6 May 2009
Prague, Czech Republic
The signature of the updated Canada-Czech Republic FIPA will encourage two-way investment by providing investors with the clarity and certainty they need when investing in foreign markets.
International investment is an essential corporate strategy for many Canadian companies competing in today’s global economy. By investing abroad, companies can gain access to overseas markets, reduce input costs, secure access to key resources, acquire new technologies and provide better support to foreign customers. The Canadian government pursues a policy of negotiating FIPAs in order to provide a more transparent and predictable climate for Canadian investors abroad.
A FIPA is an international treaty providing binding obligations on host governments regarding their treatment of foreign investors and investments. By setting out clear rules and an effective enforcement mechanism, a FIPA provides a stable legal framework to promote and protect foreign investment. It sets out a range of obligations that host governments guarantee pertaining to non-discriminatory treatment, expropriation, transfer of funds, transparency, due process and dispute settlement.
While Canada concludes FIPAs to protect Canadian investment abroad, the disciplines are reciprocal and serve to reinforce Canada as a stable and predictable destination for foreign investment. In this respect, FIPAs help enhance two-way investment flows between signatory countries.
Given the importance of international investment, it is now more important than ever to promote a fair, open and secure environment for Canadian investment abroad. The protections provided by FIPAs address a number of key issues facing Canadian firms when investing abroad.
- FIPAs protect investors from discrimination on the basis of nationality. This guarantee is important to ensure that a Canadian investor can compete on equal footing with other investors, both national and foreign.
- FIPAs provide for fair and equitable treatment and full protection and security in accordance with the principles of international law. This is an undertaking to ensure that treatment does not fall below a basic international minimum standard, for example in cases where there is a lack of due process.
- FIPAs protect against expropriation without compensation. It requires that an expropriation be for a public purpose and provides for payment of prompt, adequate and effective compensation when expropriation does takes place.
- FIPAs guarantee the free transfer of capital and other payments relating to an investment into and out of the host country. This allows Canadian firms to make payments and repatriate their profits and capital without delay in hard currency using a market rate of exchange.
- FIPAs address a number of other issues that can affect the operation of Canadian investments such as the right to appoint individuals to senior management positions or to use suppliers of choice.
- FIPAs provide access to international arbitration to resolves disputes. This allows an investor to pursue a claim before an international tribunal.
