Wednesday, February 08, 2012

My Thoughts on Canada's FIPA Negotiations with China

I think it would be a mistake for Canada to get locked in to a weak FIPA with China that does not genuinely ensure fair treatment for all Canadian investment in China.

What Canadian investors want to see before they can feel confident in dealings with China is a FIPA that is based in effective measures to guarantee that Chinese contractual obligations will be enforced through a fair legal process. A FIPA whose provisions are more rhetorical than concrete and subject to arbitrary interpretation by local authorities and weakened by carve outs and escape clauses gets us no where.

But it is hard for China's Central government to undertake an international treaty obligation with Canada that gives Canadian investment preferential treatment over that of other nations who wish to do business in China. Moreover China's Central government would have difficulty implementing an effective Canadian FIPA at the local levels.

In the final analysis the real answer ultimately lies in strong and effective and comprehensive domestic legislation in China to tame China's "wild west" business culture and make it possible for all contractual disputes to be subject to mediation by due process of law that would treat all parties in a just and fair manner.

FIPAs are really just a stop gap that can never substitute for that.

1 comment:

Paul said...

Given that corruption is endemic in China, is there any real chance that any kind of FIPA would have teeth for Canadian businesses and investors?