Innovation, Science and Economic Development Canada
("ISEDC") has published its Annual Report on the
Investment Canada Act (the "ICA") for the fiscal
year 2015-2016 (the "Report"). The ICA is Canada's
foreign investment review statute. The Report discloses statistics
concerning ISEDC's review of transactions subject to the ICA.
Notably, the Report includes for the first time information about
ISEDC's administration of the national security provisions of
the ICA since those provisions were introduced in 2009.
This alert highlights the Report's disclosures concerning
the administration of the national security review provisions of
Results of National Security Reviews
The national security provisions of the ICA came into effect in
March 2009. Between that date and March 31, 2016, ISEDC has
received 4,359 notifications of proposed investments subject to
notification requirements, and 112 applications for review of
proposed investments. It appears that pursuant to the ICA, ISEDC
has recommended that the Governor-in-Council (the "GIC")
order eight national security reviews of investments, as broken
April 2012 – March 2013
April 2013 – March 2014
April 2014 – March 2015
April 2015 – March 2016
Among the eight national security reviews ordered by the GIC:
three resulted in directives not to implement the proposed
investment; two resulted in orders that the non-Canadian investor
divest control of the Canadian business; and two resulted in
authorization of the proposed investment subject to conditions to
mitigate the associated national security risk. One review resulted
in the proposed investment being withdrawn prior to the issuance of
a final order.
Guidance Concerning the Administration of the National Security
The Report also provides some additional guidance about how
ISEDC administers the foreign investment provisions of the ICA.
This is a welcome development, given the generally opaque nature of
the national security review process.
Screening of transactions for national security review under the
ICA is conducted by ISEDC in conjunction with Canada's national
security agencies. After initial screening, further examination may
be initiated through a recommendation to the GIC from the Minister
of Innovation, Science and Economic Development (the
"Minister") after consultation with the Minister of
Public Safety and Emergency Preparedness.
If an investment is subject to the ICA's notification
requirements, the Minister has 45 days after receiving notification
(which can be unilaterally extended up to an additional 45 days) to
seek an order from the GIC initiating a national security review.
For investments that do not require notification, the Minister has
up to 45 days from the implementation of the investment to seek
such an order. If an investment is reviewed after implementation,
the review may result in an order unwinding the investment if it is
found to be injurious to national security.
In cases where an application for review or notification has not
been properly filed, ISEDC may advise the non-Canadian investor of
its obligations under the ICA and may also require the non-Canadian
investor to provide information necessary to determine whether an
investment could be injurious to national security. In conducting a
national security review ISEDC may also require non-Canadians, or
businesses involved in a proposed or implemented investment by a
non-Canadian, to provide information required to conduct the
national security analysis. The issuance of such a request for
information does not necessarily imply that the GIC either has or
will order a national security review.
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