PARLIAMENT HILL—Doing business in China can be a cutthroat affair where the promise of profit comes hand in hand with potential for unmitigated disaster.
It is into this fray that Canadian businesses enter, risking much with little protection. Such is the pressure on the Canadian government to offer something, anything, to give Canadian investors in China some kind of legal recourse.
But the Canada-China Foreign Investment Protection Agreement (FIPA) isn’t so much about protecting what investments Canadians make in China as it is about helping them get as much of it back as possible on their way out of the country.
Todd Weiler, a noted expert on treaty law arbitration, represents investors who use FIPAs and “investor state provisions” in countries like Laos, Egypt, and the Czech Republic.
He rejects much of the criticism directed against the agreement, and knows through experience how it will likely play out in practice.
By the time someone comes to Weiler for help, they have either lost their investment or are about to, whether it be a business, a stake in a joint venture, or some other enterprise.
Filing a FIPA tribunal case is going through a door that only leads out of whichever country the investment was in, he said.
“You aren’t coming back into the country.”
Retaliation Threat
FIPAs are usually the last resort of small- or medium-sized businesses that don’t have the pull that would make officials in either Beijing or Ottawa care to intervene.
“The huge big companies normally, unless things really come to push and shove, they settle their problems and don’t actually ever have to use these remedies,” Weiler said.
“Oftentimes they use their power and connections—and not necessarily in an illegal way, but certainly in a successful way—to resolve their problems. It is just commons sense.”
That’s because suing the Chinese regime, or other authoritarian or corrupt governments, isn’t exactly a gesture of good will. Retaliation is a very real threat.
You can’t sue and expect to “kiss and make up,” said Weiler. “That is not the way it works.”
Big companies that have a diversified list of assets in a country may take a hit on industry X but suck it up because they are doing well with industry Y, he said.
Smaller businesses, however, often have all their eggs in one basket. If they set up shop in China, once their business there is lost through some kind of corruption or interference from the regime, there are no other assets the investor has to worry about losing.
“If you have just one business and they are taking it from you—so what if they retaliate, you are going to be out of the country.”
But Weiler noted that that a company could face non-economic retaliation if it still has employees in the country.
Taiwan Victims
Taiwan’s Victims of Investment in China Association, a group of business people burned in China, has long railed against the arrest of Taiwanese businessmen at the behest of corrupt Chinese officials.
Taiwan businesses are particularly vocal about troubles in China and complain regularly about asset seizures and police kidnappings.
Recently, Tsai De-sheng, director of the National Security Bureau in Taiwan, told policymakers that 30 percent of Taiwanese investors are facing bankruptcy, and most lost money in 2012, reported United Daily News.
It is possible that Taiwan businesses are especially targeted because of the long-standing dispute over Taiwanese independence, but it is hard to know whether Canadian businesses suffer similarly because Canadian business people don’t talk about the rough side of doing business in China.
One Canadian family saw a member arrested during a business trip to China in order to force him to sign over his assets. After coming to The Epoch Times with their story, they changed their mind and asked it not be published out of fear of reprisals.
While the FIPA may not target those kinds of abuses, it does deal with what could be described as “detrimental reliance” scams.
Companies are invited in, start to make money, and then get walloped by a corrupt official or bogus legal case.
“You make your investment, and once you are there, you are captured. You are caught, you are trapped like flypaper, and that is when they knock you,” said Weiler.
Taking Precautions
In 2006, former Taiwanese president Chen Shui-bian suggested the government has a duty to make those situations known—something few world leaders have done.
“It is the government’s unshirkable responsibility to tell our citizens, including those who invest in China, where and what the political and business risks are,” Chen said.
