Tories Consider Review of Investment Canada Act

Tories may seek review of Investment Canada Act after rejecting Potash bid.
Tories Consider Review of Investment Canada Act
Potash Corp.'s operations in Lanigan, Saskatchewan. The Conservative government has expressed an interest in reviewing the Investment Canada Act after Industry Minister Tony Clement rejected BHP Billiton's $39 billion hostile takeover bid for Potash. Potash Corporation of Saskatchewan
Omid Ghoreishi
Updated:
<a><img src="https://www.theepochtimes.com/assets/uploads/2015/09/Lanigan.jpg" alt="Potash Corp.'s operations in Lanigan, Saskatchewan. The Conservative government has expressed an interest in reviewing the Investment Canada Act after Industry Minister Tony Clement rejected BHP Billiton's $39 billion hostile takeover bid for Potash. (Potash Corporation of Saskatchewan)" title="Potash Corp.'s operations in Lanigan, Saskatchewan. The Conservative government has expressed an interest in reviewing the Investment Canada Act after Industry Minister Tony Clement rejected BHP Billiton's $39 billion hostile takeover bid for Potash. (Potash Corporation of Saskatchewan)" width="320" class="size-medium wp-image-1812265"/></a>
Potash Corp.'s operations in Lanigan, Saskatchewan. The Conservative government has expressed an interest in reviewing the Investment Canada Act after Industry Minister Tony Clement rejected BHP Billiton's $39 billion hostile takeover bid for Potash. (Potash Corporation of Saskatchewan)
The Conservatives may be reviewing the Investment Canada Act after Industry Minister Tony Clement last week rejected BHP Billiton’s $39 billion hostile takeover bid for Potash Corporation of Saskatchewan for not passing the “net benefit to Canada” test required under the act.

Prime Minister Stephen Harper said in Parliament last week that the act should be reviewed, although he did not elaborate on how it should be modified.

Harper’s comments were in response to NDP Leader Jack Layton’s remarks calling for the act to be more transparent and to allow more public participation in the decision making process.

”The process must be made public and transparent, so that the public can have a say on the infamous net benefit,” Layton said in Parliament.

Clement has not made public his reasons for blocking BHP’s takeover bid, citing provisions in the act that prohibit disclosure of this information for 30 days—the time granted BHP under the act to make changes to its offer.

The act underwent a review when it was amended in 2009 to make it possible to reject foreign takeover bids on the grounds of national security, among other changes.

Under the act, put in place by Brian Mulroney’s Progressive Conservative government in 1985, foreign takeovers valued over $299 million (the threshold set in 2010) need to undergo a review by the industry minister to ensure they are of net benefit to Canada.

While loosely defined in the act, some of the factors taken into consideration in evaluating whether the acquisition is of net benefit to Canada include the effect on employment, exports from Canada, technological development, and Canada’s competitiveness in the world markets, among other factors.

Craig White, a corporate and commercial lawyer with the Winnipeg-based Fillmore Riley law firm, explains that the process to determine net benefit to Canada has been kept purposely vague in the act to allow the minister greater flexibility in dealing with each case on its own merit.

“It’s a very flexible test… Even, if you think about it, the words ‘net benefit to Canada’ is a pretty vague term,” White says.

“I think deals can be very complex, and you aren’t necessarily going to be able to anticipate in legislation what exactly will be good for Canadians, so I think having vague wording allows them to be flexible and allows them to hopefully make the right decision on a case by case basis.”

Canada has used the Investment Canada Act to formally reject a foreign takeover bid only once—in 2008 when it refused the takeover bid by an American company for the information systems business of MacDonald Dettiwler & Associates Ltd., the maker of the Canadarm used in NASA space shuttles.

Following the industry minister’s rejection of BHP Billiton’s bid, the Australian mining giant said in a statement that it was “disappointed” with the decision, but insists that the offer provides a net benefit to Canada and will continue to cooperate with the minister and review its options.

Saskatchewan premier Brad Wall had launched a vigorous campaign to block the takeover, claiming it would adversely affect provincial revenues and move an important resource out of Canadian control.

Agriculture Minister Gerry Ritz, one of the Tories’ 13 Saskatchewan MPs, said in Parliament last week that potash, used as a fertilizer, is a “strategic resource” for Canada that “gives us a power and a strategic position in the global food supply to be major supplier of both the inputs and our crop and livestock production.”

Potash Corporation of Saskatchewan is the world’s largest producer of potash. It was first created as a Crown corporation in 1975 and was privatized in 1989.