Canada: Canada Prohibits Chinese SOE Acquisition Of Aecon On National Security Grounds

Last Updated: May 29 2018
Article by Sandy Walker

On May 23rd, the Canadian Government prohibited the $1.5 billion acquisition of Canadian construction company Aecon Group Inc., by China Communications Construction Company International Holding Limited (CCCC), one of the world's largest engineering and construction firms, for national security reasons.

In his statement, Minister of Innovation, Science and Economic Development Navdeep Bains stated that Canada is "open to international investment that creates jobs and increases prosperity, but not at the expense of national security." The federal Cabinet made its decision more than 3 months following its commencement of the national security review.

This decision represents the first major transaction that has been blocked by the Trudeau Government since it came to office in October 2015. In fact, the Trudeau Government has been criticized for being "too soft" on China, having last year reversed the previous Government's decision to reject the acquisition by Chinese investor, O-Net Communications, of ITF Technologies, a Quebec company specializing in fibre components, modules and lasers ( see related article) and having allowed a number of transactions that some commentators argued raised national security concerns such as Chinese company Hytera's acquisition of Norsat, a maker of satellite communications technology and a supplier to the US Government.

That said, the current Government made three divestiture orders related to foreign investments in its 2016-17 fiscal year (the nationality of the investors is not public) so that the CCCC/Aecon decision does not represent a sudden hawkishness on national security on the part of the Government.

The Aecon/CCCC deal has been subject to public debate since it was first announced last fall with commentators on both sides vigorously defending or opposing the deal. The nature and size of Aecon's business contributed to the concerns about national security. Aecon is a significant player in the construction of infrastructure, including telecommunications networks, transportation, electricity grids and military facilities, as well as the refurbishment of nuclear power plants, while CCCC is majority owned by the Chinese government. Aecon itself supported the CCCC acquisition as a means of more effectively competing with large global construction companies. A CCCC company had previously acquired an Australian construction company, John Holland, a transaction approved by the Australian government in 2015.

However, the federal Cabinet must have concluded that the combination of CCCC's status as a state-owned enterprise (SOE) and Aecon's work on critical infrastructure made the acquisition a material risk to Canada's national security. Reports in the media citing unnamed senior government sources also suggest that giving CCCC access to data and intellectual property relating to Aecon's past and future work were factors in the decision-making.

Given the size and profile of the transaction, and that it involved a Chinese state-owned company, the prohibition may have negative repercussions for Canada-China relations. The Chinese government, including the Chinese ambassador to Canada, had supported the deal. Yesterday The South China Morning Post reported that the Canadian Government's rejection of CCCC's investment was "the latest move by Western nations weighing national security concerns associated with Chinese investment." It also referred to President Trump blocking Broadcom's hostile takeover of Qualcomm on national security grounds.

It may take some time to assess any damage to Canada's relationship with China. The decision could be viewed as a one-off refusal that will not have an enduring impact on Canada/China relations or it could lead China to a broader and more far-reaching re-evaluation of the Trudeau's government commitment to China and potentially negative consequences for Chinese investment in Canada.

Containing the impact of the decision to short-term damage is possible if the Chinese government regards Canada's decision as one it can relate to: China also does not permit foreign investment in a number of sectors and has a national security screening process. Indeed, since the Government's decision to reject the CCCC/Aecon deal, the Chinese ambassador to Canada, Lu Shaye, has been quoted in the press as stating it is Canada's "sovereign right" to block the acquisition of a Canadian company.

If, instead, the Chinese government regards the prohibition as a broader signal that the Canadian Government is not supportive of Chinese investment in Canada (e.g., Lu Shaye expressed concern that the decision might reflect prejudice against a Chinese SOE) or does not have a consistent and cooperative strategy towards China, then the political goodwill and capital that the Trudeau government had with China in 2015 will be eroded. This could also lead to a deceleration of preliminary discussions on a free trade agreement with China. Early signals from China's ambassador to Canada since the CCCC/Aecon decision suggest that the damage to Canada/China relations may be limited: Mr. Shaye has stated that China would continue deepening its co-operation with Canada.

It is not clear whether the rejection of the CCCC/Aecon deal will discourage Chinese investment into Canada. Although commentators have cited the Harper Government's prohibition of SOE acquisitions of control in the oil sands in late 2012 as responsible for the slowing of Chinese investment in the ensuing years, there are other explanations such as the poor commodity prices that may be larger factors in explaining that trend. As a result of the Aecon deal, Chinese investors are likely to think twice before pursuing investments in sectors that raise potential national security concerns (e.g., critical infrastructure, technology and products used in military applications). Indeed, the decision appears to represent a setback for the Chinese government's consideration of a North American extension to its One Belt, One Road infrastructure and construction initiative.

However, where there are real opportunities in Canada for Chinese investors seeking know-how, technology and resources in industries that are priorities for China and that are not in sectors that are likely to raise national security issues, such investors should not be discouraged. There is no reason to believe that the CCCC/Aecon decision represents a sea-change in how the Canadian Government views Chinese investment. For example, only last year Canada accelerated the raising of the financial threshold for "net benefit to Canada" reviews from $800 million to $1 billion (in the enterprise value of the Canadian company being acquired) for private sector investors from China and other World Trade Organization countries. As a result, fewer Chinese investments are required to clear the regulatory hurdle of demonstrating a positive impact on the Canadian economy.

While the Aecon decision might give pause to Chinese investors in the short term, the Canadian Government may itself be seeking to reassure Chinese investors that the welcome mat has not been whisked away. So, it might just be a good time for Chinese investors to come to Canada.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

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. Specific Questions relating to this article should be addressed directly to the author.

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 Nov 2018, Other, Toronto, Canada

Dentons is pleased to sponsor the Global Property Market Forum taking place November 27, 2018 in Toronto.

27 Nov 2018, Conference, Toronto, Canada
Dentons is pleased to sponsor the Global Property Market Forum taking place November 27, 2018 in Toronto. This one day forum provides participants with an intimate and informative opportunity .
30 Nov 2018, Conference, Toronto, Canada

Dentons is proud to be the presenting sponsor for Autonomous Vehicle P3s: Visions of the Future at this year’s CCPPP conference in Toronto on Nov 5-6, 2018.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions