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Trudeau pushes controversial investor-state dispute settlement provision on trip to India

Justin Trudeau arrived in India on February 17 for a week-long visit that will include a meeting with Prime Minister Narendra Modi on February 23.

The Indian newspaper Business Standard reports, “Currently India and Canada are engaged in the negotiation of the proposed Foreign Investment Promotion and Protection Agreement (FIPPA) for facilitating investments and the Comprehensive Economic Partnership Agreement (CEPA) or the proposed free trade pact.”

That article notes, “Talks on FIPPA had earlier been stalled by New Delhi’s decision to conduct negotiations for all investment pacts under the framework of the model Bilateral Investment Treaty (BIT) issued by the government in 2015.”

Negotiations on a Canada-India FIPPA were launched in September 2004 (under Liberal prime minister Paul Martin) and concluded in 2007 (under the Harper government), but the deal was never signed. Similarly talks on a Canada-India CEPA were launched in November 2010 (by the Harper government), but never concluded.

That’s because the Modi (who came to power in May 2014) implemented the BIT in April 2017 and refuses to sign any foreign investment agreement that includes the investor-state dispute settlement provision and instead requires investors to pursue disputes in domestic courts for at least five years before moving to international arbitration.

The Hindu has previously reported the situation in the following way, “India wants investors to exhaust the domestic remedies before approaching international tribunals [but] Canada is worried about judicial delays in India and wants flexibility to help investors approach international tribunals at the earliest.”

Business Standard now adds, “[An unidentified senior government official says] ‘Canada’s prime concern is with the clause that in case of an investor-state dispute, a foreign investor can seek international arbitration only when all domestic legal options are exhausted. While India feels this is required to keep control on litigation and reduce the chances of extremely high penalties from international tribunals, most developed nations believe the Indian legal system to be slow and corrupt’.”

On this visit, the Trudeau government is continuing to push for the investor-state dispute settlement mechanism in both FIPPA and CEPA. There is some speculation that India’s Department of Economic Affairs may propose a tweaking of the terms of the BIT so that there’s a shorter time limit for a domestic court to settle an investor-related dispute before it goes to international arbitration.

Furthermore, The Economic Times reports, “India is exploring, for the first time, a ‘hybrid’ model to liberalise its services under a free trade agreement. As part of its trade pact negotiations with Canada, India has offered to give a ‘positive’ list spelling out the services it can liberalise and has asked Canada to come out with a ‘negative’ list stating the exceptions to services it wants to open up. India proposed the model ahead of Trudeau’s visit and is waiting for Ottawa’s response. ‘We have offered them a hybrid model for services negotiations and they are yet to respond to it’, an official aware of the development said.”

The 10th round of Canada-India CEPA talks took place on August 21-23, 2017.