Developments in Canadian Investment Treaty Practice: New FIPA Between Canada and UAE in Force

Analysis

Of particular interest for investors with interests in Canada or the UAE, for counsel advising on treaty coverage, dispute strategy, or treaty design, the Canada-UAE FIPA is essential reading and the clearest evidence yet of where Canada's investment treaty practice stands over 30 years after NAFTA came into force.

In 2021, we published a client alert examining Canada's updated Model Foreign Investment Promotion and Protection Agreement (Model FIPA (2021)). That alert noted that the Model FIPA was a meaningful, if defensive, signal of where Canada's investment treaty practice was heading: a commitment toward modernized, reform-oriented investor-State dispute settlement (ISDS), an expanded protection of the right to regulate, and the progressive integration of Indigenous rights, gender equality, and responsible business conduct (RBC) into Canada's investment treaty architecture.

This alert picks up where our 2021 alert left off. Since the release of the Model FIPA, Canada has signed or brought into force one FIPA: UAE (in force since May 2026), and four free trade agreements (FTA) containing investment protection and dispute provisions: Ukraine (in force since 2024), UK (in force since 2021 — although investment dispute resolution under CETA Chapter 8, which the agreement incorporates, is on hold subject to review), Indonesia (signed in September 2025), and Ecuador (signed in July 2026). Notably with respect to the UK FTA, since acceding to CP-TPP in 2024, UK and Canadian investors have full access to ISDS under that treaty in any event.

Taking the Canada-UAE FIPA as our focal point, we trace the trajectory of Canadian investment treaty practice across five key issues since 1993 and assess where Canada's practice now stands, comparing the following:

• The North American Free Trade Agreement (NAFTA) Chapter 11 (1993).
• The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) Chapter 8 (2016, although the investment chapter remains not in force).
• The Comprehensive and Progressive Agreement for Trans-Pacific Partnership Chapter 9 (CP-TPP) (2018).
• The Model FIPA (2021).

NAFTA Chapter 11 was considered the gold standard of investor protection when Canada and its North American partners agreed to it in 1993. More recent Canadian treaty-making across CETA, CP-TPP and the Model FIPA has progressively constrained investor rights, tightened standards, closed procedural avenues, expanded host-state policy space, and imported public interest obligations into the treaty framework. CETA Chapter 8 introduced an autonomous fair and equitable treatment (FET) breach list and an express right-to-regulate clause, and proposed a standing Investment Court System. CP-TPP Chapter 9 introduced procedural reforms and a broader regulatory objectives clause. The Model FIPA codified reformed arbitration-based ISDS with mandatory RBC compliance language. As the first FIPA since 2021, the Canada-UAE FIPA now puts that architecture into operation in a live bilateral context.

1. Fair and Equitable Treatment: From Open Wording to a Constrained Customary Standard

NAFTA Article 1105 requires that "Each Party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security[,]" without any further definitional constraint in the treaty text. That open formulation generated what critics characterized as expansive tribunal interpretations, causing concern among treaty negotiators about unpredictable state liability. It ultimately led the NAFTA Free Trade Commission to issue a binding Note of Interpretation in July 2001 seeking to restrict the provision's scope.^[1]

CP-TPP Article 9.6 expressly anchors FET to the customary international law minimum standard of treatment (MST) of aliens and provides that FET and full protection and security (FPS) "do not create additional substantive rights." Article 9.6(4) further provides that the "mere fact that a Party takes or fails to take an action that may be inconsistent with an investor's expectations does not constitute a breach." CETA Article 8.10 had employed an autonomous FET standard with a closed list of breach categories and permits tribunals to consider "specific representations" that created legitimate expectations in limited circumstances, leaving some interpretive flexibility.

The Canada-UAE FIPA closely mirrors CP-TPP's MST formulation, also describing FET as including "the obligation not to deny justice in criminal, civil and administrative adjudicatory proceedings in accordance with the principle of due process." It limits FPS to physical security protection under customary international law. Neither the Model FIPA nor the Canada-UAE FIPA mention legitimate expectations, leaving that question to tribunals’ interpretation of FET. The trajectory is deliberately narrowing: from NAFTA's open-ended international law reference, to CP-TPP's customary-law ceiling with investor-expectations language, to the Canada-UAE FIPA's customary-law anchor with no specific mention of legitimate expectations.

2. ISDS Architecture: Three Models, One Long Conversation

NAFTA provides classic investor-State arbitration under the International Centre for Settlement of Investment Disputes (ICSID), the ICSID Additional Facility, or United Nations Commission on International Trade Law (UNCITRAL) Rules, with party-appointed arbitrators and basic procedural requirements. From Canada's perspective as a frequent ISDS respondent, NAFTA's model arguably was a source of exposure. However, as a frequent exporter of capital and investment, particularly in natural resources, the NAFTA model was a source of heightened investor protection.

CP-TPP retains ad hoc arbitration but introduces procedural changes: expedited dismissal of manifestly meritless claims, a "proposed decision preview" mechanism allowing parties to comment before an award is issued, and a forward-looking clause to consider a future appellate mechanism.^[2] CETA moves in a structurally different direction, urged by the EU, replacing ad hoc arbitration with a standing Investment Court System (ICS) and an Appellate Tribunal empowered to correct legal and manifest factual errors.^[3]

The Canada-UAE FIPA implements the reformed-arbitration model signaled by the Model FIPA,^[4] building further on CP-TPP's procedural reforms and with a nod to the potential for ICS: third-party funding must be disclosed promptly; early dismissal of manifestly meritless or jurisdictionally deficient claims is expressly provided for on a defined timetable; the UNCITRAL Transparency Rules apply, with public hearings as the default; an expedited track using a sole arbitrator is available for claims not exceeding C$10 million; and a prospective clause requires the Parties to consider channeling disputes to a future multilateral investment tribunal or appellate mechanism. Generally, these modern Canadian treaty reforms have added procedural constraints and transparency obligations that narrow the practical scope of investor claims and reduce open-ended arbitral exposure for the state.

3. Right to Regulate: From an Implicit Concept to an Express and Expanding Commitment

NAFTA Article 1114 addresses environmental measures narrowly, confirming that Chapter 11 does not prevent a  treaty Party from adopting measures to ensure investments are carried out in an environmentally sensitive manner. CP-TPP Article 9.16 broadens this to include "environmental, health or other regulatory objectives," but makes no mention of Indigenous peoples' rights, gender equality, or climate change.

CETA Article 8.9 introduces an express right-to-regulate clause, affirming that the treaty Parties retain the right to regulate to achieve legitimate policy objectives and that regulation negatively affecting an investment or an investor's profit expectations does not itself constitute a breach. The Canada-UAE FIPA extends CETA's formulation, expressly enumerating legitimate policy objectives, including environmental protection and climate change, social and consumer protection, health and safety, the rights of Indigenous peoples, gender equality, and cultural diversity. This expansion reflects a deliberate policy of enlarging host-state policy space.

4. MFN Treatment: Closing the Treaty-Shopping Door

NAFTA's most-favored-nation (MFN) provision requires MFN treatment for investors and investments, without clarifying that ISDS procedures in other treaties or other treaties' substantive obligations are excluded from the concept of "treatment" — a gap exploited in cases like Maffezini.^[5] CP-TPP Article 9.5(3) expressly closes the ISDS-importation door but does not address the importation of other treaties' substantive obligations absent implementing measures.

CETA Article 8.7(4) and the Canada-UAE FIPA go further: MFN expressly excludes ISDS procedures in other international investment treaties and confirms that substantive obligations in other treaties do not constitute "treatment" absent domestic measures implementing those obligations. This dual anti-importation provision progressively limits investors' ability to leverage third-party treaty rights to expand their procedural or substantive protections.

5. Environment, Indigenous Rights, and Responsible Business Conduct: The Most Dramatic Evolution

NAFTA Chapter 11 contains no provisions addressing sustainability, Indigenous rights, or RBC. Likewise, CP-TPP Article 9.17 does not impose any binding obligations in these areas; it merely encourages enterprises to incorporate internationally recognized corporate social responsibility (CSR) standards voluntarily. In other words, the provision is purely aspirational.

CETA addresses environmental protection, health, safety, and cultural diversity,^[6] but does not expressly enumerate Indigenous peoples' rights or gender equality as standalone legitimate objectives. Following the Model FIPA innovations, the Canada-UAE FIPA brings many of these themes together:

• The right-to-regulate provision expressly names Indigenous peoples' rights, gender equality, and climate change.
• A non-derogation article prohibits relaxing domestic measures relating to Indigenous peoples' rights in order to attract investment.
• A general exception preserves measures necessary to fulfill Canada's obligations under section 35 of the Constitution Act, 1982 toward Aboriginal and treaty rights.
• A CSR article encourages voluntary adherence to internationally recognized standards, including the Organisation for Economic Co-operation and Development (OECD) Guidelines.
• Tribunals are expressly empowered to appoint independent experts on Indigenous peoples’ rights where relevant to a dispute.

However, the Canada–UAE FIPA does not implement the Model FIPA’s requirement that investors and their investments “shall comply” with host-state domestic laws on human rights, Indigenous rights, gender equality, environment, and labor, or its encouragement of meaningful engagement with Indigenous peoples and local communities. The CanadaUAE FIPA's CSR provision also remains aspirational. This gap reflects the reality that Canada's most progressive treaty positions continue to be moderated by each bilateral negotiation's specific context. Nevertheless, the direction of travel is clear: from NAFTA's silence, through CP-TPP's aspirational CSR clause, to CETA's express right-to-regulate language, to the Canada-UAE FIPA's comprehensive sustainability framework, Canada has systematically imported public interest obligations into its investment treaties.

For more information, please contact the authors or your usual contact in Crowell & Moring's International Dispute Resolution & Arbitration Group.