Government Releases much-awaited National Security Review Guidelines

Michael Kilby - 

On December 19, 2016, the Minister of Innovation, Science and Economic Development issued Guidelines on the National Security Review of Investments under the Investment Canada Act (ICA).

Overview of the Guidelines

Most significantly, the Guidelines list factors that will be taken into account by the government in determining whether foreign investments into Canada could be injurious to national security. These factors are:

  1. The potential effects of the investment on Canada's defence capabilities and interests;
  2. The potential effects of the investment on the transfer of sensitive technology or know-how outside of Canada;
  3. Involvement in the research, manufacture or sale of goods/technology relating to certain controlled goods noted in the Defence Production Act, including firearms, military training equipment, certain types of aircraft, weaponry and defence systems, etc.;
  4. The potential impact of the investment on the security of Canada's critical infrastructure. Critical infrastructure refers to processes, systems, facilities, technologies, networks, assets and services essential to the health, safety, security or economic well-being of Canadians and the effective functioning of government;
  5. The potential impact of the investment on the supply of critical goods and services to Canadians, or the supply of goods and services to the Government of Canada;
  6. The potential of the investment to enable foreign surveillance or espionage;
  7. The potential of the investment to hinder current or future intelligence or law enforcement operations;
  8. The potential impact of the investment on Canada's international interests, including foreign relationships; and,
  9. The potential of the investment to involve or facilitate the activities of illicit actors, such as terrorists, terrorist organizations or organized crime.
Continue Reading...

Changes to Canadian Foreign Investment Regime: higher bar for review, more burdensome disclosure requirements under the Investment Canada Act

Michael Laskey -

Earlier today, the Canadian government published changes to the Investment Canada Act regulations that will - when they become effective in 30 days (on April 24) - make it significantly easier for many transactions to escape a lengthy review process, while at the same time increasing the disclosure burden for the routine notifications required of all foreign investors in Canada and – effective March 13, 2015 – lengthening the timelines for national security reviews.

The “net benefit” review threshold will be changed from an asset value test to an enterprise value test, and will be increased from C$369 million to C$600 million, for most investors. At the same time, the revised regulations impose invasive and burdensome new disclosure obligations for investments that fall short of the review threshold. These new disclosure obligations will require purchasers to provide, among other things, personal information about their directors, highest-paid officers and significant investors. National security review timelines have been extended, and made subject to potential further extension at the government’s discretion.

Continue Reading...

Canada creates further uncertainty for investments by State-Owned Enterprises

Lawson A.W. Hunter Q.C., Susan M. Hutton and Michael Kilby -

On April 29, 2013, the Government of Canada tabled its budget implementation bill, the Economic Action Plan 2013 Act, which includes proposed amendments to the Investment Canada Act (ICA), particularly in relation to state-owned enterprises (SOEs). Given that the amendments are contained in the budget bill, it again appears that there will be little or no opportunity to debate substantively the merits of the amendments or to revise them before they become law. This is not the first time amendments to the Investment Canada Act have been made within the budget bill. In 2009, extensive amendments were made to both the Investment Canada Act and the Competition Act in that year’s budget bill, and were passed without revision. The significance of both the Investment Canada Act and the Competition Act to the Canadian economy is such that the practice of amending these statutes without the opportunity for full consultation and reflection from all stakeholders increases the risk of unfortunate and unintended consequences.

The proposed amendments follow the Government’s December 7, 2012 announcements in relation to SOEs in the context of its approval of CNOOC/Nexen and Petronas/Progress. As outlined in detail in our previous blog post on the subject, the December 7 announcements set out several new concepts, including:

Continue Reading...

Canada's Merger Control and Foreign Investment Regimes - selected recent developments

Shawn C.D. Neylan and Michael Kilby -

In March 2009, significant amendments to Canada’s Competition Act and Investment Canada Act were passed, with important implications for the regulatory review of mergers and acquisitions. 

Merger Control – Competition Act

Following the amendments of March 2009, Canada now has a “two-stage” merger review process. The merits and demerits of this new regime were never thoroughly debated among competition law practitioners or in Parliament, because the amendments were included in a budget implementation bill drafted in response to the global economic crisis of 2008. The bill moved through the legislative process in a matter of weeks, with the clear focus of parliamentary debate being on economic stimulus measures, rather than amendments to the Competition Act and other statutes. In any event, the new merger review process shares many similarities with the US process under the Hart-Scott-Rodino Act1. More particularly, the submission of the required notification filings by the purchaser and the target company triggers a 30 calendar day waiting period during which the transaction may not proceed, unless the Commissioner of Competition (the Commissioner) issues a positive clearance for the transaction and/or terminates the waiting period. If the 30 calendar day waiting period expires without the issuance by the Commissioner of a supplementary information request (a SIR), then there is no legal impediment to the parties closing the transaction. However, if the Commissioner issues a SIR within the 30 calendar day waiting period, the transaction may not close until 30 days after the parties have complied with the SIR, unless the Commissioner issues a positive clearance for the transaction and/or terminates the waiting period.

Continue Reading...

National Security Notice issued in uranium transaction

On August 18, 2009, the Minister of Industry issued a notice to George Forrest International Afrique S.P.R.L. (GFI), pursuant to section 25.2(1) of the Investment Canada Act (ICA), that its proposed acquisition of Forsys Metals Corporation (Forsys) could be injurious to national security, and that an order for a national security review could be made under section 25.3(1) of the ICA. Forsys is engaged primarily in the development of a uranium deposit in Namibia and has no productive assets in Canada.

The effect of this notice was to prohibit the completion of GFI's acquisition of Forsys, unless and until the Minister issued a further notice that would have the effect of removing the prohibition on closing. The notice letter was only recently made public in the context of litigation between the parties to the transaction. This is believed to be the first national security notice issued under the Investment Canada Act since the national security provisions were enacted in March, 2009.

Investment Canada update: National security review regulations promulgated

Susan M. Hutton

The National Security Review of Investments Regulations, establishing the process for national security reviews under the Investment Canada Act (ICA), came into force on September 17, 2009. While the new ability of the Canadian government to screen foreign investment on the basis of national security reflects similar legislation elsewhere (e.g., the so-called Exon-Florio Act in the United States, pursuant to which many investments in the United States are reviewed by the Committee on Foreign Investment in the United States, or CFIUS), the procedure and time-lines are quite different.

Continue Reading...

Primer on amendments to Canada's Competition Act and Investment Canada Act

Susan M. Hutton and Kevin Rushton

On March 12, 2009, the Canadian government enacted the most significant amendments in over 20 years to Canada's competition and foreign investment regimes, as part of Bill C-10, the Budget Implementation Act, 2009. The amendments to the Competition Act result in fundamental changes to the way that business operates in Canada, and provide the Competition Bureau with unprecedented enforcement tools and/or penalties in all areas. Fewer foreign investments in Canada will meet the increased thresholds for Ministerial review and approval under the changed Investment Canada Act, but all such investments will face potential scrutiny under a new "national security" test. The most significant amendments to both these laws are discussed below.

Continue Reading...

Bill C-10 Competition Act and Investment Canada Act amendments enacted

Jeffrey Brown and Kevin Rushton

On March 12, 2009, the most significant amendments to Canada's competition and foreign investment regimes in more than 20 years were enacted when Bill C-10, the Budget Implementation Act, 2009, received Royal Assent. The amendments were described in detail in the February 20, 2009 edition of The Competitor.

Continue Reading...

Massive amendments to Competition Act and Investment Canada Act tabled today

Susan M. Hutton

The Canadian Competition Bureau will be pleased today, as significant and far-reaching amendments to the Competition Act and the Investment Canada Act were included in the Budget Implementation, 2009 bill (C-10), which was tabled today in the House of Commons by the Canadian government (see Parts XII and XIII).

Continue Reading...

Throne speech promises big changes to Canada's competition and foreign investment regimes

Susan M. Hutton

Canada's 40th Parliament opened on Wednesday, November 19, 2008 with the traditional Speech from the Throne, outlining the government's legislative priorities. In keeping with the turbulent economic times and with calls for greater supervision of business, the throne speech promised to "proceed with legislation to modernize our competition and investment laws, implementing many of the recommendations of the Competition Policy Review Panel."

Continue Reading...

Competition Policy Review Panel urges Competition Act, Investment Canada Act reforms

On June 26, the blue-ribbon Competition Policy Review Panel issued its report to the federal Industry Minister on how to raise Canada's standard of living through greater competition and productivity, calling for urgent action to improve Canada's competitive position.

The report, "Compete to Win," is wide-ranging and thought-provoking, canvassing issues ranging from education, immigration, taxation, and securities regulation to specific proposals to amend Canada's competition and foreign investment review laws.  Implementation of all, or even many, of the Panel's sixty-five recommendations would result in fundamental changes to the way business operates in Canada.

Continue Reading...

Canada considers changes to foreign investment review

Kevin Rushton, Susan M. Hutton

On October 9, 2007, Canada's Minister of Industry, Jim Prentice, announced that, this fall, the Canadian government "will examine the need for guidelines on takeovers by state-owned enterprises" and will "carefully consider the creation of an explicit national security test" in the context of foreign investment review under the Investment Canada Act.1

Speaking before the Vancouver Board of Trade in a widely-anticipated address, Minister Prentice emphasized that "Canada is open for business", but said that safeguards must be put in place to protect Canadian interests.  With respect to investments by entities owned or controlled by foreign governments, Minister Prentice explained that the "government's concern is not with the ownership of the foreign capital being invested", but rather with "ensuring that state-owned enterprises in Canada are operating under the same standards as any other commercial enterprise operating in Canada, including those related to transparency, good governance practices and whether they operate according to free market principles."  With respect to national security considerations, Minister Prentice noted that several countries have the means to review and block foreign investment on national security grounds, and commented that the lack of a national security test in Canada for foreign investment is "an oversight that should be addressed."

Continue Reading...

Canada considers Investment Canada Act amendments: Potential focus on foreign state-owned investors

The Investment Canada Act (the Act) has returned to the national spotlight. As part of the long-term economic plan released in late November called Advantage Canada: Building a Strong Economy for Canadians,iCanada's Minister of Finance announced, among other things, his intention to review the Act "with the aim of maximizing the benefits of foreign investment for Canadians, while retaining our ability to protect national interests." While identifying screening procedures under the Act as a factor that restricts foreign investment in the Canadian economy (and stating unequivocally that "both inward and outward foreign direct investment bring substantial benefits to Canada"), the report also noted concerns arising from the "rare" occasions when take-overs of Canadian businesses might damage Canada's long-term interests.

The only example cited was that of investment in Canada by a foreign state-owned enterprise (SOE) with "non-commercial objectives and unclear corporate governance and reporting." As has recently been the subject of some discussion in Canada (see below), the acquisition by a foreign SOE of a significant stake in Canada's natural resources might trigger a concern that such resources would simply be funnelled back to the investor's home country and not sold on the open market. One could also imagine, however, that investment in a defence-related industry by a hostile government might not be in Canada's "long-term interests." Moreover, in the highly charged post-9/11 world of international politics, other grounds may also be raised in opposition to certain investments.

Continue Reading...

Proposed Amendments to the Investment Canada Act: Protection or Protectionism?

The Honourable David L. Emerson, Minister of Industry, announced on June 20, 2005 that the Government of Canada is introducing legislation "to update Canada's foreign investment legislation." Although Minister Emerson has indicated that the proposed amendments reflect ".an update of our security system, not a change in our investment policy," they could, if enacted, present a significant hurdle to foreign investors.

Bill C-59, An Act to Amend the Investment Canada Act, would enable the Governor in Council (upon the recommendation of the Minister of Industry) to review any foreign investment that, in the opinion of the Governor in Council, "could be injurious to national security," regardless of the value of the assets of the target Canadian business. In contrast, generally speaking, foreign investments in Canadian businesses are currently reviewable only if the asset value of the Canadian business exceeds an established financial threshold.1

Continue Reading...