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Exchange of Notes constituting an Agreement between the Government of Canada and the Government of the People's Republic of China relating to Foreign Investment Insurance [1984] CATSer 7 (18 January 1984)

E101476 - CTS 1984 No. 9

EXCHANGE OF NOTES CONSTITUTING AN AGREEMENT BETWEEN THE GOVERNMENT OF CANADA AND THE GOVERNMENT OF THE PEOPLE'S REPUBLIC OF CHINA RELATING TO FOREIGN INVESTMENT INSURANCE

I

The Chairman of the Board and President of the Export Development Corporation of Canada to the Vice Minister of Foreign Economic Relations and Trade of China

OTTAWA, January 18, 1984

JLE-0052

Mr. Jia Shi,
Vice Minister of Foreign
Economic Relations and Trade,
People's Republic of China

Excellency:

I have the honour to refer to discussions which have recently taken place between representatives of our two Governments relating to investments in the People's Republic of China and Canada and to insurance of such investments by the Government of Canada, through its agent the Export Development Corporation. I also have the honour to confirm the following understandings reached as a result of those discussions:

1. In the event of a payment by the Export Development Corporation under a contract of insurance for any loss by reason of the following political risks in the People's Republic of China:

(a) war, or any other extraordinary political risks which result in damage to property of investors;

(b) expropriation, confiscation or deprivation of use of any property by a Government, or an agency thereof, and any other action by a Government, or an agency thereof, which deprives the investor of any rights in, or in con­nection with, an investment, and;

(c) any action by a Government, or an agency thereof, in the People's Repub­lic of China that prohibits or restricts the transfer of any money or the removal of any property from that country; the said Corporation, hereinafter called the Insuring Agency shall be recognized by the Government of the People's Republic of China to exercise the rights having devolved on it by law or having been assigned to it by the predecessor in title.

2. But to the extent that the laws of the People's Republic of China partially or wholly invalidate the acquisition of any interests in any property within its na­tional territory by the Insuring Agency, the Government of the People's Republic of China shall permit the investor and the Insuring Agency to make ap­propriate arrangements pursuant to which such interests are transferred to an entity permitted to own such interests under the laws of the People's Republic of China.

3. The Insuring Agency shall assert no greater rights than those of the transferring investor under the laws of the People's Republic of China with respect to any interest transferred or succeeded to as contemplated in paragraph 1. The Government of Canada, does, however, reserve its right to assert a claim in its sover­eign capacity in the event of a denial of justice or other question of state responsibili­ty as defined in international law.

4. Should the said Insuring Agency acquire, under investment insurance con­tracts, amounts and credits of the lawful currency of the Government of the Peo­ple's Republic of China, the said Government of the People's Republic of China shall accord to those funds treatment no different than that which it would accord if such funds were to remain with the investor, and such funds shall be freely available to the Government of Canada to meet its expenditures in the national territory of the People's Republic of China.

5. This Agreement shall apply only with respect to insured investments in projects or activities which are approved by the Government of the People's Republic of China.

6. Differences between the two Governments, concerning the interpretation and application of provisions of this Agreement or any claim arising out of invest­ments insured in accordance with this Agreement against either of the two Govern­ments which, in the opinion of the other, present a question of public international law, shall be settled, insofar as possible, through negotiations between the Govern­ments. If such differences cannot be resolved within a period of three months fol­lowing the request for such negotiations, they shall be submitted, at the request of either Government, to an ad hoc tribunal for settlement in accordance with applica­ble principles and rules of public international law. The arbitral tribunal shall con­sist of three members and shall be established as follows: each Government shall appoint one arbitrator; a third member, who shall act as Chairman, shall be appointed by the other two members. The Chairman shall not be a national of either country. The arbitrators shall be appointed within two months and the Chairman within three months of the date of receipt of either Government's request for arbitration. If the foregoing time limits are not met, either Government may, in the absence of any other agreement, request the Secretary General of the United Nations to make the necessary appointment or appointments and both Governments agree to accept such appointment or appointments. The arbitral tribunal shall decide by a majority vote. Its decision shall be final and binding on both Governments. Each of the Govern­ments shall pay the expenses of its members and its representation in the proceedings before the arbitral tribunal; expenses of the Chairman and other costs shall be paid in equal parts by the two Governments. The arbitral tribunal may adopt other regu­lations concerning costs. In all other matters, the arbitral tribunal shall regulate its own procedures. Only the respective Governments may request arbitral procedure and participate in it.

7. The two Governments, recognizing the principles of equality, mutual benefit, and reciprocity that govern the relations between sovereign states, agree that, in the event that the Government of the People's Republic of China is authorized under its laws to issue coverage for investments in any project or activity within Canada under a program similar to the investment insurance program to which this Agree­ment relates, there shall be, upon the request of either Government, consultations as to how the rights and obligations governed by this Agreement would be recipro­cated in respect of Chinese investments in Canada,

8. (a) If either Government considers it desirable to modify the provisions of this Agreement, this procedure may be carried out through a request for consultation and/or by correspondence and shall begin not later than sixty (60) days from the date of the request.

(b) The modifications of the Agreement agreed between the two Governments shall enter into force upon their confirmation on a date which shall be mutually agreed upon by an exchange of notes.

I have the honour to propose that, if the foregoing is acceptable to your Government, this Note, which is authentic in English and French, and your reply to that effect shall constitute an Agreement between our two Governments which shall enter into force on the date of your reply. This Agreement shall continue in force until terminated by either Government on six months' notice in writing to the other. In the event of termination, the provisions of the Agreement shall continue to apply, in respect of insurance contracts issued by the Government of Canada while the Agreement was in force, for the duration of these contracts; provided that in no case shall the Agreement continue to apply to such contracts for a period longer than 15 years after the termination of this Agreement.

Accept, Excellency, the renewed assurances of my highest consideration.

Sylvain Cloutier

Chairman of the Board and
President of the Export Development Corporation

II

The Vice Minister of Foreign Economic Relations and Trade of China to the Chairman of the Board and President of the Export Development Corporation of Canada

(Translation)

OTTAWA, January 18, 1984

Mr. Sylvain Cloutier,
Chairman of the Board and
President of The Export Development Corporation,
Ottawa

Sir:

I have the honour to acknowledge receipt of your Note of January 18, 1984 which reads as follows:

"(See Canadian Note of January 18, 1984)"

On behalf of the Government of the People's Republic of China, I have the honour to confirm the agreement of my Government with the above-mentioned content of your Note.

Accept, Excellency, the renewed assurances of my highest consideration,

Jia Shi

Vice Minister of Foreign Economic Relations and Trade
People's Republic of China