On April 26, 2012, the Canadian government announced plans to
amend the Investment Canada Act (the
"ICA"). The amendments in Bill C-38 (the
Jobs, Growth and Long-Term Prosperity Act) are intended to
(i) enhance the transparency of the review process under the ICA;
and (ii) improve enforcement tools for contraventions of the
The ICA currently authorizes the Minister to disclose publicly
only a final decision allowing or disallowing a proposed investment
and the reasons for the decision. Before making any final net
benefit decision, the Minister must notify the investor if he or
she is not satisfied with the proposed investment and provide the
investor with an opportunity to make further representations and
undertakings. The ICA currently does not permit the Minister to
disclose this preliminary notice or the reasons for the negative
determination. The proposed amendments will authorize the Minister
to disclose this preliminary notice and, unless the relevant party
satisfies the Minister that its interests may be prejudiced, the
reasons for the preliminary determination. The Minister has rarely
notified an investor of a preliminary unfavourable determination.
However, a preliminary notice was issued to BHP Billiton in
connection with its proposed acquisition of Potash Corp in 2010.
Following receipt of this notice, BHP did not proceed with the
transaction and the government was criticized for, among other
things, not explaining the reasons for its preliminary decision.
The amendments address this shortcoming.
The proposed amendments will also authorize the Minister to
accept security from an investor for a contravention of the ICA. As
a practical matter, any contravention would likely be limited to an
investor breaching its undertakings. This presumably addresses the
criticism by some that the government's remedies for
non-compliance are insufficient, especially in light of the
protracted enforcement measures taken against U.S. Steel for its
failure to comply with its undertakings in connection with its 2007
acquisition of a Canadian steel company.
In its announcement of the proposed amendments, the government
stated that the Minister will be authorized to accept such security
"when offered by an investor". It remains to be seen how
important it will be for an investor to "offer" to give
such security on the Minister's determination as to whether the
investment will be of net benefit to Canada. The proposed
amendments also permit the Minister to publicly disclose that the
Minister has accepted security posted by an investor.
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