Samuel Grondin • June 9th, 2021
In today’s world where business and capital transcend borders, it is commonplace for investments to be made in countries other than the investor’s country of origin.
Foreign investors can typically access the domestic legal system of the country in which the investment is made. What is less frequently known is that in addition to recourses under domestic law, a foreign investor may benefit from protections afforded by bilateral or multilateral treaties between the investor’s home State and the one in which its investment is located.
That possibility flows from the fact that investment treaties often provide for a dispute resolution process—an arbitration procedure—which may be initiated by the investor against that State for investment losses arising from a variety of proscribed State activity or measures.
In other words, foreign investors often have the right to claim damages from the home State through a mechanism that is not available to residents of that home State.
The extent of the rights and protections enjoyed by a foreign investor and/or the investment of that foreign investor will depend on the content of the applicable treaty. Each situation is unique and must be carefully evaluated.
As an example of those protections, let’s take a closer look at the Peru-Canada Bilateral Investment Treaty of 2006 (hereinafter “BIT”).  It applies to a Peruvian investor for its investment in Canada and to a Canadian investor in respect of its investment in Peru.
The term “investment” is defined and, subject to few exceptions, means either an enterprise or an equity security of an enterprise. It can also encompass a debt security of an enterprise provided that the enterprise is an affiliate of the investor or that the original maturity of the debt security is at least three years.
Among the protections conferred by the BIT are a protections dealing with the transfer of funds and with expropriation and nationalization. We look at each below:
Transfer of Funds
The BIT provides that the home State of the investment “shall permit all transfers relating to a covered investment to be made freely, and without delay, into and out of its territory.” 
Such transfers include, among other things:
– contributions to capital;
– profits, dividends, interest, capital gains, royalty payments, management fees, technical assistance and other fees, returns in kind and other amounts derived from the investment; and
– proceeds from the sale of all or any part of the covered investment or from the partial or complete liquidation of the covered investment.
The home State must “permit transfers relating to a covered investment to be made in the convertible currency in which the capital was originally invested.”
Thus, the foreign investor enjoys specific treatment for the flow of its capital.
Expropriation and Nationalization
Ownership of its private property is also protected against State actions. The BIT sets out parameters against the prejudicial consequences of expropriation or nationalization by the home State. While the home State can expropriate or nationalize if it chooses to, it is nonetheless bound to:
– do it for a public purpose in accordance with due process of law, in a non-discriminatory manner; and
– provide prompt, adequate and effective compensation to the foreign investor. 
If expropriation occurs, the BIT provides that the foreign investor’s compensation must be “equivalent to the fair market value of the expropriated investment immediately before the expropriation took place.” 
In such a case, the foreign investor is therefore not at the mercy of the domestic judicial system of the home State which just took control of its private property. It can assert rights and remedies before an independent forum through the arbitration procedure provided by the BIT.
These are two examples of the various protections conferred by the Peru-Canada BIT of 2006. Those protections flow from the content of that specific treaty and apply in favour of their nationals (Peruvian and Canadian companies) acting as foreign investors in the jurisdiction of the other State party to the treaty.
To know more about that specific treaty, investment law and/or the arbitration mechanism related to it, please do not hesitate to contact us.
 Agreement Between Canada and the Republic of Peru for the Promotion and Protection of Investments (2006). Treaty signed by both countries on 14/11/2006 and in force since 20/06/2007.
 Pages 3-4, definition of “investment“ of the Peru-Canada BIT.
 Ibid, art. 14(1).
 Ibid, art. 14(1) a) to c).
 Ibid, art. 14(2).
 Ibid, art. 13(1).
 Ibid, art. 13(2).
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