Canada: Proposed Amendments to the Investment Canada Act

Last Updated: September 7 2005

This article was originally published in Blakes Bulletin on International Trade, July 2005

Article by: Jesse Tracey and Cliff Sosnow, ©2005, Blake, Cassels & Graydon LLP

Bill C-59 allows the government to review foreign investments if it is thought that they might compromise Canada’s national security. The amendment contains no definition of national security nor does it set out criteria to be considered when determining if an investment is a threat. Foreign investors are given little protection from arbitrary and capricious decisions under the NAFTA and the WTO.

Overview On June 20, 2005, the Minister of Industry announced amendments to Canada’s foreign investment legislation, the Investment Canada Act (ICA). The proposed amendments contained in Bill C-59 (An Act to Amend the Investment Canada Act) would allow foreign investments to be modified or disallowed because of concerns they may compromise Canada’s national security. The ICA currently allows for review of foreign investment but this review is limited and the factors to be considered are set out in the legislation. These factors are also reflected in the North American Free Trade Agreement (NAFTA) in the Investment Chapter under Annex I and certain provisions of the World Trade Organization (WTO) General Agreement in Services (GATS) and the Trade Investment Measures (TRIMs) Agreement. This transparency allows for certainty and predictability in decision making and affords a level of protection to investors. In our view, the proposed amendments to the legislation remove this certainty and protection. The amendments do not define national security nor do they set out the criteria to be used when considering it.

The Investment Canada Act Amendments

Recognizing that increased capital and technology would benefit Canada, the ICA was originally established to encourage investment in Canada that contributed to economic growth and employment opportunities, ensuring a net benefit to all Canadians. In its present form, the ICA differentiates between investments in cultural businesses and other investments. Investments in cultural businesses are reviewable by the Minister of Canadian Heritage regardless of their asset value. Other investments are reviewable by the Minister of Industry but only when the asset exceeds an established threshold, $250 million in direct acquisitions for (WTO) members. A lower threshold applies for certain sensitive sectors such as uranium production, certain financial services and transportation services or where both the buyer and the seller are not from countries or entities that are members of the WTO.

When the Minister is making a decision as to whether the investment will be of net benefit to Canada, certain listed economic factors, known as the net benefit test, must be considered. These factors are reflected in Annex I to Chapter 11 of the NAFTA, the Schedule of Canadian Commitments appended to the GATS, and the TRIMs Agreement. They include the effect of investment on domestic competition; on Canada’s ability to compete in world markets; and on the compatibility of the investment with national and provincial economic and industrial policies. The listed criteria, along with the financial threshold, minimize hindrance to investments flowing into Canada. Foreign investors are afforded protection from arbitrary and capricious decisions and can appeal decisions using the NAFTA or the WTO through the proxy of their government.

The new provisions could take away this protection as it would allow the Minister to conduct foreign investment reviews for security purposes when the Governor in Council (i.e., Cabinet) deems the review necessary, independent of existing reviews and without the former limits of sectoral or asset value thresholds. Under Bill C-59, the Minister can alter or deny investment if he or she has "reasonable grounds to believe that an investment by a non-Canadian could be injurious to national security." The new powers provided by the amendment do not come with any limit, definition or criteria to be considered.

Comparable U.S. Provisions

While the government claims that the proposed amendments bring the Act in line with other G8 countries, there are a few important differences with, for example, the equivalent American legislation which provides far more protection to potential investors from arbitrarily being denied the opportunity to invest. The United States federal government reviews foreign direct investment for national security concerns under Section 721 of Title VII of the Defence Production Act of 1950, known as the Exon-Florio Amendment.

Under the legislation, the President has the authority to suspend or prohibit any foreign acquisition, merger or take-over of a U.S. corporation that is determined to threaten the national security of the United States but only if he finds there is credible evidence that the foreign entity exercising control might take action that threatens national security and the law does not provide adequate authority to protect the national security.

The U.S. legislation states that credible evidence is required, while no such requirement is included in the Canadian legislation. The U.S. legislation also goes further to list the factors that the President or his designee may consider in determining the effects of a foreign acquisition on national security, including the potential effects of the transaction on the sales of military goods, equipment, or technology to a country that supports terrorism.

NAFTA and WTO Provide Limited Protection

In the current international trade environment, the lack of certainty in Bill C-59 may have negative consequences for foreign investment in Canada. Under Article XIV bis of the GATS, Article XXI of the GATT (General Agreement on Tariffs and Trade) and Article 2102 of the NAFTA, there are expansive exceptions for national security measures. These international agreements historically allow countries to limit trade and investment when they perceive their national security is threatened. A country is left to make this determination and, "in practice", no recourse is left for investors or countries denied access to markets. Given the current global environment, this is unlikely to change in the future. Investors will get little protection from either of these agreements if they feel they have been unfairly denied access to markets as a result of national security concerns under the amended ICA.

Listing Criteria is a Better Way

The Canadian legislation, as tabled, lacks any explicit direction in considering what constitutes a threat to Canadian security. By following the lead of our neighbors to the south and providing a definition of national security, along with the criteria to be considered when making a decision, the Canadian Government can provide protection to foreign investors and also protect Canadians from harm.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
27 Oct 2016, Seminar, Toronto, Canada

Please join members of the Blakes Commercial Real Estate group as they discuss five key provisions of a commercial real estate purchase agreement that are often the subject of much negotiation but are sometimes misunderstood.

1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.