Amendments to Investment Canada Act Will Toughen Foreign Investment Scrutiny: Innovation Minister

Innovation, Science, and Industry Minister Francois-Philippe Champagne responds to a question during Question Period in Ottawa on Nov. 16, 2022. (Adrian Wyld/The Canadian Press)

Canada is updating the Investment Canada Act (ICA) to toughen scrutiny on foreign investments and protect national security, a move that came in the wake of the government’s recently released Indo-Pacific Strategy labelling China as an “increasingly disruptive global power.”

“The reality is geopolitics of the world today has vastly changed in the last few years. That’s why we must be prepared to face the challenges that could endanger our economic security, and I would say our national security,” Innovation Minister François-Philippe Champagne said at a press conference on Dec. 7.

“To protect Canadian interests, to secure our resources, and to keep Canadians safe, we are doing the most significant update of the law in more than a decade.”

A government news release says the amendments to the ICA would include:

• New filing requirement prior to the implementation of investments in prescribed business sectors
• Authority for the Minister to extend the national security review of investments
• Stronger penalties for non-compliance
• Authority for the Minister to impose conditions during a national security review
• Authority for the Minister to accept undertakings to mitigate national security risk
• Improved information sharing with international counterparts
• New rules for the protection of information during the course of judicial review

“These proposed changes will ensure that foreign investments in Canada are not only to the net benefit of Canadians, but are not detrimental to our national security,” Champagne said.

While China is not directly mentioned in the amendment, Champagne noted that new guidance has been put in place to prevent the transfer of sensitive technology and information to China.

Foreign investors seeking to take over Canadian companies in sectors sensitive to national security are required to file notifications for review, according to the news release.

The act will “ensure that the national security review of certain transactions in prescribed sectors can occur before potential injury to national security by requiring investors to file notifications in time periods set out in regulation,” the release said.

While the government hasn’t specified the sectors that would require “pre-notification,” Champagne said it would be covering ”sensitive technologies around critical minerals, around anything about personal information.”

“As we’ve seen more and more, in the digital economy, people ... want to access data of Canadians, so you can rest assured that I'll be a hawk in that to make sure that we protect the information of Canadians and that any transaction is in the interest of Canadians and our national security,” he said.

China

With demands for critical minerals on the rise and the importance of these natural resources to national security, Ottawa is taking steps to protect and develop its supply chain from foreign governments’ investments.

On Nov. 2, Champagne ordered three Chinese companies to sell their investments in Canadian lithium companies, as Canada and the United States struggle to enhance independence from China, which has overwhelming dominance in the critical minerals supply chain, owning up to 80 percent of market share in some cases.

Champagne said on Dec. 7 that the pre-notification requirement will also apply to both state-owned enterprises and private companies.

“The Investment Canada Act when it comes to national security has no threshold. So the law would allow the current law, as well as the future law ... to review any transaction with respect to national security,” he said.

“We just put more rules around state-owned enterprises because there’s a presumption that if a state-owned company wants to do that, we would apply additional scrutiny, but we would only find it to the benefit of Canada in very exceptional circumstances,” he said, adding that in the case of private companies, the government will be looking at it “on a case by case basis.”

Ottawa’s Indo-Pacific Strategy labelled China as an “increasingly disruptive global power,” signalling its intent to join allies in confronting Beijing’s global influence operations.