Originally published in Blakes Bulletin on
Competition Law, April 2008
Over the past several months, the federal government has
demonstrated its willingness to use the Investment Canada
Act (the Act) to closely screen acquisitions of Canadian
businesses by foreign investors.
Recent developments in this regard include:
On April 10, 2008, it was reported that the Minister of
Industry, Jim Prentice, had sent a notice to Alliant
Techsystems Inc. (ATK), a Minnesota-based company, advising
ATK that its proposed acquisition of MacDonald Dettwiler
and Associates (MDA) is not likely to be of net benefit to
Canada – this being the statutory test under the
Act for ATK being in a position to complete the
MDA operates Radarsat-2, a satellite that is used to
observe Canada's Arctic, and is also the developer of
the 'Canadarm', the robotic limb used on the space
shuttle and International Space Station. The Minister's
letter to ATK was sent pursuant to subsection 23(1) of the
Act. Under this section, ATK has 30 days – or
such further period as may be agreed on with the Minister
– to make any additional representations and
undertakings in an effort to demonstrate to the Minister
that its acquisition is likely to be of net benefit to
Canada. This development is particularly noteworthy for at
least two reasons. First, it is relatively uncommon for the
Minister to issue a formal letter under subsection 23(1)
indicating that he is prepared not to approve a proposed
transaction. In the overwhelming majority of cases, the
investor and Minister can arrive at a favourable net
benefit ruling within the initial 45-day waiting period or
following an extension thereof. Second, ATK is a U.S.
investor. With the exception of a Canadian business engaged
in a cultural business, there is no history of the Act
being used to potentially block a transaction involving an
investor from the United States. Recent scrutiny under the
Act has been limited to state-owned enterprises (see below)
and investments from certain other parts of the globe. In
defending the Minister's decision, Prime Minister
Stephen Harper told the House of Commons that "No one
should doubt the determination of this government and this
minister to protect this country's
In December 2007, Industry Canada released guidelines on
the review of investments by state-owned enterprises (SOEs),
such as sovereign wealth funds. The guidelines reflect the
government's policy that the governance and commercial
orientation of SOEs will be considered in determining whether
an investment subject to review under the Act is of 'net
benefit' to Canada. In particular, the guidelines state
that the Minister of Industry will examine whether the SOE
making the investment adheres to Canadian standards of
corporate governance, such as commitments to transparency and
disclosure, independent members of the board of directors,
and independent audit committees.
On various occasions, the federal government has
confirmed that it is considering the proposal of a national
security test as part of the Minister of Industry's
review of foreign investments under the Act. In particular,
the Competition Policy Review Panel, which was established by
the federal government in July 2007, is considering the
possibility of a national security review clause as part of
its mandate to review key elements of Canada's
competition and investment policies to ensure that they are
Canada is not alone in reconsidering how investments by
foreign investors will be reviewed. On April 9, 2008, for
example, the U.S. Treasury Department announced that it will be
releasing rules by the end of April clarifying how the
government will examine acquisitions by foreign investors that
may pose national security risks.
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.
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