Issue link: http://resourceworld.uberflip.com/i/107613
i n v estment Bilateral investment treaty considerations by Richard G. Dearden and Wendy J. Wagner – Gowling Lafleur Henderson LLP Resource nationalism and other adverse changes in national laws that substantially destroy the value of an investment present a significant business risk to resourcebased companies. To guard against such risk, investments must be properly structured at the outset to take advantage of the protections offered by the thousands of bilateral investment treaties (BITs) that exist today. Investment Treaties Signatories to a bilateral investment treaty (BIT) agree to reciprocal obligations in respect of investments made by nationals of the other country within the host country's territory. Similar obligations are found in some free trade agreements. For example, Chapter 11 of the North American Free Trade Agreement (NAFTA) contains investment obligations that are nearly identical to the model that Canada currently uses to negotiate new bilateral investment treaties known in Canada as Foreign Investment Promotion and Protection Agreements (FIPAs). BITs provide a stable investment environment that is not dependant on a contractual relationship between the investor and the host country. They protect investors against risks arising from the unilateral exercise of governmental powers by the host country, and enable investors to have recourse against the host country in a neutral arbitration forum. While investment treaties differ in how they define the investors and the investments to be protected, as well as the scope of the obligations owed by the host country, the treaties are generally based on a common set of obligations to investors. Canada's model FIPA incorporates the following core obligations: National Treatment and Most Favoured 34 www.resourceworld.com Richard G. Dearden Nation Treatment: imposes an obligation to treat investors and investments no less favourably than domestic investors and investors of a non-Party. Minimum Standard of Treatment: requires treatment of investors in accordance with the "customary international law minimum standard of treatment of aliens, including fair and equitable treatment and full protection and security." Canada's model FIPA specifies that the provision does not require treatment beyond that which is required by "customary Wendy J. Wagner international law," a standard which remains uncertain in its scope. Performance Requirements: prohibits the imposition of various performance requirements, including those pertaining to domestic content and requirements to export goods produced by the investment. Expropriation: prohibits the host country from taking measures that directly or indirectly expropriate/nationalize an investment or have an equivalent effect. The host country may only expropriate/ nationalize an investment if the measure february 2013