Activities and Priorities Dept. Justice Private International Law 2007



a. Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) (World Bank)

[33] The ICSID Convention, prepared under the auspices of the World Bank in 1965, establishes rules and a venue for conciliation or arbitration of international investment disputes. The Convention applies to disputes between States and nationals – the investors – of other States party. It is a unique mechanism as awards rendered by ICSID are enforceable in any country party to the Convention as if they were final court judgement of that country.

[34] Recourse to ICSID conciliation and arbitration is entirely voluntary. However, once the parties have consented to arbitration under the ICSID Convention, neither can unilaterally withdraw its consent. Provisions on ICSID arbitration are commonly found in free-trade agreements such as North-American Free-Trade Agreement (NAFTA) and foreign investment protection agreements (FIPAs). These agreements constitute advance consents by governments to submit investment disputes to ICSID arbitration.

[35] The Convention creates an organization, the International Centre for Settlement of Investment Disputes (ICSID), which provides facilities for conciliation and arbitration of investment disputes. Under the ICSID Convention, proceedings need not be held at the Centre's headquarters in Washington, D.C. The parties to a proceeding are free to agree to choose another venue for their proceeding. The ICSID Convention contains provisions that facilitate advance stipulations for such other venues when the place chosen is the seat of an institution with which the Centre has an arrangement for this purpose (e.g., Australian Commercial Dispute Center in Sydney). Canadian arbitration centres such as the Canadian Commercial Arbitration Centre and the British Columbia International Arbitration Centre could potentially make similar arrangements, which would promote ICSID and their own centre.

[36] The Additional Facility Rules allow the ICSID Secretariat to administer certain types of proceedings between States and foreign nationals which fall outside the scope of the Convention. These include conciliation and arbitration proceedings where either the State party or the home State of the foreign national is not a member of ICSID. When parties have recourse to the Additional Facility Rules, they are not covered by the Convention and therefore they do not benefit from the same enforcement rules ICSID awards have.

[37] The vast majority of our trading partners have ratified the ICSID Convention - 143 States are party to the Convention – and Canada has now signed it. The federal government has been actively promoting the Convention in recent years to obtain the agreement of all provinces and territories to implement the Convention. In 1999, the province of Ontario adopted the Settlement of Investment Disputes Act (S.O. 1999, c.12, Sch. D) and became the first jurisdiction to have adopted implementing legislation for the Convention. In 2006 four jurisdictions adopted legislation to implement the Convention: Saskatchewan, British Columbia, Newfoundland and Labrador and Nunavut. Federal legislation was introduced in 2007.

[38] The adoption of these bills represents the most significant development in Canada for the adoption of the ICSID Convention. With Ontario, there are now five jurisdictions that have adopted implementing legislation. We are grateful to those jurisdictions and to those that are currently taking steps for the adoption of ICSID implementing legislation and we would invite those jurisdictions who would wish to be designated under the Convention to adopt implementing legislation as well.

[39] A uniform act for the implementation of the ICSID Convention was adopted by the ULCC in 1997. The uniform act is still considered suitable for implementing the Convention. The proposed legislation is relatively simple since the obligations of States under the Convention are essentially for States to recognize and enforce ICSID arbitral awards. The arbitration proceedings, the conduct of the arbitration, and the appeal mechanism fall under the responsibility of ICSID.

[40] The Department maintains the adoption of the ICSID Convention as a top priority. We will continue to work closely with our provincial and territorial colleagues to answer their questions and to seek to resolve any issues they may have with the Convention or how the Convention would apply in their jurisdiction. We have had federal-provincial-territorial meetings and discussions in the last year at various levels. We will continue to seek a productive dialogue with our colleagues in the coming year, with a view to taking steps for ratification in the near future.

b. Convention on International Interests in Mobile Equipment and Aircraft Protocol (Unidroit/ICAO)

[41] The Convention provides a framework for the creation and effects of an international interest in mobile equipment and an international registry in which these interests can be registered. Each type of mobile equipment is the subject of a specific protocol under the Convention. There are no limitations on the categories of mobile equipment for which a protocol could be adopted. In addition to aircraft equipment, the Convention could apply to registered ships, oil rigs, containers, railway rolling stock, agricultural equipment, mining equipment, space property, and other objects that could be identified in the future.

[42] The Convention entered into force internationally on April 1, 2004, after its third ratification. It only enters into force as regards a specific category of objects to which a Protocol applies as of the date of the entry into force of that Protocol. The Aircraft Protocol entered into force at the international level on March 1, 2006 after the eighth instrument of ratification or accession required for its entry into force was deposited. The eighth instrument of ratification or accession was deposited by Malaysia on November 2, 2005. Canada signed the Convention and Aircraft Protocol in March 2004.

[43] The ULCC adopted a uniform implementing act in 2002. Canadian jurisdictions have been asked to consider adopting legislation to implement the Convention and Aircraft Protocol. Legislation implementing the Convention and Aircraft Protocol has been adopted at the federal level as well as in Ontario, Saskatchewan, Nova Scotia, Alberta, Newfoundland and most recently, Quebec.

[44] The federal government is in a position to consider ratifying the Convention and Protocol since sufficient support for ratification has been expressed by the adoption of implementing legislation in the provinces and territories. Consultations with provinces and territories will resume to work towards ratification. When seeking authority to ratify, the federal government will consider the relevant declarations that need to be made under the Convention and Protocol in order for the instruments to apply only in the jurisdictions that so wish, along with other declarations that may be requested by the provinces and territories. Justice Canada will be looking to the former ULCC Working Group on International Interests and PT officials to complete the process of drafting declarations.

[45] Action required in Canada: Consultations with provinces and territories will resume to work towards ratification. Continue to encourage provinces and territories to consider adopting legislation to implement the instruments.

c. Draft Legislative Guide on Secured Transactions (UNCITRAL)

[46] In July 2001 at its 34th session, UNCITRAL mandated a Working Group to begin developing a uniform legal regime for security rights in tangible goods of a commercial nature. The work was to include the form of the security instrument, the scope of goods that can serve as collateral, perfection, formalities, enforcement, publicity, priority, and creditors’ and debtors’ rights.

[47] The UNCITRAL work on security interests was initiated because it was felt that modern secured credit laws could alleviate inequalities in access to lower-cost credit between parties in developed countries and parties in developing countries, which would overall contribute to foster international trade. It was also widely recognised that an appropriate balance needed to be struck in the treatment of privileged, secured and unsecured creditors. States agreed that a flexible approach aimed at the preparation of a set of principles in a guide, rather than a model law, would be advisable. Furthermore, given the close link between security interests and the work on insolvency, countries recognised that any effort on security interests would need to be co-ordinated with efforts on insolvency law.

[48] Canadian experts Me Michel Deschamps of McCarthy Tétrault in Montreal and Professors Catherine Walsh and Roderick Macdonald of McGill University have been leading contributors to the project, participating in both Working Group sessions and in the drafting of the Guide. The Commission approved the Guide in principle in 2006. The Working Group held two sessions this year, one in December 2006 and one in February 2007 and the Commission finalized a large part the guide at its 40th session in June-July 2007. It is expected to complete it at a resumed session this December.

[49] The Guide contains recommendations covering general issues of a secured transactions regime as well as creation, effectiveness, the registry, priority, rights and obligations, default and enforcement, insolvency, conflict of laws, transition and special provisions for acquisition financing devices. It also sets out particular recommendations for specific types of assets including bank accounts, negotiable instruments and negotiable documents. At the 40th session, the Commission decided to exclude securities from the current scope of the Guide but will consider the extent to which some directly-held securities can be included as future work. The Commission also decided to include security interests in intellectual property in a general way and, beginning in 2008, will be developing additional recommendations and commentary to provide detailed guidance to legislators in that area in collaboration with WIPO.

[50] From a Canadian perspective, the Guide is not inconsistent with our security interests regimes here in Canada. Although the Guide would not be particularly useful for Canadian jurisdictions, given that our legal framework for secured interest is already relatively modern, its acceptance in other countries where Canadians do business would be a positive development.

[51] Action required in Canada: Prepare positions for work on intellectual property and securities issues.

d. Project on Harmonised Substantive Rules Regarding Indirectly Held Securities (Unidroit)

[52] Unidroit continued its project on transactions on transnational and connected capital markets. This project comprises 5 items: (1) the creation of clear and consistent rules for the taking of securities, especially securities held indirectly through intermediaries in multi-tiered holding patterns and evidenced by book entries in the investor’s account, as collateral; (2) the creation of harmonized “global shares”, permitting trade of such shares on more than one (national) stock exchange so as to make foreign capital markets accessible to a wider range of companies with limited means; (3) the development of rules capable of enhancing trading on emerging markets; (4) the development of harmonized or uniform substantive rules applicable to so-called “delocalised” transactions; and (5) the examination of the desirability and feasibility of rules for world-wide takeover bids. This Unidroit project is complementary to the Convention on the law applicable to certain rights in respect of securities held with an intermediary, adopted under the auspices of the Hague Conference on Private International Law in December 2002.

[53] Four meetings of governmental experts have been held on this project: May 2005, March 2006, November 2006 and March 2007. The text is now well-developed and will take the form of a convention. A diplomatic conference to finalize the instrument will be hosted by Switzerland in Geneva in June 2008.

[54] Given the recent activity in Canada toward adopting the Uniform Securities Transfer Act, it will continue to constitute the main point of reference for Canada’s position on the substance. Consultations will be held to develop Canada’s position for the diplomatic conference and will include provincial and territorial authorities, the Uniform Law Conference of Canada (ULCC) Working Group on the Uniform Securities Transfers Act, federal departments and agencies, private bar, academics and non-governmental organizations.

[55] Action required in Canada: Consultation on the draft convention in preparation for the diplomatic conference in June 2008.

e. Convention on the Law Applicable to Securities Held by Intermediaries (Hague Conference)

[56] Canada actively participated in the negotiations of the Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary. The Convention was finalized and adopted during the Diplomatic Session held from December 2 to 12, 2002 in the Hague.

[57] This Convention is a first attempt worldwide to draft cross border rules on the law applicable to securities held with an intermediary. The objective is to enable financial market participants in the global market to ascertain readily and unequivocally which law will govern the proprietary aspects of transfers and pledges of interests in respect of securities held through indirect holding systems. This Convention is intended to provide certainty and predictability on a limited but crucial aspect of such transactions.

[58] The Canadian delegation included Manon Dostie, IPLS, Department of Justice Canada, two practitioners: Brad Crawford (common law expert) and Michel Brunet (civil law expert), and two experts from the Canadian securities commissions: Eric Spink (Alberta) and Daniel Laurion (from Quebec, absent at the last meeting). Maxime Paré from the Ontario Securities Commission participated as a representative of the International Organization of Securities Commissions (IOSCO) and represented Canada on the Drafting Group leading up to the Diplomatic Conference.

[59] In 2004, the ULCC agreed that the Canadian Securities Administrators (CSA) authorize the Task Force to prepare a uniform implementing statute for the Convention once the Explanatory Report for the Hague Convention was finalized, which occurred in late 2004. Securities Administrators approved the CSA Task Force pursuing Convention implementation work in April 2005.

[60] Since then, Canadian experts have continued to focus on USTA implementation as a priority with the result that no progress has been made on a uniform act to implement the Convention apart from informal discussion suggesting that implementation might be accomplished via a small addition to USTA legislation. We hope to see a convention implementation Working Group making progress on uniform implementing legislation over this coming year. Note that the United States and Switzerland signed the Convention on July 5, 2006.

[61] Action required in Canada: The ULCC with the CSA Task Force is to prepare uniform implementing legislation.

f. Convention on the Assignment of Receivables in International Trade (UNCITRAL)

[62] In July 2001, UNCITRAL adopted the Convention on the Assignment of Receivables in International Trade after six years of development. The Convention was opened for signature in December 2001. The rules are intended to facilitate financing by removing uncertainty encountered in various legal systems as to recognition and effects of assignments in which the assignor, the assignee and the debtor are not in the same country. Canada was an active participant in the development of this Convention.

[63] A preliminary implementation study was prepared through the ULCC’s Commercial Law Strategy and the Department of Justice by two leading experts in the field in Canada, Catherine Walsh for the common law perspective and Michel Deschamps for the civil law perspective. The study was presented at the ULCC meeting in August 2005.

[64] The ULCC Working Group on Assignments of Receivables prepared a draft uniform implementation act and a final report, presented at the annual meeting of the ULCC in 2006. This work was part of a joint project with the US National Conference of Commissioners on Uniform State Laws (NCCUSL) and the Mexican Uniform Law Centre. At the 2006 annual meeting, the adoption of the draft uniform act was postponed to allow the joint project to proceed. The draft is presented to the Conference for adoption this year.

[65] Internationally, the Convention’s importance continues to be recognized. The United States has indicated that it anticipates taking the steps necessary for ratification. The European Commission, by letter of June 22, 2006 to UNCITRAL, stated its intention to ensure coherence between the Convention and the future Rome I Regulation and to facilitate the ratification of the Convention by EU Member States.

[66] Action Required in Canada: Presentation of the draft uniform act and final report and subsequent enactment by jurisdictions.

g. Conventions on the Limitation Period in the International Sale of Goods (UNCITRAL)

[67] These Conventions, which entered into force August 1, 1988, grew out of the work of UNCITRAL to unify international sales law. There are 26 States party to the Limitation Convention of 1974, and 19 States party to the Amended Limitation Convention, including, in both cases, our North-American trade partners, the United States and Mexico.

[68] The Conventions dovetail with the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980), which is in force for all of Canada. There is substantial similarity between the three Conventions, in particular the articles setting out the sphere of application, declarations and reservations, the federal State clause, and the final clauses.

[69] The purpose of the Limitation Conventions is to eliminate all disparities in the national laws governing limitations on the initiation of legal proceedings arising from contracts for the international sale of goods, as these disparities can create hardship both in cases where meritorious claims are statute-barred by a very short limitation period, and where parties are left open to liability for an inordinately long time in jurisdictions with very long limitation periods. The Conventions establish a uniform prescription period of four years for commercial litigation.

[70] In 1995, the Advisory Group on Private International Law recommended that the Department take steps toward acceding to and implementing the Conventions. In August 1998, the ULCC adopted the Uniform International Sales Conventions Act. This Act would implement the United Nations Convention on Contracts for the International Sale of Goods, already in force in Canada, and the Conventions on the Limitation Period in the International Sale of Goods.

[71] The Minister of Justice of Canada has undertaken consultations with provincial and territorial counterparts on the desirability of implementing the Limitation Conventions. Some provinces have expressed support for implementation and Nunavut has already enacted the International Sales Conventions Act, which received assent on June 6, 2003.

[72] Action required in Canada: Consider the adoption of federal implementing legislation, which would apply to contracts for the sales of goods involving the Crown in right of Canada.

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