Industry Minister Proposes Reforms to Foreign Investment Legislation
On Thursday December 7th, Canada’s Minister of Innovation Science and Industry, François-Philippe Champagne, introduced legislation to the House of Commons that intends to amend the Investment Canada Act (ICA), to address concerns of national and economic security. The Minister highlighted that these changes are the most significant update to Canada’s foreign investment legislation since its inception in 1985.
Also cited as the National Security Review of Investments Modernization Act, the proposed legislation will notably create new powers allowing the Minister to impose conditions on foreign direct investment transactions, rather than reject the transaction entirely, which is an authority not provided by the current legislation. Today’s announcement does not impose explicit guidelines for investments by state owned enterprises – which are subject to explicit rules in Canada’s critical minerals sector – but will instead apply to all transactions to ensure organizations cannot circumvent its purpose. The changes will apply to venture capital efforts for controlling or partial acquisitions, but in this regard, the Minister reassured Canadians that this framework is in line with Canada’s economic and security allies and will not prevent the growth of Canadian businesses that rely on foreign capital from allied nations.
Proposed Amendments to the Investment Canada Act will:
- Require investors in certain business sectors to register with industry Canada prior to the implementation of investment,
- Provide authorities for the Minister to extend the national security review process of investments,
- Provide authorities for the Minister to impose conditions during national security review,
- Provide authorities for the Minister to accept undertakings to mitigate national security risks,
- Improve information sharing with international counterparts
- Impose new rules for the protection of sensitive information during judicial review,
- Impose stronger penalties when an investor does not respect the rules in place.
The Minister held a media availability to discuss the proposed legislation and reaffirmed Canada’s strong position to attract foreign investment because of domestic talent, a vibrant economic ecosystem, critical minerals, renewable energy, and access to a market of 1.5 billion consumers on a preferential basis.
When discussing the announcement, the Minister showcased certain technologies and sectors including critical minerals, and semiconductors, underpinned by sensitive technologies including quantum, artificial intelligence, and cybersecurity. The Minister additionally highlighted key resources including lithium, cobalt, and graphite. When responding to questions about the proposed legislation, the Minister acknowledged that geopolitics has changed, and Canada needs to change as well, highlighting his view that Canada needs to be more vigilant and needs processes in place to ensure national and economic security for both procurement and transactions.
This announcement follows consultations in 2021 with Public Safety Canada and is aligned with other security-focused items on the government’s legislative agenda, including amendments to the broadcasting act, and the creation of a Critical Cyber Systems Protection Act. This announcement also served as an opportunity for the Minister to reinforce the government’s previous announcements regarding new rules for sensitive technologies, as well as critical minerals.
