The Power of Perspectives

The Canadian Bar Association

Yves Faguy


Did Canada get steamrolled by China?

By Yves Faguy October 9, 2012 9 October 2012

Paul Wells commits journalism and reads the fine print of the Foreign Investment Promotion and Protection Agreement (FIPA) between Canada and China, which will soon come into force:

Most of the news coverage about Canada-China investment has centred on Chinese attempts to buy into Canada, especially on the Nexxen deal [sic]. But Canadians are also trying to buy into China and they have had a hard time of it. That’s what was making Harper nervous in Vancouver (and former Harper cabinet minister Jim Prentice borderline apoplectic). And the vaunted FIPA provides prospective Canadian investors (of which there are many) very limited protection compared to what it provides existing Canadian investors (of which there aren’t enough).

Why is that? Well, because it seems that Canada abandoned its own model for FIPAs and agreed to go along with China’s preferred wording for the national treatment clause, which normally would give foreign investors the same rights in the host country as those of its own investors.

So in its current wording, that clause excludes those Canadian investors still trying to establish themselves in China. And vice versa, mind you, which is why I can’t see how this would pose Canada a problem if it would want to block a takeover similar to CNOOC’s bid for Nexen. Still, Canadian investors not already established in China may find it difficult to get around new Chinese regulations aimed at protecting national and economic security, not to mention a number of industry-specific standards that favour domestic firms.

But what should worry advocates of transparency are the provisions of the FIPA dealing with dispute resolution. Again, Wells drills down to the specifics:

Here again, the language in the final treaty is very restrictive. “The treaty does not require that arbitration of disputes be done in a manner that is open to the media and the public,” Luke Eric Peterson told me. He’s a reporter in New York City with this investment arbitration newsletter. ”This is a huge concern,” he added — especially because the arbitration process is designed to supplant the previous forum for such disputes, which is the courts. “Journalists that want to cover this beat in future may be deeply chagrined to discover that they are barred from arbitration hearings and may not be able to access the ‘court file’ related to major disputes — unless the states decide that it is in the ‘public interest’ to allow such access."  So when massive commercial disputes are arbitrated under this FIPA, they will be arbitrated out of public view unless both Canada and China agree. Again, this is a departure from Canadian practice and an embrace of Chinese practice.

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Public inquiry witness protection?

By Yves Faguy October 5, 2012 5 October 2012

Catherine Solyom at The Gazette wonders whether Lino Zambito of Charbonneau Commission fame is immune from prosecution in court about his own involvement in the system of collusion that ruled Montreal’s construction industry for so many years:

Presumably, he believes his testimony before the Commission cannot be used against him in court. But while that may be true for criminal proceedings, it is not clear whether it holds true for civil suits — including those for defamation and slander.

In June, when former police chief Jacques Duchesneau was testifying, Sylvain Lussier, the lead counsel for the Charbonneau Commission, at first said testimony before the commission could be used in civil suits. Then he changed his mind. He and his team had examined the relevant laws, the Commission heard, and determined that yes, witnesses are also protected against civil suits.

But as Solyom points out, here’s what Lussier told Luis Millán in the Lawyer’s Weekly, regarding a claim in restitution he launched representing the Canadian government against defendants for their role in the sponsorship scandal:

"I myself used what was said in the Gomery Commission against civil defendants and was vindicated by Justice Hébert,” said Lussier, adding that in his own opinion s. 13 of the Canadian Charter does not grant protection against self-incrimination in civil proceedings. Though on less solid ground because of the absence of precedence, Lussier also believes that witnesses who slander while providing testimony before a commission of inquiry cannot hide behind the shield of immunity.

And finally there’s this other quote from Lussier in Millán’s reporting:

“You can sue for defamation for slanderous procedures. Lawyers and clients do engage their liability if they write defamatory procedures. The fact that it’s in court does not grant immunity from defamation suits. So why would something slanderous being said before a commission (of inquiry) be immune from ulterior prosecution.

So it seems an admission of responsibility made before a commission of inquiry can be used in civil proceedings (in Quebec at least). Which explains why the Commission has ordered a publication ban on the remainder of Zambito’s continuing testimony.

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Mobile marketing for lawyers

By Yves Faguy October 4, 2012 4 October 2012

Here are some striking figures from Pew Research Center's Project for Excellence in Journalism - most notably, how quickly people are embracing smartphones and tablets:

Nearly a quarter of U.S. adults, 22%, now own a tablet device-double the number from a year earlier. Another 3% of adults regularly use a tablet owned by someone else in their home. And nearly a quarter of those who don't have a tablet, 23%, plan to get one in the next six months. Even more U.S. adults (44%) have smartphones, according to the survey, up from 35% in May 2011.

And what’s encouraging for content providers (that includes lawyers, people) is this:

News remains an important part of what people do on their mobile devices-64% of tablet owners and 62% of smartphone owners say they use the devices for news at least weekly, tying news statistically with other popular activities such email and playing games on tablets and behind only email on smartphones (not including talking on the phone). This means fully a third of all U.S. adults now get news on a mobile device at least once a week.

Mobile users, moreover, are not just checking headlines on their devices, although nearly all use the devices for the latest new updates. Many also are reading longer news stories - 73% of adults who consume news on their tablet read in-depth articles at least sometimes, including 19% who do so daily. Fully 61% of smartphone news consumers at least sometimes read longer stories, 11% regularly.

This report is obviously great news for the media industry. But the rapidly changing habits of consumers of content have huge implications for lawyers and law firms eager to embrace social media and market themselves online.

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Foreign takeovers: When to say no

By Yves Faguy October 2, 2012 2 October 2012

Stephen Gordon doesn't see many reasons why Ottawa should reject a foreign takeover.

Foreign ownership became an issue some fifty years ago, and there were credible reasons for concern. Foreign-owned branch plants tended to be less productive and less interested in innovation. But the problem wasn’t foreign ownership per se, it was the fact that the raison d’être for these branch plants was the high tariff wall protecting Canadian industry. Firms with nothing to fear from foreign competition have little reason to be concerned with low productivity.

Things are very different in the post-NAFTA world.This Statistics Canada study (opens pdf) finds that:

foreign-controlled plants are more productive, more innovative, more technology intensive, pay higher wages and use more skilled workers… [Multinational enterprises (MNEs)] have accounted for a disproportionately large share of productivity growth in the last two decades. Finally, we find robust evidence for productivity spillovers from foreign-controlled plants to domestic-controlled plants arising from increased competition and greater use of new technologies among domestic plants.

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What does "net benefit" mean?

By Yves Faguy September 29, 2012 29 September 2012

Tom Flanagan urges the federal government to approve the CNOOC-Nexen deal before sorting out the "net benefit" rule. Rejecting it would be damaging to Canada's reputation:

After more than 20 years in which neither Progressive Conservative nor Liberal governments rejected any foreign acquisitions, this would be the third rejection in five years by this Conservative government.

Relations with China would certainly be set back, but the damage would also be wider. It would signal to international investors that any large acquisition, no matter how carefully rationalized in economic terms, can be blocked on the basis of an unpredictable variety of political considerations. Uncertainty means risk, and risk deters investment.


Jeffrey Simpson imagines the outcome if the roles were reversed:

Canada, however, is strong in energy, telecommunications, automobiles, aviation and metals – all products that China considers largely off limits to foreigners. Any free-trade deal for Canada would have to involve access in these sectors. It would also need to provide guarantees for patent protection (intellectual property) because Chinese firms are notorious (let’s be blunt here) for stealing patented technology and adapting it to their own companies. And the rule of law protecting private property is wobbly in China. As for the new investment treaty between Canada and China, only time will tell whether it’ll resolve these challenges. It’s worth noting that the protections contained in the agreement apply only to companies already operating in China.

Free-trade negotiations, in principle, are not to be dismissed lightly. The structure of the Chinese economy, the erratic respect for the rules of property law, and the off-limits areas of the Chinese economy mean that any talks would be long and laborious, with no guarantee that the Chinese government would agree to rules found in free-trade deals that Canada has signed with other countries.

The bid for Nexen is now being reviewed by the Harper government, with the nebulous term “net benefit” before a takeover is approved still unclear. If one part of the “net benefit” became “Can we do there what you’re proposing to do here?” the takeover would never be approved. Quite likely, the government will eventually approve the deal, but the condition of reciprocity won’t be there.

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