Canadian Investment in Vietnam under the CPTPP: Chapter 9 Protections and How ISDS Applies

In short: Canada and Vietnam are both CPTPP members (in force for Vietnam since 14 January 2019; for Canada since 30 December 2018), and unlike some other member pairs, Canada and Vietnam have NO bilateral side letter carving out investor–state dispute settlement (ISDS). The result: Canadian investors in Vietnam enjoy the full substantive protections of Chapter 9 (national treatment, most-favoured-nation treatment, minimum standard of treatment, protection against uncompensated expropriation) and may bring Vietnam to investment arbitration after six months of unsuccessful consultations. It is a legal shield investors should understand precisely — including its limits.

Substantive protections under CPTPP Chapter 9

Chapter 9 (Investment) sets out the host state’s core obligations: national treatment (Article 9.4 — no less favourable treatment than domestic investors in like circumstances), most-favoured-nation treatment (Article 9.5), the customary international law minimum standard of treatment including fair and equitable treatment and full protection and security (Article 9.6), and a ban on direct or indirect expropriation except for a public purpose, in a non-discriminatory manner, under due process and with prompt, adequate and effective compensation (Article 9.8). These protections apply to Canadian investors in Vietnam like any other CPTPP investor.

ISDS: six months of consultations first

Section B of Chapter 9 lets investors sue the host state in international arbitration, but with strict procedural conditions: the investor must deliver a notice of intent and undergo at least six months of consultation and negotiation with the host government (Article 9.19.1) before filing. This is not a “sue at the first dispute” mechanism — the six months are a mandatory window for settlement. There is also a denial-of-benefits clause (Article 9.15) letting the host state deny protection to shell companies without substantive business operations.

The Canada–Vietnam particular: no ISDS side letter

A little-noticed detail: New Zealand signed bilateral side letters with five countries (Brunei, Malaysia, Vietnam, Australia, Peru) excluding mandatory ISDS; Canada has similar letters with Australia and New Zealand. But there is NO Canada–Vietnam side letter — so ISDS applies in full between the two. Canadian investors are not constrained by those bilateral carve-outs, though they should note the joint declaration by Canada, Chile and New Zealand affirming the state’s right to regulate in the public interest — non-discriminatory public-welfare regulation is hard to characterise as indirect expropriation.

What Canadian investors should set up from day one

For the CPTPP shield to work when needed, investors should: (1) structure the investment through a Canadian entity with substantive operations (to avoid denial of benefits); (2) keep full records evidencing the Vietnamese authorities’ measures, the resulting loss and causation; (3) before thinking of arbitration, use the six-month consultation period seriously — most investment disputes settle at this stage at a fraction of arbitration cost. And most importantly: ISDS protects against state conduct only; it is no substitute for ordinary commercial risk management.

This article has been quality-reviewed by the FLAW AI Legal Council