The Foreign Investment Regulation Review: Canada

Overview

Under the Investment Canada Act (ICA),2 Canada's investment review laws require mandatory notification for foreign investments, administrative review for certain foreign investments based on 'net benefit' to Canada and heightened scrutiny of investments that raise national security concerns or pertain to cultural sectors.

Although the overwhelming majority of foreign investment reviews in Canada are successful, the increase in contentious reviews over the past 10 years demonstrates that Canada is not entirely immune to trends of economic protectionism and concern for national security that are increasing in various jurisdictions across the globe. While recent developments suggest that the liberal government of Prime Minister Justin Trudeau continues to encourage foreign investment, changes in geopolitical tensions and the covid-19 pandemic are affecting reviews of foreign investment in Canada. In particular, the Trudeau government has become less welcoming of foreign investment from China and has stated that it will increase the scrutiny of foreign investment in Canadian businesses related to public health, or involved in the supply of critical goods and services to Canadians or the Canadian government, as well as investments made by state-owned enterprises (SOEs).

Year in review

In March 2021, the Minister of Innovation, Science and Industry (the Minister) released new guidelines on the government's approach to administering Canada's national security review process. The release of the guidelines brought about new transparency and signalled the potential for greater scrutiny, particularly with respect to investments by state-owned and state-influenced investors.

In the 2019–2020 fiscal year, 10 notices were issued to non-Canadian investors under Section 25.2 of the ICA on the grounds that the investment could be injurious to Canadian national security and seven national security reviews were ordered under Section 25.3 of the ICA.3 Of these seven national security reviews, three were withdrawn by the investor, three were subject to divestiture orders under Section 25.4 of the ICA and one required no further action. Notwithstanding this emerging trend, the Trudeau government has placed significant emphasis on attracting foreign direct investment in infrastructure projects and has held seminars aimed at encouraging investors to deploy capital in Canada.

Recent developments in geopolitical tensions between Western allies and China, and Canada's own evolving relationship with China, have raised the profile of Chinese foreign investment in Canada. Following the decision to prohibit the CCCI/Aecon Canada transaction on national security grounds in 2018, the Trudeau government signalled an intention to scrutinise Chinese foreign investment, particularly by Chinese SOEs, more closely. Notably in 2020, the Trudeau government blocked the acquisition by Shandong Gold Mining, a Chinese SOE, of TMAC Resources, operator of a gold mine located in Canada's far north. Canada and its sub-national governments have also moved to limit ties between China and Canadian research institutions. This shift is consistent with the stance of Canada's Western allies.

In July 2020, in response to the covid-19 pandemic, Canada issued an order lengthening the period of time for national security reviews. These extensions ended on 31 December 2020.4

Finally, in response to the covid-19 pandemic, Canada, similar to certain other countries, introduced new measures to increase the scrutiny of all investments in Canadian businesses related to public health or involved in the supply of critical goods and services to Canadians or to the Canadian government, as well as investments made by SOEs.

The Canada–United States–Mexico Agreement (CUSMA) came into force on 1 July 2020. The Canada-United Kingdom Trade Continuity Agreement (Canada–UK TCA) came into force on 1 April 2021. These agreements preserve the trade and investment relationships between Canada, the United States and Mexico under the North American Free Trade Agreement (NAFTA), and between Canada and the United Kingdom under the Canada–European Union Comprehensive Economic and Trade Agreement (CETA), thereby ensuring that investors from these countries are subject to the most liberal thresholds for review.

Foreign investment regime

i Policy

Canada began regulating foreign investment in 1973 when the Foreign Investment Review Act was introduced. While this Act was emblematic of Canada's protectionist stance towards foreign direct investment in the 1970s and early 1980s, its replacement by the ICA in 1985 made Canada a friendlier environment for foreign investment.5

The stated purpose of the ICA is to review 'significant investments' by non-Canadians with a view to encouraging investment and economic growth, as well as to review investments by non-Canadians that 'could be injurious to national security'. The ICA applies when non-Canadians acquire existing Canadian businesses or establish new Canadian businesses.

ii Laws and regulations

Canada's foreign investment regime is contained within the ICA and its accompanying regulations, the Investment Canada Regulations6 and the National Security Review of Investments Regulations.7

The Minister of Innovation, Science and Industry (the Minister) is responsible for administering the majority of investments subject to the ICA, save for acquisitions or investments concerning 'cultural' businesses, which fall under the responsibility of the Minister of Canadian Heritage, as discussed in Section III.v.

There are two separate but interdependent regimes for review under the ICA: net benefit reviews, aimed at determining whether the proposed transaction is likely to be of net benefit to Canada, and national security reviews.

Net benefit reviews

Proposed transactions subject to the net benefit review provisions of the ICA – acquisitions of control of Canadian businesses by non-Canadians – are either notifiable or reviewable, depending on whether the applicable statutory financial threshold is met. When investments are notifiable, the foreign investor need only file a notification of the transaction with the Director of Investments, which is due no later than 30 days after closing.8 In contrast, investments that are reviewable cannot be completed until the foreign investor has received, or has been deemed to receive, approval of the responsible Minister. The standard for this approval – namely, that the investment is likely to be of net benefit to Canada – is discussed in Section VI.9

National security reviews

All foreign investments in Canadian businesses may also be subject to a national security review if the investment could be injurious to national security.10 The national security review provisions in the ICA do not specify threshold requirements based on the size of the transaction or the extent of the interest being acquired by the foreign investor. Accordingly, any transaction involving a non-Canadian investor in a Canadian business may be subject to a national security review, even if the transaction is neither notifiable nor reviewable under the net benefit review provisions discussed above. The national security review framework is discussed further in Section V.iii.

Special rules for state-owned enterprises and cultural businesses

Special guidelines under the ICA also apply to investments by foreign SOEs. These special guidelines are discussed in Section V.iii. Similarly, transactions involving cultural businesses (e.g., those involved in the production or distribution of books, or film, audio and video products), for which the financial thresholds for review are substantially lower, are also subject to special rules, as discussed in Section IV.vi.

iii Scope

Key terms: non-Canadian, acquires control and Canadian business

The ICA provides a framework for determining whether an investor is non-Canadian, whether an investment is an acquisition of control by a non-Canadian, and whether the investment relates to a Canadian business.

Non-Canadian

The ICA defines 'non-Canadian' as an individual, a government or an agency thereof, or an entity that is not Canadian.11

An individual is a Canadian under the ICA if she or he is a Canadian citizen or a permanent resident 'who has been ordinarily resident in Canada for not more than one year after the time at which she or he first became eligible to apply for Canadian citizenship'.12

An entity is Canadian if it is Canada-controlled. The determination of whether an entity is Canada-controlled is more complex and is determined by applying Part V of the ICA. Subject to additional rules applicable to SOEs, cultural businesses and investments that may be injurious to national security (discussed below), the ICA stipulates certain presumptions regarding the determination of whether an entity is Canadian-controlled.

Acquires control

The manner of acquiring control varies under the ICA depending on the target entity. Generally, an acquisition of control occurs upon the acquisition of a majority of the voting shares or voting interests of an entity, either directly or indirectly, carrying on a Canadian business, or upon the acquisition of all or substantially all the assets used to carry on a Canadian business.

In the case of a corporation specifically:

  1. where fewer than one-third of voting shares of the target corporation are acquired, control of the corporation is deemed not to be acquired;13
  2. where more than one-third but less than 50 per cent of voting shares of the target corporation are acquired, there is a rebuttable presumption that control has been acquired;14 and
  3. where more than 50 per cent of the voting shares of the target corporation are acquired, control of the corporation is deemed to be acquired.15

In the case of a non-corporate entity, such as a trust, partnership or joint venture, the acquisition of less than 50 per cent of the voting interests of the entity is deemed not to be an acquisition of control.16

When the foreign investor is an SOE,17 the acquisition is in respect of a cultural business18 or where a transaction may be injurious to national security,19 the Minister is given the flexibility to make a fact-specific determination as to whether an acquisition of control has occurred.

Canadian business

A Canadian business is defined as 'a business carried on in Canada that has:

  1. a place of business in Canada;
  2. an individual or individuals in Canada who are employed or self-employed in connection with the business; and
  3. assets in Canada used in carrying on the business'.20

The ICA also contains provisions relating to businesses that are only partially carried on in Canada.

Threshold requirements

Foreign investments are only reviewable where the value of the Canadian business of which the foreign investor is acquiring control exceeds certain financial thresholds.21

Threshold factors

The applicable statutory threshold depends on a number of factors:

  1. whether the investor, or investors, is a World Trade Organization (WTO) investor or trade agreement investor, or the target Canadian business is controlled by such an investor. A 'WTO investor' generally refers to an individual who is a national of a WTO Member State, the government of a WTO Member State and a WTO-controlled entity. A 'trade agreement investor' refers to the subset of WTO Member States with which Canada executes a trade agreement, such as CUSMA or CETA;22
  2. whether the investor is an SOE;
  3. whether the target entity carries on a cultural business;
  4. whether the acquisition is direct or indirect. Pursuant to the ICA, an indirect acquisition is a transaction involving the acquisition of the shares of a company incorporated outside Canada, which owns subsidiaries in Canada; and
  5. whether the investment raises national security concerns.
Statutory financial thresholds

Depending on the type of transaction and investor, the threshold may be triggered by either the book value of the business being acquired or the enterprise value of the transaction. The book value is determined by the value of the assets acquired as reflected in the business's most recent annual audited financial statements.23 The calculation of enterprise value depends on the structure of the transaction:

  1. in the case of an acquisition of shares of a public entity, enterprise value is equal to the market capitalisation of the entity prior to the acquisition plus its liabilities (excluding operating liabilities), minus its cash and cash equivalents;24
  2. in the case of an acquisition of shares of an entity that is not publicly traded, enterprise value is equal to the acquisition value – namely, total consideration – plus the entity's total liabilities (excluding operating liabilities), minus cash and cash equivalents;25 and
  3. in the case of an acquisition of assets, enterprise value is equal to acquisition value plus liabilities assumed by the investor (excluding operating liabilities), minus cash and cash equivalents.26

The 2021 reviewable threshold for direct private sector investments involving WTO investors either as purchaser or seller is C$1.043 billion in enterprise value. Since 1 January 2019, this reviewable threshold is adjusted annually to reflect the change in Canada's nominal gross domestic product. The 2021 equivalent reviewable threshold for private sector investments involving trade agreement investors is C$1.565 billion in enterprise value, which is also adjusted annually.

The reviewable threshold for direct acquisitions by investors not belonging to a WTO Member State, or for direct acquisitions of Canadian cultural businesses (irrespective of investor nationality), is only C$5 million (book value of assets).27 For direct acquisitions by SOEs from WTO Member States, the 2021 reviewable threshold is C$415 million (book value of assets).

Indirect acquisitions (in which a non-Canadian parent company that controls a Canadian subsidiary is being acquired) by investors from WTO Member States are not reviewable, unless the Canadian subsidiary of the target is a cultural business.28 Indirect acquisitions of cultural businesses are reviewable if the book value of the assets involved exceeds C$50 million, but this threshold is reduced to C$5 million if the Canadian asset value of the target exceeds 50 per cent of the target's total international asset value.

iv Voluntary screening

Voluntary screening is not applicable.

v Procedures

Applicable time frames

The Minister has 45 days from the date of receiving a sufficient application to complete the net benefit review and issue an opinion.29 The Minister can (and typically does) unilaterally extend the review period by an additional 30 days.30 In practice, investors should therefore allow at least 75 days for the process. The review period may only be extended beyond 75 days with the consent of the investor.

As previously noted, when a transaction is merely notifiable (i.e., not reviewable), the investor must file a completed notification within 30 days of closing. As discussed in this section below, there may be an advantage to filing a notification before closing.31

Net benefit test

In determining whether the proposed transaction is of net benefit to Canada, the Minister considers a set of factors enumerated in the ICA, none of which is individually determinative. These include:

  1. the effect of the investment on the level and nature of economic activity in Canada, including employment, resource processing, and the utilisation of parts, components and services;
  2. the degree and significance of participation by Canadians in the business;
  3. the effect of the investment on productivity, industrial efficiency, technological development, product innovation and product variety;
  4. the effect of the investment on competition within any industry or between industries in Canada;
  5. the compatibility of the investment with national industrial, economic and cultural policies, taking into consideration industrial, economic and cultural policy objectives enunciated by the government or legislature of any province likely to be significantly affected by the investment; and
  6. the contribution of the investment to Canada's ability to compete in world markets.32

This broad language provides the Minister with wide discretion to approve or reject proposed transactions. While ministerial decisions approving a proposed transaction are published, the Minister may, but has no statutory right, to publicise the reasons for approving or rejecting reviewable investments without the consent of the investor.33

In making an assessment under the net benefit test, the Minister will consider the investor's plans for the Canadian business and proposed undertakings (i.e., legally enforceable commitments from the investor to the Canadian government), and may also consider representations made by other federal departments and agencies, any provinces likely to be significantly affected by the investment, and the Competition Bureau.34

Undertakings, which are typically required as a condition of approval, usually have a term of three years and address matters such as employment levels in Canada, Canadian participation in management and the board of directors, production targets, research and development, future capital expenditures and charitable contributions.

In the 2019–2020 fiscal year, 1,032 investment filings (both applications for review and notifications) were submitted (also termed 'certified'),35 with a total value of C$100.52 billion in enterprise value. Of these filings, only nine consisted of applications for net benefit review. All were approved (this is the same number as for the 2017–2018 and 2018–2019 fiscal years).36

National security reviews

Under the ICA, investments may be subject to a national security review where the Minister, after consultation with the Minister of Public Safety and Emergency Preparedness, considers that 'the investment could be injurious to national security' and the Governor in Council (i.e., the federal Cabinet) makes an order for review.37

The national security review process has a different timeline from the net benefit review process and can theoretically run for an indefinite period of time.38 If the Minister believes that an investment could be injurious to national security, the Governor in Council, within 45 days of receipt of a notification or an application for review under the net benefit provisions, may order a formal national security review. Alternatively, the Minister may, within that same 45-day period, notify the investor that such a review may be commenced.

If the transaction is not reviewable or notifiable (for example, because there is no acquisition of control), the 45-day period only begins to run after the transaction closes.39 This can create timing difficulties because formal pre-acquisition clearance cannot be obtained under the national security provisions of the ICA. To address this uncertainty, the government has encouraged investors to engage in an informal dialogue ahead of time in an effort to determine whether the proposed investment raises national security concerns.

When a formal national security review is ordered, the review itself may take 45 days to complete; this period may be unilaterally extended by the Minister for a further 45 days. Following the review, unless the Minister sends a notice that no further action will be taken, she or he can refer the matter to the Governor in Council, who has 20 days in which to take any measures advisable to protect Canada's national security, including blocking the investment, allowing the transaction to close subject to undertakings by the investor or certain terms and conditions, or, in the case of a completed transaction, order a divestiture.40 The investor may be required to make legally binding undertakings to the Canadian government to mitigate potential harm to national security. The investor may give structural and/or behavioural undertakings that require the investor:

  1. to obtain government approval of proposed locations to avoid proximity to strategic assets;
  2. to service and support some or all business lines in Canada;
  3. to create approved corporate security protocols to protect information;
  4. to conduct third-party compliance audits; and
  5. to provide access to facilities for compliance inspection to mitigate such harm.41

The ICA does not define 'national security' and so the Minister has broad discretion to review investments. To aid investors, the government published guidelines detailing the factors that it will consider in either ordering or considering a national security review.42 These factors include:

  1. potential effects of the investment on Canada's defence capabilities and interests;
  2. potential effects of the investment on the transfer of sensitive technology or know-how outside Canada;
  3. potential effects of the investment on the security of Canada's critical infrastructure;
  4. potential effects of the investment on the supply of critical goods and services to Canadians or the Canadian government;
  5. potential for the investment to enable foreign surveillance or espionage, hinder current or future intelligence or law enforcement operations, or involve or facilitate the activities of terrorist organisations or organised crime; and
  6. potential effects of the investment on Canada's international interests, including foreign relationships.

Investors should engage with the Inland Revenue Department early in a review if any of the factors above are present, and work with counsel to identify any necessary mitigation strategies, including, potentially, filing a notification at least 45 days ahead of closing, to achieve certainty regarding the likelihood of a national security review. In addition, investors should take note that the Canadian government has close working relationships with its Western allies, including the United States, the United Kingdom, Australia and New Zealand, on matters of national security, which may affect Canadian foreign investment reviews.

SOEs

As part of the Minister's net benefit assessment, investments by foreign SOEs must meet specific guidelines. These guidelines were significantly revised in 2012, following high-profile acquisitions of Canadian oil and gas producers by SOEs from China and Malaysia.

In addition to organisations that are directly owned by foreign governments, SOEs include entities 'controlled or influenced directly or indirectly' by a foreign government.43 The ICA also allows the Minister to make 'control in fact' determinations about SOEs; in practice, this means the Minister can declare that a Canada-controlled investor is controlled in fact by an SOE, possibly subjecting the investment to review under the ICA. The Minister can also determine that an SOE has acquired control of a Canada-controlled entity, subjecting even minority investments by SOEs to ICA review.44

As detailed above, the financial thresholds for review are lower for SOEs, increasing the likelihood of review of SOE transactions. The 2021 financial threshold applicable to a WTO SOE is C$415 million (book value of assets).

Pursuant to the SOE guidelines, the Minister may consider the governance and commercial orientation of SOEs to determine whether an acquisition by an SOE is of net benefit to Canada. The Minister's aim is to ensure that foreign SOEs acquiring Canadian businesses will operate in a transparent and commercially oriented manner that mirrors private sector enterprises, and to prevent state owners from using Canadian acquisitions to effect their own undesirable objectives.45 In practice, this means that SOEs seeking to complete investments subject to the ICA must satisfy the Minister that they are free from political influence and will adhere to Canadian laws, implement standards and practices that promote sound corporate governance and transparency, adopt free market principles, and make positive contributions to the productivity and industrial efficiency of the Canadian business.46

To uphold these principles, the Minister may require that an SOE investor provide additional undertakings, such as the appointment of Canadians as independent directors on the board of directors.47 Unlike undertakings required by non-SOE investors, which typically have a three-year term, undertakings required of SOEs might continue indefinitely or for as long as the investor is an SOE.48

vi Prohibition and mitigation

There are a variety of trade and investment agreements pertinent to foreign investors in Canada; namely, free trade agreements, multilateral agreements, WTO agreements and bilateral investment treaties.49 In Canada, bilateral investment treaties are called foreign investment promotion and protection agreements (FIPAs), and they aim to promote and protect foreign investment through a mechanism of legally binding reciprocal rights and obligations.50

Although there are a number of exclusions concerning sensitive policy areas, such as environmental protection, FIPAs generally enable foreign investors to receive the same treatment as domestic or other third-party foreign investors,51 referred to respectively as 'national treatment' and 'most-favoured-nation treatment'.52 FIPAs include provisions allowing foreign investors to repatriate their capital and returns, and precluding the Canadian government from expropriating their investments without arranging sufficient and timely compensation.53

Sector-specific requirements

i Prohibited sectors

There are no prohibited sector requirements. See below regarding restricted sectors.

ii Restricted sectors

The Minister of Canadian Heritage is responsible for reviewing acquisitions of, or investments in, cultural businesses.54 A 'cultural business' is defined in the ICA and can include, for example, businesses involved in the publication or distribution of books, film, music and radio communications.55 Even if only a small portion of a business's operations is cultural, the Canadian business is a cultural business for the purposes of foreign investment review.

The monetary thresholds for review of cultural businesses are much lower than those for non-cultural businesses, ranging from C$5 million to C$50 million (book value of assets). Even when an investment would be otherwise merely notifiable, the Minister of Canadian Heritage has considerable discretion to review a transaction involving a cultural business when certain notification requirements are met.56

Transactions involving cultural businesses must also align with Canada's cultural policy objectives, where relevant, in addition to meeting the standard 'net benefit to Canada' test. Specifically, the Minister of Canadian Heritage will consider the consistency of the investment with Canada's cultural policies in such industries as periodical and book publishing, and film production and distribution.

In addition to the cultural sector, foreign ownership limits apply to certain telecommunications firms, financial institutions, broadcasters, airlines and uranium producers.

Typical transactional structures

Non-Canadian investors should take care when structuring their transactions because the ICA applies differently depending on the transaction structure. Most direct acquisitions of Canadian businesses are subject to 'net benefit' review under the ICA, whereas indirect acquisitions of Canadian businesses are subject only to notification. The only exception is for the indirect acquisition of a cultural business, which will be subject to review if the applicable financial threshold is exceeded (see Section VI).

Acquisitions of public companies

The acquisition of a public company in Canada by way of an asset purchase generally requires at least two-thirds-plus-one shareholder approval. The acquisition of shares in a public company is usually achieved through one of three structures: plan of arrangement, amalgamation or takeover bid.

A plan of arrangement is a statutory procedure that facilitates the acquisition of all the outstanding shares of the target company in a single step through a court-approval process.

An amalgamation is the combination of one or more entities resulting in a single new entity that houses the combined assets and liabilities of both pre-amalgamation entities.

A takeover bid is an offer to acquire outstanding voting or equity securities where the securities subject to the offer, together with the shares already owned by the potential acquirer, constitute 20 per cent or more of the shares of the class that is subject to the offer. A takeover bid is the only method available in Canada to acquire legal control of a public company without the consent of the board of directors.

Other strategic considerations

i Enforcement

If the Minister believes that a non-Canadian has breached the ICA (for example, by implementing an investment that required prior approval without first obtaining the approval or failing to comply with a written undertaking), the Minister may send a demand to the non-Canadian, requiring the person or entity to cease the contravention, to remedy the default, to show cause why there is no contravention or to justify non-compliance with any undertakings provided.57

If a non-Canadian fails to comply with such a demand, the ICA provides for an application to be made to a superior court. The court may make any order that it determines is required in the circumstances, including an order imposing a penalty not exceeding C$10,000 for each day on which the person or entity is in contravention. The penalty is recoverable as a debt and any breach of a court order would constitute contempt of court. An appeal may be brought from any such order by the court.58

ii Exemptions from net benefit or national security reviews

Part II of the ICA provides a list of transactions that are exempt from the review and notification requirements contained in the ICA, and a list of transactions that are also exempt from the national security provisions of the ICA.

Transactions exempt from the review and notification requirements, but still subject to the national security review provisions, include:59

  1. an acquisition in the ordinary course of business by a trader or dealer in securities;
  2. an acquisition in the ordinary course of business by a venture capitalist;
  3. an acquisition of control by a foreign lender in connection with the realisation of security granted for a loan or other financial assistance;
  4. an acquisition of control for the purpose of facilitating financing so long as the acquirer divests itself of control within two years;
  5. an acquisition of control through an amalgamation, merger, consolidation or reorganisation where the ultimate control through the ownership of voting interests remains unchanged;
  6. an acquisition of control of a Crown corporation; and
  7. an acquisition of control of a non-profit corporation.

Certain transactions are exempt from the national security review provisions.60

iii Interplay with competition law

Investments that are subject to foreign investment review may also be subject to review under the Competition Act (CA),61 whereby certain proposed acquisitions and business combinations trigger advance notification requirements. Specifically, Part IX of the CA establishes a review process whereby parties to a transaction must provide the Commissioner of Competition with pre-transaction notification filings if the proposed transaction exceeds specified monetary and shareholding thresholds.62 These thresholds are different from those contained in the ICA. When a transaction is subject to review under Part IX of the CA, it cannot be closed until expiry of a 30-day statutory waiting period, which may be extended if the Commissioner requires more information about the proposed transaction.63 Many reviews under the CA take approximately four to five months to complete; some cases certainly take longer.

Competition and foreign investment reviews in Canada cannot be 'siloed', as they require careful coordination, in terms of both timing and messaging. For example, it is of fundamental importance to ensure that information provided to each authority by the transacting parties is consistent. One of the factors considered in the net benefit test during a foreign investment review is the effect of the investment on competition within any industry or between industries in Canada. Given the Competition Bureau's expertise in this area, the Minister, through the Director of Investments, will consult the Bureau in respect of this criterion.64

Parallel reviews under the CA and the ICA can also have real-world timing implications for a proposed transaction. For example, the Minister might not issue a clearance under the ICA until the Bureau has completed its review, especially where there are significant competition issues. While not usual practice, there is also a possibility that the Competition Bureau may not complete its assessment until the ICA review process concludes, especially if there are significant foreign investment issues and sufficient competition issues to give rise to a supplementary information request.

Outlook

Applications for review continue to constitute a very small portion of foreign investments, holding steady at approximately 1 per cent for each of the last three years, with no transactions blocked based on 'net benefit' in the past years. We expect the current trend of increased scrutiny with respect to foreign investment from specific jurisdictions, including China, investment from SOEs and investments that raise potential national security concerns to continue.

Footnotes

1 Michael Koch and David Rosner are partners and Josh Zelikovitz is an associate at Goodmans LLP.

2 Investment Canada Act, RSC 1985, c 28 (1st Supp). ['ICA'].

3 Ministry of Innovation, Science and Economic Development, 'Annual Report: Investment Canada Act 2019-2020' (2021), online: http://www.ic.gc.ca.

4 Government of Canada, Temporary Extension of Certain Timelines in the National Security Review Process Due to COVID-19, online: https://www.ic.gc.ca/eic/site/ica-lic.nsf/eng/lk81225.html.

5 Mathieu Frigon, 'The Foreign Investment Review Process in Canada', Library of Parliament (12 July 2011), online: http://www.parl.gc.ca.

6 SOR/85-611.

7 SOR/2009-271.

8 ICA (see footnote 2), Section 12.

9 id., Sections 16 and 17.

10 id., Section 25.3.

11 id., Section 3.

12 ibid.

13 id., Section 28(3)(d).

14 id., Section 28(3)(b).

15 id., Section 28(3)(a).

16 id., Section 28(3)(b).

17 id., Section 28(6.1).

18 id., Section 28(4).

19 id., Section 28(4.1).

20 id., Section 3.

21 id., Section 14.

22 id., Section 14(6).

23 Investment Canada Regulations, SOR/85-611, Section 3.1.

24 id., Section 3.3.

25 id., Section 3.4.

26 id., Section 3.5.

27 Government of Canada, 'Thresholds for Review' (2021), online: http://www.ic.gc.ca.

28 ibid.

29 ICA (see footnote 2), Section 21(1).

30 id., Section 21.

31 id., Section 20.

32 ibid.

33 The Minister must provide reasons for rejecting a proposed investment to the non-Canadian investor – ICA (see footnote 2), Section 23.1.

34 ICA (see footnote 2), Section 19.

35 Ministry of Innovation, Science and Economic Development, 'Annual Report: Investment Canada Act 2012-20' (2021), online: http://www.ic.gc.ca.

36 ibid. Ministry of Innovation, Science and Economic Development, 'Annual Report: Investment Canada Act 2019-2020' (2021), online: http://www.ic.gc.ca.

37 ICA (see footnote 2), Section 25.3.

38 The Minister may unilaterally extend the review period to up to 200 days, and may extend the deadline further with the consent of the party. As a practical matter, the timeline is indefinite as the party's only real choice in such instances is to accept the extension or abandon the transaction.

39 ICA (see footnote 2), Section 25.2(1); National Security Review of Investments Regulations, SOR/2009-271, Section 2.

40 ICA (see footnote 2), Section 25.4(1); National Security Review of Investments Regulations, note 41, Section 6.

41 'Annual Report: Investment Canada Act 2018-19' (see footnote 39).

42 Minister of Innovation, Science and Economic Development, 'Guidelines on the National Security Review of Investments' (19 December 2016), online: http://www.ic.gc.ca.

43 ICA (see footnote 2), Section 3.

44 Industry Canada, 'Investment Canada Act – All Guidelines' (7 December 2012), online: http://www.ic.gc.ca.

45 Angela Avery, Peter Glossup and Paula Olexiuk, 'Foreign Investment in Canada's Oil and Gas Sector: New and Emerging Challenges' (2013) 51:2 Alta L Rev 343 at Paragraph 69.

46 Industry Canada, 'Statement Regarding Investment by Foreign State-Owned Enterprises' (7 December 2012), online: http://www.ic.gc.ca.

47 'Investment Canada Act – All Guidelines' (see footnote 44).

48 'Statement Regarding Investment by Foreign State-Owned Enterprises' (see footnote 46).

49 Government of Canada, 'Agreement Types' (21 March 2017), online:http://www.international.gc.ca.

50 ibid.

51 ibid.

52 See, for example, Agreement Between the Government of Canada and the Government of the People's Republic of China for the Promotion and Reciprocal Protection of Investments, Canada and the People's Republic of China, Articles 5 and 6 (entered into force 1 October 2014) (Canada–China foreign investment promotion and protection agreement (FIPA)).

53 See, for example, id., Articles 10–12.

54 ICA (see footnote 2), Section 4.

55 id., Section 14.1(6).

56 id., Section 15.

57 ICA (see footnote 2), Section 39.

58 id., Section 40.

59 id., Section 10(1).

60 id., Section 10(2).

61 RSC 1985, c C-34. Canada's competition law is governed by the CA, a federal statute that applies across Canada and contains both criminal and civil provisions aimed at preventing harmful anticompetitive practices in the marketplace. The CA empowers Canada's Commissioner of Competition to challenge transactions that are likely to prevent or lessen competition substantially in a relevant market. Subject to certain exceptions, the Commissioner may challenge a proposed transaction before the Competition Tribunal within one year of the transaction's substantial completion if it raises competition concerns. The Tribunal, an independent adjudicative body, is distinguished from the Competition Bureau (headed by the Commissioner), which investigates complaints and decides whether to proceed with the filing of an application to the Tribunal. The Bureau is part of the Department of Innovation, Science and Economic Development.

62 The size of the parties' threshold is met where the parties to the transaction (with their affiliates) have aggregate Canadian assets that exceed C$400 million or gross revenues from sales in, from or into Canada that exceed C$400 million in aggregate (CA (see footnote 55), Section 109(1)). For the pre-merger notification requirement to be triggered, the size of the transaction must also exceed a threshold, which was C$93 million for 2021 (CA (see footnote 76), Section 123(1)). This threshold value is determined annually according to an indexing mechanism set out in the CA, which is tied to Canada's gross domestic product.

63 CA (see footnote 61), Section 123(1).

64 Mathieu Frigon, 'Foreign Investment in Canada, Library of Parliament' (2011), online: http://www.parl.gc.ca.

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