On December 7, 2022, François-Philippe Champagne, Canada’s Minister of Innovation, Science and Industry (Minister), announced a sweeping set of proposed amendments to the national security provisions of the Investment Canada Act (ICA). The proposed amendments include:
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A new, pre-closing filing requirement in certain business sectors;
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Authority for the Minister to extend the timelines of national security reviews;
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Stronger penalties for non-compliance, including new penalties and substantial increases to fines;
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Authority for the Minister to impose interim conditions on an investment during a national security review;
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Authority for the Minister to accept undertakings to mitigate national security risk;
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Authority for the Minister to disclose information that is otherwise privileged under the ICA to foreign states for the purposes of foreign investment reviews; and
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New rules for the protection of information during judicial reviews.
Today’s announcement is the latest in a series of increasingly stringent national security rules over the past couple of years. These have included “enhanced scrutiny” of foreign investments during the COVID-19 pandemic that may be driven by “non-commercial imperatives” (April 2020); investments by Russian investors being permitted only on an “exceptional basis” in response to Russia’s invasion of Ukraine (March 2022); and rules regarding investments involving “foreign SOEs or foreign-influenced private investors” in critical minerals (October 2022). Most recently, the government’s long-awaited Indo-Pacific Strategy specifically described an updated ICA as an important tool to respond to China as an “increasingly disruptive global power.”
These proposed amendments signal that the government is inclined to take a harder line on certain types of foreign investment. Depending on how the scope of the prescribed business sectors and applicable circumstances are defined, this could prove to be an important change in ICA law and practice. However, key aspects of these proposed amendments remain open and undefined, namely the prescribed business sectors subject to the new pre-closing filing requirement. The government also has not addressed the lack of transparency associated with national security reviews under the ICA, which fosters an element of uncertainty as to the types of investments that may give rise to national security concerns. Regardless, foreign investment remains a key driver of the Canadian economy and investors can expect the government to strike a balance between the legitimate consideration of national security imperatives and the need for Canada to remain a predictable and attractive jurisdiction in which to invest.
