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On September 12, 2014, the Harper government announced that it had ratified a 31-year foreign investment promotion and protection agreement (or FIPA) with China. In his book, Sold Down the Yangtze, Osgoode law professor Gus Van Harten explains how the deal was lopsided in favour of China and foreign investors. He debunked proponents of the deal and suggested ways for a new government to limit the FIPA's damage.

With reports that the Trudeau government is now considering a broader trade deal with China, Van Harten's analysis points to the risks and opportunities for Canada. Among the risks are the prospects that a broader trade deal would mimic or worsen the FIPA's lopsidedness. There is also the concern that, by agreeing to a lopsided FIPA first, the federal government has already given up a key bargaining chip for negotiating a favourable trade deal. Yet a trade deal could also offer an opportunity to override and replace flaws in the FIPA.

This excerpt from Van Harten's book highlights one of the FIPA's flaws: its lack of fairness for any Canadians (or Chinese) who are affected directly by a dispute with a foreign investor, but are denied a right of standing in the FIPA's process to resolve those disputes.

Imagine that your community opposes a Chinese investor's project. The federal government supports the investor. You succeed in blocking the project, after years of court battles. The investor then sues Canada under the FIPA.

Your community would have no right to standing -- meaning a full right to participate in the arbitration process -- even if the Chinese investor's FIPA lawsuit smeared people in the community, even if it led to an award that affected the community's reputation, and even if it prompted a settlement in which the government agreed to change course and force the project through after all. Your community would not even have a right to know that the lawsuit existed.

That is Canada now, brought to you by the FIPA. Arbitrators can make decisions that affect Canadians, without ever hearing from them.

Arbitrations under the FIPA may affect actors besides the foreign investor. They may also affect governments other than the federal government. Yet, the process does not allow these other parties to participate fully and to the extent of their interests.

This exclusion of others from the process is a basic flaw in investment treaties. The treaties use arbitration, based on principles of private litigation, to decide disputes that affect third parties and the public. But they raise only foreign investors, not other private parties, to the same level as sovereign countries in international disputes. Only the foreign investor that brings the claim and the national government of the country that is sued get to have full standing.

This selective approach to participation violates a fundamental rule of fairness. The rule is captured in the common law by the maxim audi alteram partem, the other side must be heard. It's in Latin because it's an old rule.

Many actors other than the foreign investor and the national government can be affected by the arbitrators' decisions. For example, private individuals may be accused of

involvement in government corruption, as happened in the St. Marys NAFTA lawsuit against Canada. A local company may have bid on the same government contract as a foreign company, which then challenges the bidding process under an investment treaty, as happened in a case called Eureko v. Poland. A province may be accused of violating the FIPA, and have different interests from Ottawa, as seemed true in the NAFTA case of AbitibiBowater v. Canada, involving Newfoundland and Labrador. An indigenous people may have a land claim or cultural traditions that are the subject of findings by the arbitrators, as happened in the cases of Pezold v. Zimbabwe and Glamis Gold v. United States.

In each of these cases, a party could not seek full standing in the arbitration, even though the arbitration affected the party's interests. The party did not have a legal right to access the record and make fulsome factual and legal submissions to the extent of its interests, as a fair process must allow all affected parties to do.

Tying the hands of others in this way may suit the foreign investor and national government involved in a FIPA arbitration. It can help things go faster and cheaper. There is little risk of having to confront another party's point of view. It might be easier for one or the other side to win the case, or for both sides to settle their dispute on terms that hurt an excluded party.

None of that should matter at all. The process is fundamentally unfair. Like in a court process, it can be made fair only if all of those who have an interest in the outcome can seek a full right of standing.

Promoters of investor-state arbitration sometimes claim that this unfairness in the process was solved by letting the arbitrators grant amicus curiae or "friend of the court" status to

parties other than the foreign investor and the government. The China FIPA, like some investment treaties, allows for this accommodation, saying:

A Tribunal, after consultation with the disputing parties, may accept written submissions from a person or entity that is not a disputing party if that non-disputing party has a significant interest in the arbitration. The Tribunal shall ensure that any non‑disputing party submission does not disrupt the proceedings and that neither disputing party is unduly burdened or unfairly prejudiced by it.

However, this response is clearly inadequate to solve the problem of unfairness. If a party has "a significant interest in the arbitration," as the FIPA says, then the party should be given full standing to the extent of the interest. Full stop. That is fair; the alternative -- a possible opportunity to make a limited "written submission" at the arbitrators' discretion -- is not.

It should not matter if the other party's participation may "disrupt the proceedings," as the FIPA says, or if it means a Chinese investor or the federal government is "unduly burdened." That is another way of saying that the process is an

exclusive system for foreign investors, at the expense of anyone else who is affected by the dispute.

There are other problems with this limited right of participation under the FIPA. An affected party's right to participate is entirely at the arbitrators' option and can be limited in all sorts of exceptional ways, as it has been under other treaties that include the procedural accommodation now in the FIPA. The FIPA itself only lets other parties file one twenty-page document, in a context where the documents submitted by the foreign investor and national government regularly run into thousands of pages. There is no right of the affected party to make submissions on relevant issues or even to review all of

the documents put before the arbitrators. There is no requirement for public notice of FIPA lawsuits, so that others are given an opportunity to apply for standing.

The FIPA is basically a licence to be unfair.

As an expert in investment deals and international law, Gus Van Harten is uniquely qualified to explain what the Canada-China agreement means for Canada. He is currently a professor at Osgoode Hall Law School in Toronto, working previously as a tenured faculty member in the Department of Law at the London School of Economics in the United Kingdom. He has written over twenty academic studies on investment treaties, and has provided commentary to governments, international organizations, and media such as Bloomberg, the CBC, The Globe and Mail, the Guardian, and the Toronto Star. He lives in Burlington, Ontario.