that’s why we are negotiating it. And therefore Canada is also negotiating it, and we are very keen, both sides are, to bring it to a fruition at the earliest,” he said.
Neither Mr. Prakash nor the Canadian government would say precisely what their position was on the inclusion of investor-state arbitration in the FIPA.
"Canada’s FIPAs include investment protections, with processes to resolve investment disputes, and Canada’s investment negotiation practice is constantly evolving," wrote Global Affairs Canada spokesperson François Lasalle in an emailed statement.
Mr. Prakash took a slightly softer line on investor-state arbitration than the former Indian finance minister. He declined to go into the specifics of the negotiations, but said that “legal remedies” are an important part of any FIPA negotiation and are “matters of detail that can be sorted out.”
“When you start, there are a number of outstanding issues, and then you chip away. We’ve already done a lot of heavy lifting. And there are a few outstanding issues,” he said.
It appears Canada’s government has unofficially been working with India on the supposedly concluded FIPA since at least last spring. The leaders of the two countries “welcomed the progress made in the recent bilateral discussions between treaty negotiators [on the FIPA] and agreed to intensify discussions to finalise the outstanding issues” in a joint statement issued during the visit of Indian Prime Minister Narendra Modi’s visit to Ottawa in April.
The India FIPA isn’t Canada’s only international treaty to have been stalled by investor-state arbitration. Canada’s Comprehensive Economic and Trade Agreement with the EU has been bogged down for months as opponents of investor-state arbitration—also know as investor-state dispute settlement, or ISDS—protested the deal. Canada’s new Liberal government has hinted it may be willing to revisit those provisions in the CETA, in contrast to the hard line taken by the former Conservative government.
“We know that ISDS is an issue. We have, I think, a pretty reasonable approach, an open-minded approach to ISDS. So I think it’s fair to say we like the agreement as is, but we’ll continue to engage our European partners and we’ll get this deal to work,” parliamentary secretary for trade David Lametti told Embassy in January.
‘Political will’ a problem: Ritz
Trade Minister Chrystia Freeland has been tasked with building closer trade ties with India. Canada and India struck a deal for more access for Canadian pork exports in January, though Mr. Ritz said most of the work on that deal was completed under his Conservative government.
An investment agreement is an essential precursor to a free trade deal with India, said Mr. Ritz, one that creates the “rules-based trade system” needed for Canadian businesses eyeing the Indian market.
“If they’re not willing to even go to that extent where you have rules-based investment capacity, then there’s no sense promoting a whole lot of other things. At the same time...we look at [free trade with India] as something that needs to be done,” he said.
But securing trade and investment deals with India could be difficult for Canada’s new federal government, he said.
“Our problem has always been to get the political will in India to follow up,” he said.
Mr. Prakash, however, said India is eager to complete trade and investment deals with Canada as soon as possible. “The long and short of it is, yes, we are very interested," he said.
He rejected the idea that an investment agreement must be signed before a trade agreement. India is interested in access to a range of Canadian goods and services, including liquefied natural gas, he added.
India also wants to discuss Canada’s temporary foreign worker laws, as it seeks to help more of its skilled IT workers win jobs abroad. However, he said, Canada may be able to address India’s concerns in the way it implements its existing labour laws.
The new Canadian government may need a little time to pull together a strategy for engaging India on free trade and investment agreements, but doing so will be essential for Canada, said Gary Comerford, president and CEO of the Canada India Business Council.
“It’s just a market that we can’t afford to ignore,” he said.