Canada and China have both now ratified the Foreign Investment Promotion and Protection Agreement (“FIPA”), with the result that, as of October 1, 2014, FIPA is now in full force and effect.  There has been a lot of commentary  on the implications of FIPA for Canada, and this article is designed to address one of the most significant misunderstandings regarding the application of FIPA to the two contracting states.

At a Beijing news conference two weeks ago, China Ministry of Commerce spokesman Shen Danyang described FIPA, in the following terms:

“The implementation Agreement is conducive to further promote two-way investment between China and Canada, deepen economic and trade cooperation and Canada to promote the bilateral strategic partnership to a new level for the benefit of both investors and the two peoples.”. [N.B. emphasis added]

In that regard, Article 3 of FIPA, states:

“Each Contracting Party shall encourage investors of the other Contracting Party to make investments in its territory and admit such investments in accordance with its laws, regulations and rules.”.

It is important to note that FIPA sets out the obligations of the Canadian government with respect to how it treats Chinese investors, and vice versa. The FIPA is a bilateral agreement, and it’s provisions apply equally to the governments of Canada and China.  In pragmatic terms and for the purposes of contextual understanding, 2013 bilateral trade volume reached $54.4 billion, two-way total investment as of the end of 2013 a total of over 51 billion U.S. dollars.

Beyond that, Articles 5 and 6 of FIPA require each party to confer “most favoured nation treatment” and “national treatment” to the investors of the other contracting party. Again, this obligation is reciprocal.  If one adopts a position that Canada is a net beneficiary of enhanced foreign trade, trade liberalization agreement of this nature, benefit the Canadian economy.

It is clear, that FIPA will have profound and positive impacts on the economies of each state, and will enhance bilateral trade relations, investments and economic co-operation between China and Canada, to the benefit of both states.  That is not say; however, that there will be no domestic economic dislocation resulting from the implementation of FIPA, or that the comprehensive FIPA dispute resolutions tools will go unused. It is simply to say that Canadian investors in China and Chinese investors in Canada, will now operate in an environment of enhanced certainty, within the ambit of economic and trade cooperation.