Canada has long marketed itself as a safe, rules-based destination for foreign capital, close to the U.S., rich in resources and governed by predictable law. But a growing docket of international arbitration claims is beginning to challenge that image, raising questions about how Ottawa balances national security, geopolitics and investor protection at a time of increasing global tension.
The number of treaty-based disputes against Canada is quietly rising. With four cases now pending before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), and additional claims under other arbitration rules, Canada finds itself defending policies that foreign investors argue have crossed from regulation into expropriation.
This trend comes at a delicate moment. Relations with the United States, Canada’s largest trading partner and source of investment, have grown more complicated amid industrial policy disputes, energy transition politics and diverging approaches to trade and national security. Against this backdrop, investor confidence matters.
One of the latest ICSID cases illustrates the challenge. In January, ICSID registered a claim worth at least $250 million brought by Igor Makarov, a Cypriot-Moldovan businessman, under the Moldova-Canada bilateral investment treaty. The dispute arises from Canada’s refusal to remove him from its Russia sanctions list, despite his renunciation of Russian citizenship and delisting by several allied governments.
Canada froze an estimated $140 million of Mr. Makarov’s Canadian assets in 2022, including interests in a Calgary-based energy company. While Ottawa maintains that the sanctions were justified on national security grounds, Mr. Makarov contends that they were imposed, and later reimposed, in bad faith due to his substantial investments in Canada. He argues that, after Canada was required to delist him following his renunciation of Russian citizenship, authorities amended the sanctions framework and relisted him under a revised regime that he alleges was designed to target him specifically. Canadian courts declined to overturn the foreign minister’s decision, emphasizing the broad discretion afforded to the executive. Arbitration, however, applies a different lens.
Whether Canada ultimately prevails is beside the point. The case highlights a broader issue: actions taken in the name of foreign policy can carry significant investment-law consequences, particularly when allies take divergent approaches. Mr. Makarov has never been sanctioned by the U.S. or the European Union, and was delisted by the U.K., Australia and New Zealand, countries with which Canada typically aligns on sanctions policy.
This is not an isolated dispute. Canada is also defending a C$2 billion claim by Australian mining investors Riversdale Resources and Hancock Prospecting, a $1 billion NAFTA legacy claim by U.S. investor Ruby River over a rejected LNG project, and an UNCITRAL claim by a Russian airline whose aircraft was seized in Ontario. Each case arises from different facts, but together they point to a pattern: foreign investors increasingly see arbitration, rather than Canadian courts, as the forum of last resort.
For policymakers, the risk is cumulative. Arbitration claims are costly to defend, politically sensitive, and, regardless of outcome, signal uncertainty to global investors. They also complicate Canada’s diplomatic posture, especially when claims involve investors from allied countries or sectors Ottawa is eager to attract, such as energy and infrastructure.
Foreign investment is ultimately a confidence business. As arbitration filings mount, Canada may find that the question is no longer whether it wins individual cases, but whether its reputation as a predictable investment destination can withstand the accumulation of disputes.