International & Domestic Arbitration: An effective option for dispute resolution

Bob Armstrong: Actually, of the three panels this is the one that I'm most excited about. When I first heard about this opportunity, two years ago in England, I thought that it was one of the best ideas that I'd heard in my career. It's an opportunity for plaintiffs to manage risk and to manage costs and to share all of that. It's called third party funding. And we have an unbelievable panel for you and they're going to explain to you what it is. Up until a few years ago there weren't very many third party funders. There were none in Canada. There were no bricks and mortar funders in Canada. You could reach across the border to Washington or Boston or New York and find some assistance, as well as in Europe, because third party funding in Australia, the United States and England was quite mature. Today, in Canada, we have two existing: IMF Bentham, Nomos Capital, and possibly Burford Capital, depending on whether I can convince her to come here. We also have firms that are looking in a more private equity investment portfolio approach like Balmoral Wood - which is a litigation finance company that's in Toronto - that are engaged in this process and the process that these people are about to tell you about. My takeaway for you, my going in proposition is, that you probably have never used it but hopefully by the end of this session you will have a fresh view on whether or not it's one of the most important assets you can have if you're in a dispute, and I think you're going to find that is exactly the case. Let me introduce the panel to you briefly.

On the far side is Tom Price. Tom is one of our partners in England. He has over 20 years' experience in arbitrations and spends a great deal of time in Europe, the Far East, and focuses largely on energy, natural resources and construction.

Beside him is Mark Crane who's one of my partners in Toronto. One of the leaders in our Arbitration Group, his emphasis is with respect to construction, fraud and enforcement.

And then we have the true real experts here. Tania Sulan, who is on the end here, was a serious, sophisticated litigation lawyer in Australia for many years doing bet-the-farm litigation. She helped set up the third party funding organization there and in Adelaide and has now come to Canada with her family and is trying to project into this country as well. Having met her she is a remarkably accomplished and determined person. I have no doubt that she will succeed. I described her as the Chief Investment Officer in one of the powerful forces that began third party funding in Australia. She told me that she was only a small part of that in Australia. I told her that I was going to keep it just the way it was and she could change her CV accordingly.

Beside her, from New York City, is Emily Slater who's a Director at Burford Capital. Burford Capital is a force in this industry. She was, prior to joining Burford, a very senior litigation lawyer at a powerhouse law firm doing very high end securities and other types of litigation. She too is extremely experienced and knowledgeable with respect to the topic we're going to talk about today.

I'm going to ask the panelists a series of questions as I did in the first panel but we're going to do something a little different. I'm going to ask, if I can, Tania and Emily, to explain to you what third party funding is. Just make it real for you and understand why I'm so excited about it and why I think you're going to want to do it when you leave here. Tania, do you want to go first?

Tania: I'll kick off. Bob, I'm delighted to be here. Also delighted to have the promotion. I'll put you in touch with my bosses in Australia.

Bob: I'll negotiate a new income for you.

Tania: Sounds perfect. I think you're right. Up until pretty much the last couple of years litigation funding's been little known in Canada and, I think where there has been activity in the litigation funding space in Canada, has been in the personal injury and class action realms. But with the advent of players like Burford and Bentham and Nomos into this market we're really very focused on commercial litigation cases and arbitration cases. So that's a real evolution in what's happening here and the market's becoming increasingly sophisticated in knowledge of the products. But on a very high level third party funders typically cover all, or part of, the legal costs and disbursements associated with litigation or arbitration. A litigation funder can also cover any adverse costs that are associated with the litigation or arbitration if it's being pursued in a cost shifting jurisdiction. We'll get a little bit more into the depths of some of the products. But just to give you a high-level overview of how the process works and how you might approach a funder. I think, probably, my experience is about 80% of applications for funding come through law firms. We often get queries directly from clients who are just really wanting to explore - they might already have lawyers in place, they might not. We enter into an NDA pretty early on to protect the privilege of confidentiality of the information that needs to be shared with the funder. We would do some high level analysis of the case, and if things are stacking up, we would enter into a term sheet with the clients and the lawyers as to how the structure of the deal will look going forward. I think Emily is going to talk a little bit about some of the due diligence criteria that funders particularly look at.

Emily: So, the diligence process is a combination of both analysis of the case itself, the merits, the damages and the overall economics of a potential investment. When a party is seeking litigation finance one of the most important pieces that needs to come into place is getting an assessment of what we think the cost of the litigation is going to be and what the potential upside is. Since the funder will provide non-recourse capital for fees and expenses but, of course, who wants in return a recovery from the potential proceeds from the case. The funders will typically take a good hard look at the merits of the case. For Burford, we really like to have a case, it's good that most cases come to use through the lawyers, because we do really need to have a lawyer to have done an initial assessment of the case. Sometimes the case will be fairly well developed and along, you know, there may be a draft statement of claim or a draft complaint, already put together. Often times in the arbitration space there'll already have been a notice and there in the middle of, you know, the sort of cooling off period and in the process of developing a statement of claim. We will take a good look at the risks and arbitration. Obviously there's always jurisdictional risks that come into play, particularly in the treaty space where you're talking about a contract arbitration. There's usually less potential issues on jurisdiction for an arbitration panel but in the treaty, arbitration space, where a company may have a claim for expropriation or harm to a foreign investment, there are often jurisdictional defenses for the respondent. We'll then take a good look at the case in terms of what do we think of. Is there a real breach of contract here, is there a breach of the treaty claims, you know, sometimes - particularly in the US and commercial arbitration - there may be an underlying contract that obviously gives arise to the arbitration clause, but the dispute might be not a contract based dispute and that might be swept into the arbitration process as well. So, a trade secret case or other kinds of collateral litigation or disputes that might arise between the parties. We'll take a good hard look at the facts and the underlying law and legal merits. Depending on the jurisdiction, obviously in the US there's often a choice, generally in arbitration clauses and contracts will often be a choice of law provisions. We'll take a look at the local law and then do an analysis of the damages. On the damages analysis, obviously if there's some expert work that's been done early on as part of the process, that's extremely helpful to us but I think, you know, oftentimes that hasn't been done. It's expensive. For us, I think, we need to get a sense if the case is big enough to support the payback of our investment in the case. For the client to have a substantial, we really want to have the client have most of the upside in the case if the case goes well, for us to have a return, and if the lawyers are participating in risk sharing, for the lawyers to have their piece as well.

Tania: I don't know if you have any particular metrics around what you look at in terms of likely budget to claim size but we typically look at a ratio of what we think a realistic estimate of the budget relative to a realistic estimate of the claim size of about one to 10.

Emily: Same for us. Yeah. We like to have room because, obviously, most claims settle and they settle at a discount. We really do want to have room for a claim to have gone a fair way through the process, you know, may have incurred quite a bit of expense. But for the parties still to have the right incentives to settle.

Tania: Yeah. I think the other aspect, that I think undoubtedly you do as well, is we do sometimes, if there is a close damages analysis that needs to be done and perhaps there's not money or resource to get that initial expert report, we might provide some funding at that preliminary investigation stage, even before we've committed to the case, just to shore up some of those aspects. The other aspect that I think is super important for funders to look at, for obvious reasons, is recoverability and enforcement from the defendant.

Bob: Okay. We're going to come back to you in a minute. Let me ask Tom a question. From your experience as the lawyer dealing with a client what are the benefits? Why is this trend growing, in your experience, and what are the benefits to the clients you have that have used it?

Tom: I think it's two things and they're related and possibly even opposite sides of the same coin. The first is, and these will be all points very obvious to you, fighting litigation, as far as costs is concerned, first of all it is relentless, if you are doing it on a non-funded basis. If you're just paying your lawyers by the hour, which is still the traditional way for litigation/arbitration, even if there might be elements of fixed fees in there, it's ultimately still a pariah game. So you end up with just relentless monthly bills. A lot of that is outside your control. Even if you are the claimant you do not know what those are going to be on a monthly basis. They may depend on whether the other side is tactically playing an aggressive game and all the other uncertainties with that. So you've got relentless bills, uncertainty. Litigation funding, effectively, takes that away from you. It becomes not your problem, but not the funder's problem either, if they're happy to fund then that's the solution. That is in part, it's to address that evil I guess, which is why litigation funding has grown. But just a little bit of history, and I think this certainly is the case from the English perspective and probably in other jurisdictions as well, there have been, of course, other ways of funding litigation. Traditionally, conditional fees, where the lawyers are effectively taking the risk because it's a no win no fee, so if the case is not won then the lawyer gets nothing. If the case is won the lawyer gets an uplift. In the UK that used to be an uplift of 100% of the fees. That was the maximum uplift. Those were very popular in the UK until they were made unlawful about five years ago. I say unlawful. You can still enter into such an agreement but you can't recover the uplift from your opponent. That was a big, big change, as I say, about five years ago. That's made conditional fees, certainly in England, now effectively dead. No one really uses that. What's the other alternative? It's contingency fees. Obviously, have been very popular in the US, have never caught on in the UK and that might be to do with our innate caution, but I think it's a little bit more than that. It's the regulations, which allow contingency fees, are drafted in such a way that it's very difficult to exit those. Also you have to have a full contingency. You can't have a partial contingency fee. Once you've got all of those difficulties in the way litigation funding really does present the solution to a certain particular type of case and clearly not every type of case. There's more I can say but I'll save it.

Bob: The one question that I have about that is litigation may or may not be an asset and there are different ways of financing that. What's your experience with the benefit to a client when they want to manage the outflow of the cash and how they use the relationship with the third party funder to do that?

Tom: That's absolutely right. I guess the point is that litigation funding is not necessarily a situation where the funder has to fund all of the costs. You can have hybrid situations where the lawyers take some of the risk as well by doing a conditional fee from the lawyers' perspective. There is definitely risk sharing that is going on and I think that is certainly one of the appeals to it.

Bob: One of the things that I've heard from clients, and these ladies, is when you get into large scale litigation or arbitration, and you're sending bills of a couple hundred thousand dollars a month, that may not be the easiest way for a company to manage its cash flow. If, instead of spending a hundred, two hundred, three hundred thousand dollars a month on expenses for lawyers, they can enter into an arrangement and share the risk and have a third party funding arrangement that allows them to manage their cash flow on their balance sheet much more effectively.

Mark: And with more certainty I would just add. What in-house counsel and CFOs are telling us more and more, as you know, is that it's sometimes not so much about the cost of the litigation but the transparency and the certainty of it. If you're able to provide clarity as to what that's going to be, whether you can robustly participate in the litigation, or not, then it provides that transparency so the business can go on. I would also add that I think it provides an opportunity for access to justice for some. Because, for some, litigation funding may be about ironing out lumpy cash flows. For others it may be they just don't have, they otherwise would not be able to robustly participate in the process.

Tom: I think, and I'm not sure whether there is empirical evidence of this but certainly the 2008 financial crisis did mark a watershed in terms of litigation funding becoming mainstream. That was simply because there were companies that just did not have the cash to progress litigation and were looking for alternative means.

Bob: We're talking about sharing risk. Mark, what is the law in Ontario, and then I'll ask Tom about England, with respect to the question of privilege. You're now engaged with a third party, how does that impact, if any, the privilege that you have with your client?

Mark: Yes. So that's a good question and I have to set out that as it relates to, because normally, I guess, if I back up, you have a solicitor/client relationship and it's the client's right to waive that privilege and they will do so, oftentimes, if they inform a third party about the receipt or something relating to an opinion when they do the legal advice. You're going to have the third party funder in order to - we've heard from Emily and Tania - in order for them to do their due diligence they're going to want to collaborate with counsel, share opinions or, perhaps, be informed of an opinion from counsel and that on its face you think may give rise to privilege issues. I think there's two ways you can look at this. One's through the lens of litigation privilege and the second lens is through common interest privilege. I think litigation privilege, if the communication that you were anticipating sharing, or you do share with the third party funder, or the proposed third party funder, was prepared for the dominant purpose of litigation that's either contemplated, pending or in process, then you would argue, I say, that you've fallen under the benefit of litigation privilege, as you would perhaps to analogy with any experts that a client and/or the lawyer may retain to advance their litigation interests. That's the position, I think, you would take in Ontario. I have to tell you that there's scant case law on it though. I think there, perhaps, is some risk and you want to be cautious about that but that's the approach I would take, certainly. I think the other approach you can take is that there's a common interest privilege as between the client and the third party funder. The common interest, I think, argument is not quite as strong. You may have a common foe, that you have a common interest in the outcome of the litigation, but I think the distinction, perhaps, is that you don't share the common foe. You may, if the third party funder's going to eat, sort of a cost award or something, but on its face I'm not sure the third party funder shares the same adversarial nature with the foe. I think that, perhaps, sheds some weakness on the common interest privilege argument.

Bob: Let me ask Tom and Tania a question. Tom you can go first. If you're talking about settlement what's the role of the third party funder in that issue vis-à-vis the lawyer's relationship with the client?

Tom: Well, essentially Tania will obviously give the view of the funder. The funder should really be standing away from that in order certainly to avoid allegations of maintenance and champerty. I mean, it is a question for the client and the lawyers. In practice that may not be entirely how it pans out. But certainly that's the theoretical position.

Tania: I think, in large part, it depends on the jurisdiction and it does come down to issues of maintenance and champerty and funder control. In Australia I think the way that the laws come out is that funders can be quite involved in the cases. Probably more than actually the funder we would want. But under our contract, and the contract that we are using in Canada - and hopefully we'll get some more judicial guidance as we move forward - we have a dispute resolution clause in our funding agreement so that if there are offers of settlement, and there's an irreconcilable dispute, as to between the client and the funder as to whether the case should be resolved, then it goes off to a short-fuse arbitration. It's a very blunt tool in a situation where you are permitted expediency. In our 17 year history we've never had to invoke … contractual rights but it's there. I think the reason that a funder looks to have that kind of input into a case is that if, particularly in Australia where there is no ability for lawyers to charge contingency fees, where we're often paying all of the costs and carrying on all of the risk of a litigation, it becomes easy for a client to say, "Well, I think this settlement offer is unreasonable and I want to go for more," in the face of advice from the lawyers that it's within the realm of a reasonable settlement range. So, it's really a clause that's in there for a situation where you've got a client who's no longer being particularly commercially reasonable about an offer that's on the table. But, as I said, seldom used.

Emily: Burford's funding is primarily in the US and international arbitration and actually, you know, I think it is driven somewhat by the jurisdiction but typically driven by US law. We are very passive and we don't have a right to settlement control. We have a right to know that there's an offer, and we do frequently offer an opinion on settlement, but we really are, just because of the state of the law and because of our just wanting to make sure that we're avoiding any interference in the client/lawyer relationship, we are very passive and our agreements don't provide rights to impose settlement. Just to sort of circle back a little I think we mentioned up top on the non-recourse basis of litigation finance. So, we don't recover anything if the case isn't successful, and, our return is cash by the ultimate recovery of the case. Even if we have a return entitlement that's large, if the case doesn't end up recovering, or settling, at an amount that provides us our full entitlement we're really capped by what the ultimate recovery is. It can be some difficult conversations when a case doesn't go as well as anticipated and there's usually a negotiation between us and the client and the lawyers. If a case is settling, but you know, I think it is the case where it gets to be difficult where the lawyer and the funder are the ones taking the risk, and the client has control over whether to settle or not, and those can be some difficult negotiations. But usually do resolve without too much pain.

Bob: Is there a typical timeline of recovery that you, and your industry, target in your assessment of a case?

Emily: Just speaking for Burford, and I'll let Tania speak for Bentham, we obviously, our returns are time based and how we report to investors is IOR based. We obviously are very concerned about how long a case is going to take. I think very often we have more realistic expectations about how long a resolution is going to take in a case then the parties and sometimes the lawyers do. We typically build some time based components into the economic terms. Partially because our capital is out. Partially because we want to incentivize clients to be commercial and reasonable when there is an opportunity for settlement and things have been going for a long time. Burford has permanent capital, unlike some funders who have more of a private equity based fund structure, they're looking for an exit in a relatively defined period of time. Burford, and I think IMF Bentham, are sort of here to stay in terms of a litigation partner. Particularly in some very large, when you're talking about very, very large and substantial litigations and arbitrations, they really do take a long time to resolve. They can often take three to five years, at least, and sometimes longer for the largest disputes. You want to have a partner that's going to be able to be there and isn't looking for an exit.

Bob: We've talked a lot about benefits and theories and how things may work. Can I ask each of you to give an illustration, just a concrete case that you've actually done, where it's worked out well for the client. How somebody here might actually go away and say, "That might work for me especially given that example you just gave."

Emily: You want me to go first?

Tania: No. I'll start.

Emily: Okay.

Tania: As Bob mentioned we set up here 18 months ago and we've looked at about 180 cases. Of course, in 18 months we haven't seen any cases through to completion here in Canada, so I thought I'd give you an example of a case that we'd had in due diligence. The client was a resource company out West - was involved in a dispute regarding one of its oil fields. At the time that this client came to us they knew very little about litigation funding, in fact nothing, and they'd been told about litigation funding by their accountant. This client is by no means short on cash but they're in the mining industry and given the state of the market at the moment they were very keen to make sure that they're using their resources wisely. When we had some initial discussions with this client, and the CFO was involved, and he said something to us like, "At the moment, we are faced with a decision as to whether we continue to explore our mining assets or whether we pursue this piece of litigation." It was a real choice as to whether they might want to do both with their available cash and how they were going to finance those activities. He said, "With Bentham's money we can do both. We're experts in drilling wells. You're experts in funding litigation. So hopefully now we can do both and both will yield results. But if they don't I'll still have my gas well." And for our part hopefully we'll yield a result. I think that, anecdotally, what he said exemplifies the key benefits, or two of the key benefits, of litigation funding for these types of clients who do have cash but need to think about where they allocate their resources. The first is that it's a smart way for a company to pursue litigation which is, as we've heard and talked about, or an arbitration, which is inherently risky, without any risk, either to cash flow, or if the case is ultimately unsuccessful because a funder will pick up any adverse cost orders. And secondly, it releases companies with their resource allocation and that's a key thing that was of interest to this client.

Emily: Tania's talked about a company with a single case. We work with both law firms and companies to provide capital and we have done quite a bit of work with providing, what we call portfolio funding, to law firms to provide capital for the firm to manage risk and take on cases across a whole group of cases. We like it and they like it. They can grow their business and take on risk, which a lot of firms have not had a lot of practice doing, and grow their business and we like the diversity across a larger pool of cases. But one that we have in, more specifically companies, I think that we can work as well with companies on portfolios of cases for the companies. Companies in the extraction industry, or in the construction industry, a lot of times they may have multiple groups of cases disputes sometimes. There's claimants sometimes. There's respondents sometimes. They have counter-claims and we can help provide capital to the company across the whole group of cases allows them to predict certainty on what their litigation spend is going to be. They may want to offload all of their litigation spend to us and we can do that and take on substantial obligation to the company to provide capital over a long period of time. Or maybe they want to have certainty in terms of how much they're going to spend. They're willing to put in some capital but what they really are looking for is to flatline their expense and know that they're not going to incur expense over that amount, say, several million dollars a quarter, and we'll put in the additional expense over and above. That way we can help companies, again, manage their risk exposure. A lot of companies, they defend cases and they feel like they have to do that, but a lot of times are reluctant to bring claimant cases, partly because they don't want to enter into a dispute with their business counter-parties, and partly because it's risky and they may not get a return on their investment for that. We can help the companies manage that risk and manage their cash flow. Not only does it help them just manage their cash flow day to day, but for public companies, it can really make a difference in valuation, because they're taking that above the line litigation expense out of their EBITDA, and that really had a big difference in shareholder value and valuation of the company.

Bob: Tom and Mark, can I just ask you to comment on something that I would have thought would be quite a sensitive issue for a client in third party funding. What is the law with respect to whether or not those funding agreements have to be disclosed? Are they kept private or do they have to be disclosed? Tom, what's the rule that your experience in Europe is?

Tom: They don't have to be disclosed, is the starting point, and I think the rationale for that is that whereas say a conditional fee agreement would have been because there was an uplift, which the other side would be liable for if they had to pay those costs. There isn't actually any particular reason why the other side does need to know that there's a funding agreement behind it. Having said that, there are circumstances in which the funding agreement will come out and that is possibly, or classically, in relation to security for costs. A claimant bringing a claim by virtue of the fact it sought funding might be evident that has it insufficient funds. The defendant may apply for security for costs, in the event that it wins, that it has security for a costs award. And then the question arises, well you need the claimant to then disclose the funding agreement to show that you've actually got sufficient funds, and it may be that your funding agreement is going to cover that security. That's a situation in which that might come out. Just dovetails in with a point that I wanted to make at the beginning which was about why litigation funding, generally, is becoming increasingly popular and that's in the area that we'll come onto in the third session of Investment Treaty Claims. Where you've got claims for a lost investment against a state, where in fact as a result of that expropriation, simply the investor has no money and therefore needs funding. That's the only way it can actually bring the claim. I just wanted to make that point. That's another reason why these funding agreements are increasing in popularity. But to go back to your question at the beginning, Bob, there is no, as far as English law is concerned, and it may be different in the other jurisdictions, no actual requirement that they should be disclosed.

Mark: So, it's quite different in Ontario and I guess by backdrop, if you look at the Domestic Arbitration Act in Canada, or the International Arbitrations Act, it doesn't provide any insight into third party funding, at all. Frankly, whether it needs to be disclosed or not, but if you look at through analogy, the courts. Certainly the courts in Ontario, there's an expectation that if a party enters into a third party funding agreement, that you bring that to the attention of the court at your earliest convenience. The agreement will not be in effect until it's been blessed by the court. It may or may not be blessed by the court, but there's nothing necessarily that would amount to maintenance and champerty about a third party funding agreement, but the court needs to find it reasonable before it will be considered in play. Then you look at it through the lens of an arbitration agreement, and I think an arbitrator in Ontario would have a difficult time being persuaded not to follow that case law in Ontario, because it's consistent. It's becoming there are more decisions. You tend to see it come out in the class action context but I don't see why an arbitrator wouldn't be persuaded by that case law. I think you'd want to do that for a couple of reasons. One, it gives rise to a conflict issue. I think you will want to clear conflicts with the arbitrator, vis-à-vis the third party funder, and I think for a couple of reasons, including enforcement, but I think that as part of the clearing of conflicts you want to have transparency and be open and candid about whether there is a third party funder involved. Secondly, to the extent you don't disclose it, then you get an award, and you go to seek to enforce it, I think it gives rise to at least a potential argument from the losing party, that the award shouldn't be enforced because there was no disclosure. Certainly if you're going to be in Ontario, and even if you're not in Ontario, I'd hate to run the risk of trying to enforce a judgment abroad if there's a potential argument to be raised by a party that disclosure of the funding agreement ought to have been made and it wasn't. I think, certainly, if you look at some of the international arbitration centres, they are coming out now with recommendations that you do make disclosure to the arbitrator, both for reasons of conflict and for transparency purposes.

Tania: I think some of the international trade agreements, for example the Canada EU Trade Agreement now has an obligation in that agreement that if you are pursuing an arbitration and there's litigation funding involved, then you have to disclose that. I think it's the name and the fact of the funding. Not necessarily the agreement itself. That's an interesting development.

Mark: Yes. So the name, I agree, and the fact that there is a funding agreement and the name of the funder, you'll see the commentaries, it's not privileged and I think you can get into quite the debate as to what may or may not be privileged within the funding agreement. Certainly, I think if you're going to get a funding agreement blessed by the court in Ontario, people will redact certainly the lawyers' fees, or potentially the view on, you know, will typically be redactive but certainly the name of the funder and the fact that you've got a funding agreement wouldn't be protective by privilege.

Tania: Although, just quickly, in the US the courts have generally found in US litigation that the funding agreement, and the funder itself, is all subject to attorney work product and have generally been protected from disclosure. I agree that there has been, in the arbitration space, a movement towards disclosure, in particular just to ensure transparency and lack of conflict. I think it's in, frankly, in the funder's interest to have an enforceable award at the end, to be conservative and cautious about making sure that there's disclosure at the beginning so you don't put, you know, you've already invested millions of dollars in something that is now becomes unenforceable.

Bob: So, we're at the end of the time we have for panel two subject to anybody that has questions for them while they're here.

Audience: Yes, Scott Fraser of Watson Millican. I'm involved in a lot of construction disputes. My question really is are you seeing owners or contractors who use you for these services?

Emily: Both. It really just depends, you know, on mega contracts where there may be
a dispute between a subcontractor and the ultimate contractor. We're seeing parties come to us there, and we're seeing companies coming to us that are huge major brand name companies, that may be the main contractor on a project and may be subcontractors on different aspects of it. It doesn't really make a difference to us, really. To us it makes a difference of just what's the strength of the claim of the potential recoverability. In those construction disputes there's almost always counter-claims, so just sort of looking at the whole package together.

Bob: Chris.

Chris: I'm litigating right now against a party that's getting third party funding and that case I'm concerned, perhaps, full disclosure hasn't been made to the funder, or if there's some sort of misrepresentation has been made. If it turns out that's the case, in one of your cases, your client hasn't made full disclosure or made some sort of misrepresentation to you, what happens to the funding and do you have recourse against that client? Is that a risk for the client that they get third party funding?

Tania: Under the terms of our funding agreement, if there's been a misrepresentation as to a material fact, then we have a right to terminate the funding agreement. As to whether we would pursue the client, I think it would be [a] very fact-specific situation. I think in the grand scheme of things I think it's probably unlikely that we would take a proactive action against a client. Hopefully our due diligence system is enough to pick up these kinds of things at the outset, but as everybody knows, as litigation unfolds things come to light, and so I think having that ability to be able to extract ourselves from a litigation that's no longer viable is very important.

Audience: Yes. My question is more for Tania. The panel talked about class actions and what the Ontario courts have said about funding agreements. A couple of weeks ago there was a decision by Justice Perell which made positive comments about some portions of the Bentham agreement but rejected some other portions of it and said, "I approve this agreement based on those portions that I disprove of being basically either change or delete it." Where do you see the future of Bentham being in a class action funding scenario within Ontario?

Tania: It's a good question. I think the there'll be some appellant consideration of Justice Perell's decision. You're right. He was quite supportive of the concept of litigation funding and saw it as a positive development. But from our perspective there's a couple of aspects of his decision that are problematic. The first relates to a funder's termination rights. So, under our contract, as I alluded to, we've got a right to terminate our funding if the case is no longer, in our reasonable opinion, commercially viable or no longer has good prospects of success. So, as we all know, as litigation/arbitration proceeds things come out, and it's a very rare event, but we need to be able to get out of our obligations if that arises, and in our 17 year history we've terminated one funding agreement on the basis that the client was engaged in some activity that we thought was less than honest. And the reason for that is that we remain on the hook for adverse costs for the period that we're funding a case. If we terminate an agreement it's a huge decision. We might have sunk millions of dollars already into the case, and then, if we can't negotiate a discontinuance with the defendant, we will remain on the hook for adverse costs for the period that we're funding the case. The case were we did terminate our agreement we paid three quarters of a million dollars in adverse costs orders. It's a significant and not a lightly taken decision. That's one aspect that I think needs some clarification in his decision. The other relates to returns and it's a very class action specific decision so I won't go into the nuance of it. But I think, in broad strokes, it's important for a litigation funder to know what it's reasonable returns might be if the case resolves within certain parameters. Justice Perell's decision doesn't give that kind of certainty, which means that litigation funding for class actions in Canada, they might become a more tricky proposition if we can't get some clarity on that.

Bob: Anybody else? Okay. Then let me just thank the panel and obviously we got very lucky. Two remarkable experts. Hopefully I didn't overstate the sales job at the beginning but I do believe it's an exciting opportunity and it's going to be taken up by a lot of clients. So, we're going to go to panel three now. It'll be a bit shorter than the other two panels. We're just going to change and keep at it.

Mark Crane: As Bob was kind enough to introduce me this morning, my name is Mark Crane. I'm a partner here in the Toronto office working in the commercial litigation group and I'm the national lead of our arbitration group here in Canada. I'm pleased to be moderating this panel on investment treaties, and we've got a terrific panel to canvas questions with for the next half hour or so. I'll waste no more time but to introduce my panel, here. Immediately to my right is Wendy Wagner. Wendy is a partner in our Ottawa office, where her practice focuses on, in part, international trade law. Wendy's also the leader of the firm's Privacy and Data Protection Group. In her international trade practice, Wendy represents clients involving trade, investment agreements, export controls and sanctions and embargos. She has appeared as counsel on trade related matters before the Canadian International Trade Tribunal and the Federal Court of Canada, and she has litigated NAFTA related disputes. Wendy's expertise in international trade has been recognized by Chambers, Invest Lawyers and other organizations.

To Wendy's right is our colleague from London, England, Michael Darowski. Michael is a partner in our London office where he practices in the area of international arbitration, and his focus is particularly within the energy, natural resources, financial, transportation and telecom sectors. Michael is an active member of, amongst other institutions, the London Court of International Arbitration as a member of the Young International Arbitration Group.

And finally, but not least of which is, my colleague Paul Murphy. Paul is a managing director in our firm's energy group and he is based out of Washington, DC. Paul's practice focuses on multiple aspects of the nuclear industry, from legal and policy matters, including international regulatory treaty work, to strategies for creating viable nuclear power programs. Paul represents developers, owners, investors, and contractors on nuclear projects internationally. Paul is recognized as an expert in the development and financing of nuclear programs by, amongst, other organizations, the International Atomic Energy Agency and the United States government. Prior to joining Gowling WLG, Paul served as senior counsel for Bechtel Power Corporation, where he supported both the nuclear and fossil fuel business lines.

What I wanted to do prior to engaging the panel in questions was to just give a brief overview relating to investment treaties. And I've put up on the screen a definition for Bilateral Investment Treaties because it may be the one topic today that some people don't have a lot of context for. You can see the definition up on the screen. Bilateral Investment Treaties are particularly important for us in Canada because, given the resource base of our economy we are extracting, given the presence of the TSX here in Toronto, we often have corporations or investors who have a Canadian presence where they have assets abroad. So Bilateral Investment Treaties, from the Canadian context, allow and provide some comfort to investors where they've got an investment in assets abroad. To give you some context for the number of Bilateral Investment Treaties, as you can see up on the screen, approximately 3,000 worldwide, in Canada the number, almost 40 BIT's that have been signed in Canada. The vast majority of these have been entered to by governments since 1990. Why do you enter into these things? They provide some protection to investors going into the foreign country in the event that, for example, their asset is expropriated with no compensation. Or if there have been some unfair trade practices. It provides some recourse to the investor going into the international country. Why is this relevant to arbitration? In part because generally the BITs, or the Bilateral Investment Treaties, require disputes between contracting parties to resolve their disputes, by way of arbitration, as opposed to domestic or international courts. It elevates it in part, for the reasons that we heard, from Gordon, that if you get an award then you'll get an opportunity to go in and enforce it more easily then you may otherwise have been able to in the domestic court.

We've got a screen here of the location in those jurisdictions with whom Canada has entered into Bilateral Investments Treaties. I'll canvas through this relatively quickly. And then a second visual of those jurisdictions where Canada has entered into with investment treaties, that have some investment protections such as NAFTA, up on the screen. We'll get there when we turn to our panel. With the growth of investment treaties, you'll recall there's 3,000 in present day, that has given rise to a similar growth in terms of the number of investor- stayed arbitrations that have arisen in recent years. You can see the trend has the top line being the number of Investment Treaties that have been entered into and the red line reflecting the growth in the number of disputes that give a rising amount of these Investment Treaties.

With that context what I'd thought I'd do is now canvas with our panel. I've given some context, Michael, about Bilateral Investment Treaties and they're there to protect investors who make investments in foreign jurisdictions. Can you give us some context as to what's considered to be an investment for the purposes of a treaty?

Michael: Generally, the treaty will have a definition of an investment in it. Those definitions tend to be pretty broad to capture as many types of assets as possible in tribunals on disputes arising under that investment treaty, and they tend to construe the definitions pretty broadly as well. I think we've got a slide which has got a definition of an investment from one of Canada's investment treaties with the Ivory Coast. You can see from that slide that this covers a whole range of assets category, we're talking about companies, we're talking about shares in companies, financial instruments and loans, real estate -- it can [also] be rights under a contract such as a concession contract. That sort of thing. It's very broad and covers a lot of things, which means the investment treaties are important in a whole aid of transactions. For example, if you're doing an international M&A transaction, you may want to consider what Bilateral Investment Treaty protections might be available which impact on that transaction. But one thing to mention is the investments tend to also, there is generally a requirement that the investment shouldn't just be a passive holding. It does require some sort of active performance, of a project or use of the investment by the investor, which contributes to the economic development of the host state in which the investment is made.

Mark: Wendy, do you have anything to add there or has he covered the landscape?

Wendy: Yes. It's broad enough so that, for example, it'll cover intangible property rights which is one of the categories that's listed on the slide. For example, in a case that we did for Eli Lilly Pharmaceutical Company, the investments at issue were the patents, two of the patents, that were owned by the company in Canada. That was actually what we had claimed was expropriated by the action of the courts in Canada. I mean, that's not a new thing, by any means. Those intangible property rights have been protected. There are cases from the 1930s that acknowledge that. And then really, one of the only things I can think of that's not commonly covered would be, the revenues flowing from a commercial contract. I think, for example, in the context of NAFTA, the definition of investments specifically mentions that that's a category that's excluded. That's one of the things you can think of that's not captured. I think we've got a question at the back there.

Mark: Sure. Yeah. Go ahead.

Audience: What about real estate …

Wendy: Yeah. Real estate is tangible property. Traditionally, and we'll get into this more, but traditionally one of the most common types of claims that you see is for expropriation. A traditional expropriation claim will involve real property frequently.

Mark: We've gone through definitions, you've mentioned expropriation, apart from expropriation which would be conduct that the treaties are trying to prevent or manage, what other behaviour are the treaties trying to address? Wendy?

Wendy: Yes. We'll have seen from the first slide that definition of Bilateral Investment Treaty was one that we came up with ourselves because actually when we had looked up the definition online, in my view, it wasn't very accurate because it had said, "the terms and conditions for investment in the host state", or something like that. The treaties are not about terms and conditions. They're about obligations that are accepted by host governments towards foreign investors that invest in the economy. So what a treaty will commonly do is, in the first part of the treaty they'll set out what those specific obligations are, and then in the second part of the treaty they'll set out your dispute resolution mechanisms. So, the obligations are, the most common one that people would be familiar with is expropriation. Which isn't just limited to an actual physical taking of property. Commonly the cases will involve an indirect expropriation. What your complaining of is some form of government measure. It could be a law, a regulation, a policy, a practice, any measure undertaken by government. And then you see whether that measure offends one of those obligations and so indirect expropriation would be a regulation that has the effect of depriving the investor of substantially all of the value of the investments. It's tantamount, or equivalent, to a traditional physical taking but it's regulatory in nature. Then you have fair and equitable treatment, or the minimum standard of treatment, is another a common obligation. It sets a fairly high standard. It requires the host state, for example, to have a functioning system of justice. It will require the host state to provide full protection and security to the investment. You can't have armed insurgents walking in and taking the investment without the state having been given some recourse or having taken some action to protect the investor. It encompasses the concept of legitimate expectations based on specific representations made to the investor. That's kind of in that bucket. There's most favoured nation treatment and national treatment. That guards against discriminating between foreign investors, either treating your own investors in a preferable way to a foreign investor, or treating investors from other jurisdictions in a preferable way [compared] to investors from the jurisdiction that's bringing the complaint. There are performance requirements. You think of a company going into, or protections against, certain performance requirements, so a company goes into a jurisdiction, and they invest in a plant to produce a certain type of product, and now the host government says you must export 95% of what you produce, because we don't want your production to compete against production from the local economy so you are required to export 95% of your production. That would be a performance requirement that might be prohibited by a specific treaty. Those are some of the more common ones. Michael, I'll turn it over to you.

Michael: I don't really have much to add in terms of the types of protection. Just thinking of some examples of what might constitute expropriation because it isn't always the obvious sort of military walking into a mine and chucking the interest to the country. That sometimes happens, but it's pretty rare because of the negative publicity that's associated with that, and you can expropriate someone pretty efficiently through any number of more subtle ways. But to provide some examples, I've just finished a two-week hearing of an exit arbitration where we were acting for a government where the allegation is that there was a creeping expropriation by way of repeated tax audits of a company set up by the investor. Those tax audits led to a criminal investigation and various criminal charges being brought with money, in the accounts of the company, being confiscated as security for the potential damages that the government would be able to claim if they were able to prove that the tax charges were properly brought. That is alleged to have led to the closure of the business because the business then couldn't pay its bills, couldn't pay its electricity bills. It shut down. I say this is all alleged. This has all yet to be determined, but that's the sort of conduct that gets treated as indirect expropriation. Looking at some examples of what Canadian companies have disputed, involving Canadian companies, there's a big award [that was] recently given to Crystallex relating to Venezuela. It's got gold deposits there where it successfully argued that it was refused to be, it wasn't given an environmental permit to extract gold, and the failure to give that environmental permit was an indirect expropriation. An indirect expropriation is the assets that are the investment, the title to those assets tends to remain with the investor, but effectively the benefit of those assets is removed from the investor. The economic benefits are lost. Those are the sort of things you tend to see.

Mark: Terrific. So, we've heard what a BIT is. [It] sort of what falls within the context of an investment, what behaviour they're trying to mitigate against or manage. Paul, can you give us your thoughts on when contracting parties ought to start thinking about investment treaties in their negotiations?

Paul: Sure. I think there's a tendency to sort of, when you're in a bad situation and you're preparing for claims, dispute resolution, you sit there and say, "What's available to me?" and you may look and say, "Well, is there a BIT? Do I have anything I can turn to?" But I think the more prudent approach is to be doing that at the deal formation stage so that you have these remedies available to you, these protections available to you before you even start the deal. So, I think, at the deal formation stage, we generally recommend that if you're going into a foreign jurisdiction, and when you're negotiating your commercial deal, you don't want to be subject to the local law and you don't want to be subject to the local courts. That's sort of chapter and verse as to what not to do unless you're in certain sophisticated jurisdictions. If you start with that premise, what you'll find a lot of times is, if it's a government type procurement, there may be national laws that basically say "though shalt use local law and local courts" and they can't contract around it unless there's someone special exemption that's available. You may not be able to negotiate your way out of those provisions. From a risk mitigation perspective, looking at whether or not there is a BIT, that may then let you know that, hey, if I get railroaded in the local courts then I have somewhere else to go, some other forum to protect my interests. Then you start to get into well, what if I'm in a country, or I'm coming from a country, where there is no BIT with this jurisdiction, what can I do? That starts getting you into, "Can I structure my deal so that I run it through an intermediate country that may have a BIT?" For example, the Netherlands is one country that has a ton of BITs. So, you may say, "Well, maybe we can form a Dutch company and now all of a sudden I'm protected by those BITs", but what you then have to think about is, is it [just] a mailbox [located in the Netherlands] or do I need to have actual people sitting in the Netherlands doing Dutch things? You know, buying tulips. Important stuff. What you then have to really look at is, say, if I need to make that investment in tulips, is it worth it? Now you start to [look at] the size of the deal. So, for example, where we used this or looked at it, was in India because their nuclear liability law deviates from international best practice and people were worked up. As part of a mitigation strategy for a client we tried to create a layered defense. In that layered defense was [the idea to] avail yourself of BITs to the extent you can. But you sit there and say, "If I'm doing twenty thousand dollars of business every year maybe it's not worth it", to actually open up an office and put people there, or fly people there quarterly to have the board meeting, or whatever you need to do to clear that hurdle. Then you start, [and] it's a cost-benefit analysis. We're talking about building 10 nuclear power plants in India, where each of them are five, six billion dollars each, maybe more, a little bit of investment in forming a Dutch entity, [and] it's a drop in the bucket and it's worth doing. But if it's a little bit, a little bit of a bit, yeah, but if it's a small deal, you may not want to make that investment in trying to structure things through a third country. It's a cost-benefit analysis but I think it's really just the sort of prudence to make sure that you're arming yourself with as many protections as you can before the deal. I think it also depends on the type of the deal. If you're talking about major infrastructure projects, high profile projects, if things go badly the contract doesn't really start to matter all that much because the politicians in the country are going to find a way to come after you. Because you're going to have to be the scapegoat for the bad deal. So, you sort of say, "Okay, this is how it should work [and] that's nice, but if it doesn't, what else can I do to protect myself outside of the country?" and I think that's where availing yourself of BITs is a good defense mechanism to have available to you. The arrow in your quiver that you structure the deal ahead of time before waiting and saying, "Gee, is there a BIT here? Oh, no, sorry. I can't use that."

Mark: That's very helpful context. Wendy, Paul talks about thinking about things at the deal formation stage as a risk mitigation tool. Do you have any other thoughts when your client starts thinking about deals and framing them?

Wendy: Yeah. So, from a legal perspective you're basically working back. You're looking at what jurisdiction you are investing in. What BITs do they have globally. Then you're examining each one of those BITs because what Paul was talking about, in terms of [asking] do you have enough of a presence in the country that has a BIT with the country in which you're investing? Each treaty will address that differently. They're normally called denial of benefits clauses. If you don't have a significant enough connection to the jurisdiction that has the BIT with the jurisdiction in which you're investing, then you can have benefits denied under that treaty. You won't be able to avail yourself of the treaty. But every single BIT will treat that in a different way. I mean, you mentioned the Netherlands, and their BITs tend to be light in terms of what the requirement is as to how much investment you actually have to have in the Netherlands. Is it just a corporate entity? Is it something more? That's what you're looking at, and in addition to that, there may be a number of BITs that are potentially applicable so you're actually sort of shopping to see which one gives the most robust protection. That might depend on a broader definition of investment. One of the things that Michael had mentioned is, what's the level of investment that you need in the host country for the BIT to be applicable, for there to be an investment that you can make a claim against? That will often depend, not only on the definition of investment within the treaty, but also the forum for dispute settlement. Under the ICSID Convention, which is one forum for dispute settlement that might be included within the treaty, that's where that whole issue of having a sort of substantial investment, and making a real and lasting investment in the host jurisdiction comes into play. If Uncitral is available as a forum for dispute settlement then you don't have that same ICSID Convention definition of investment coming into play. It might be the preferable one if what you're doing in the host country is not as substantive. Those are just a few of the considerations. Then the extent of the obligations: do they include taxation? -- which is the type of case you're dealing with now. Do they carve that out? There are a lot of considerations.

Mark: Paul, do you have a final comment?

Paul: Yeah, I was just going to say, you just mentioned tax in a different context. But when you do these major deals you're going to have your tax people looking at structuring through other countries as well. You're going to have to bring in, your tax people may say, "Oh, you need to go through this country," and the BIT may dictate that] you go through a different country. You're going to have to, again, weigh all those things. The other thing that I think really just has to be emphasized, and everybody's touched on it is, the obvious that you really have to read these things carefully. Some of them, for example, will have an exhaustion of local remedies clause. You can't go to the international arbitration provision, ICSID, until you have exhausted local remedies. Then the question [is], "Well, what does that mean?" Again, a very real case in India, if you say, "You have to exhaust local remedies in India," [but] we may all be dead by the time that happens. How do you deal with that in a jurisdiction that may observe the rule of law, and may have a good court system at one level, but if it takes 15 years or 20 years to hear a case before it's all said and done, that's not a meaningful remedy in a lot of cases. You've got to start to look at, if I created this protection, how can I get there? What hoops do I have to jump through first? Are there ways to maybe engineer around that problem as well, if you find that you're not worried about the local system being corrupt, or underdeveloped, but it just takes forever which, as a publicly trading company, by saying, "I can't be consistently reporting; I have a multi-billion dollar litigation in every quarterly statement that's hanging over my head for the next 15 years." That's not helpful.

Mark: Right. Helpful context. So, I couldn't resist having this panel without asking a few questions relating to NAFTA, just given our investment treaty and where we are today, and some of the experiences our panel have had. There's been a great deal of discussion in the media, as you know, recently, in regards to NAFTA re-negotiations, in whole or in part, depending on what you read or when you read it, and in particular, discussions relating to chapter 11, which is the Dispute Resolution Regime. Wendy, you've had some experience litigating NAFTA pursuant to chapter 11. Maybe, I'm not sure we need a recap, but perhaps you could briefly touch on your experience there, and your views as to the extent there is a re-negotiation of chapter 11, what's the likely outcome in your view, and what happens if it goes away?

Wendy: I think litigation under BITs is a bit different when you're dealing with a developed country context. That's what's sort of a bit unique about NAFTA is that it's United States, Mexico, and Canada. You don't think of those countries as being as risky in terms of a location for investment as perhaps Venezuela or Argentina, or countries like that. There haven't been as many disputes under NAFTA as there may have been under other BITs in other jurisdictions. I think there's been about 50 initiated, or somewhat over 50 initiated, over the last 23 years that the agreement's been in force. It's a bit of a big deal to bring a dispute under NAFTA, but once you do, I think it functions basically the same as any dispute under the Bilateral Investment Treaty. The one thing that I'd say, in terms of our clients, one thing we've been able to do with NAFTA is also use it as an advocacy tool. Sometimes people don't realize that, for example, when the government of Canada adopts a new law or regulation, consistency with international agreements, including Bilateral Investment Treaties or investment agreements, is one of the reviews that they have to undertake. It's just like review to make sure that the new law or regulation is not ultra vires, or not unconstitutional, same type of thing. So you can often, if you're seeing something happening and it looks like it's really not going to be great for a client, and is pretty serious and dramatic in its potential impact, it's one of the things you can put forward to government as an advocacy piece. I think from that perspective it would be unfortunate to lose that mechanism within NAFTA. I don't think that will happen. The latest I had read was that the USTR representative, Lighthizer, said it might be an opt-in mechanism. Each of the three governments could decide whether they wanted to subject themselves to the obligation of the treaty or not, and his view was that Canada and Mexico might decide to do it because then they can show the Americans what a great investment climate they have and continue to have. So, it may just be that they'd opt in and then we might not. You never know. I don't know. I don't know where that will go. I think Canada is probably going to look for changes to the agreement that are similar to what was done with CETA. The Canada/EU free trade agreement does have an investment chapter in it. They narrowed some of the obligations, ostensibly, to give more scope for regulation, and to answer some of the critics in terms of taking away the sovereign rights of the countries to regulate. They also put in place a permanent court of arbitration, which is very different, because one of the big criticisms has been that you're dealing with ad hoc arbitration panels, [and] there's no consistency in result, [so] you could get a panel that's very favourable towards the investor, [or] you could get a panel that's not. It's not a precedent setting system. There are no arbitral awards. We argue them as though they are precedent but they are not binding precedent in any sense. That's probably something that Canada will look to. The business community is very in favour of retaining the mechanism within the agreement, for obvious reasons, then there's usually a lot of sort of left wing dissent and that's a common theme. I call it left wing dissent. I don't know whether that's entirely fair or not but just as a catch-all.

Mark: Terrific and informative. Michael, I guess perhaps related to NAFTA but from the UK perspective, while not a party to NAFTA obviously, in your view, [regarding] the views of protectionism, or re-negotiation, has it had an impact on the UK or internationally in your view?

Michael: Well, I guess a lot of that stems from the election from Trump. His election has, I think, seen a chilling of various other trade agreements that the US was negotiating. So, Trans Pacific Partnership, which Canada, I think, was also going to be a party to. The USEU Trade Agreement. Those are effectively on, well TPP I think has been abandoned. The EU Investment Treaty, or trade treaty, has been put on ice. I guess that wouldn't have affected the UK now after Brexit. What the UK is going to do is a mystery, I think, even to us Brits and after Brexit. But by all accounts there will be a UK US trade agreement at some point. It's not clear what sort of investment, sorry, what sort of dispute resolution mechanism that will have. Given the hostility in the US we all got from Trump to chapter 11 in NAFTA, it may not be your typical international arbitration dispute resolution mechanism. We shall see. But it's all up in the air at the moment, and not entirely clear what will happen, but I think just generally the election of Trump has changed a lot of what was previously accepted as being almost inevitable, in terms of the agreement of various trade treaties around the world.

Mark: On that point, Paul, we've talked about the growth and expansion of Bilateral Investment Treaties, is there some element in the community, domestically and internationally, that there's sort of a cooling off of BITs at present, for some, in the eyes of some?

Paul: Specific to NAFTA or to BITs?

Mark: Not necessarily to NAFTA -- just investment treaties.

Paul: I think what you're saying a little, I want to say a little bit but I'm trying to fight that, but I think what you're saying is [that] some countries are pushing back on BITs, viewing them as [a] weapon for foreign multi-national corporations coming into their country and, especially when there are changeovers in governments, the new government wants to do certain things. They have a deal in place and a BIT sitting over the top of it and now they take some action, environment, tax, whatever it may be, and the multi-nationals are then hitting them over the head with the BIT, and they're viewing it as a bit of sovereignty issue. They're pushing back and saying, "We don't like the way this is playing out because the corporations are benefiting." I think from a corporate perspective they absolutely want to see these protections in place. But, you know, some of the countries, India being one of them, is taking a position that they're not exactly thrilled with the way all of this has played out because it's tying their hands domestically. But the flip side is, and I don't know that there's been any study done, if there is it would be really interesting to read, but the presence of a BIT as a threshold issue to doing a deal, that if the BIT goes away that corporation wouldn't have done the deal. And weighing the costs and benefits, you know, it's easy for the host country to say, "I don't like these results" but if you pull the BIT and people don't want to do business in the country they're not going to like that result either. It's going to be very interesting to see how this plays out because the multinationals are clearly going to want to see the BITs in place.

Mark: Yeah, I would've thought, I could see the tension there with some jurisdictions wanting to keep things domestically but, on the other hand, you have them entering into the BIT's. As long as they're in force I take it the investors can have some comfort in that. Perhaps one final question to canvas with the panel. From a practical perspective we've sort of talked about what they are, we've given some real live examples of what's going on with NAFTA, what recommendations would you have for parties that are structuring transactions now? Tangible recommendations with a view to taking advantage, or being live, to the potential of investment treaties? Want a crack at that Michael?

Michael: Yeah. I would first highly recommend a note that we prepared on exactly on this which, if you're interested in, you can come and ask me, I've got copies with me, on structuring investments to get protection from investment treaties. We're very happy to circulate that. After having read that, obviously, get good advice from someone like me, or Wendy, or Paul, but all joking aside, it is something to think about. As we talked about at the outset of the transaction, I would hasten to add that it's not necessarily too late, if there's anyone sitting out there thinking, "Oh no. We forgot to do this when we were doing a particular deal", it might not be too late to restructure your transaction. And if you're worried about the potential risk that you're facing in a particular foreign country, tribunals have generally found that restructuring to get benefit from investment protection agreements, after a dispute has arisen is impermissible, but it is a perfectly legitimate thing to do if you do it before there is a scope of a dispute arising on the horizon. That's one thing to mention. But the things to look out for are: what is the scope of the protection of the treaty? How wide is the protection? What is carved out? What doesn't get protection? What sort of transactions may not be protected by treaty? Does the treaty specify a level, or measure of compensation, that you might get if your investment is expropriated and what is it and how does that compare to other treaties? Does the treaty have various provisions such as the ones we've discussed, like fork in the road provisions, umbrella clauses, and as Paul alluded to, also consider and get tax people involved in the discussion because there are huge potential tax implications of any structure you might implement in order to get investment treaty protection.

Mark: Perfect. We've heard about, thinking about investment treaties from the context of the deal formation stage. Thinking about them as a risk mitigation tool. Reviewing them carefully. Being aware of any carve-outs, and those are the things that we are encouraging our clients to think about, all with a view of thinking about this early on so that if you do end up in a dispute you have some clarity as to what the landscape is going to be. I want to thank my panel for having come here, and travelled here, all of them have travelled to be here today. They are all experts in their field and thank you very much for coming.

Before we close off, I'll take a few questions if we've got time, and then Bob Armstrong's going to come up and have a few concluding remarks. But while the panel is here do we have any questions for them? Yes sir.

Audience: Can you just give a brief overview of the Russian and Chinese legalities following the patent rule. The reason I ask is because … one, just … and applicant number two, but specifically to Russia and China. So, I'd just like to know after hearing the BIT, I'm thinking maybe I should protect myself a little bit better.

Wendy: I'm not sure any of us know enough, specifically, about that in law to comment on the patent laws of those specific regimes. I mean, from a general perspective, as I was saying, we did a case for Eli Lilly that involved patent rights. So, generally speaking, under a Bilateral Investment Treaty, that is a form of right that has protection. It does get a bit complicated because in many cases it's the courts that adjudicate patent rights. So it will be the domestic court in Russia, or the domestic court in China, that will adjudicate the patent rights. It may be more difficult to challenge the decision of a court under an investment treaty versus government action. But, you know, there may be a circumstance where government simply doesn't follow its own patent rules or removes a patent after the fact by administrative procedure. That's possible too. You have to look at our specific, we have a Bilateral Investment Treaty with China, and I'm sure it does cover intangible property rights so it may confer a level of protection. I don't think it's necessarily a different analysis than any other form of investment with those caveats that sometimes you're dealing with courts versus the administrative, or executive, arm of the government.

Michael: One other thing to mention with Chinese BITs, and I'm not sure if all of them, but a lot of them don't provide for international arbitration as a means of dispute resolution under the treaty because the Chinese don't want to surrender, what they see as sovereign issues, to a panel of arbitrators. But that's something that depends on each particular treaty and needs checking in each case.

Wendy: I think the Canadian one does. It's pretty similar to most of the foreign investment protection agreements we negotiated.

Audience: How about the Russians …?

Paul: Can't help you. Sorry.

Wendy: I think we have a BIT with Russia.

Paul: We have a wonderful office in Moscow.

Wendy: Yeah. Definitely.

Paul: We can certainly connect you with our colleagues there. Especially, in IP, they win a ridiculous amount of awards every year. Happy to connect you with the folks there.

Mark: Any other questions? Bob, do you want to come up? Okay. This is the first time we've hosted this session. We'll do it again and I think all three panels were informative. We had people travel here. I know I certainly enjoyed it and learned a great deal and it was terrific for them to come, listen to your questions. Thank you all for coming. It was our pleasure to have hosted you this morning and we hope to keep in touch. Thank you very much.