On September 3, 2024, a first set of amendments to the national security provisions of the Investment Canada Act (the "ICA") came into force. These amendments significantly change the framework for national security reviews undertaken under the ICA. In particular, they give the Minister of Industry (the "Minister") greater control and autonomy over the national security review process, which was previously subject to oversight by the federal Cabinet. They also expand the Minister's rights and obligations with respect to information sharing; and provide clarity on the approach to be taken in judicial review of a national security review. Together, they appear to have the effect of shifting responsibility for these reviews from the federal Cabinet, which holds a more centralized executive branch, to the administrative division of government under the Minister's oversight. The amendments also formalize the review process in a manner similar to that adopted in the United States.
These are the first amendments to the ICA to come into force as a result of Bill C-34, the National Security Investment Review Modernization Act, but more are to come. This broad initiative represents the most significant update to the ICA's national security provisions since the Act was passed in 2009. As part of the Act, a new mandatory pre-closing filing regime is also expected to come into force (currently in 2025) and will apply to all investments in specified sectors if they meet certain prescribed criteria.
For the rest, these first amendments, and those that will follow, reflect a change of direction with regard to the main objective of the ICA, insofar as, previously, priority was given to examinations relating to the net benefit of Canada, whereas today, it seems to be given to examinations relating to national security.
Changes to National Security Review Procedures and Information Sharing
Expansion of the Minister's powers
- Minister may order national security review: The making of an order ordering a review of an investment that may harm national security is no longer the responsibility of the federal Cabinet; the Minister may now make such an order after consultation with the Minister of Public Safety and Emergency Preparedness (the "Minister of Public Safety").
- Minister may impose interim conditions : Where a national security review has been ordered, the Minister shall, after consultation with the Minister of Public Safety, impose interim conditions that are considered necessary to prevent breaches of national security that may arise during the review, provided that the imposition of the conditions does not result in significant new risks of breaches of national security. The Minister may subsequently remove a condition if the Minister is satisfied that it is no longer necessary to prevent such breaches.
- Investors may make representations and submit undertakings: Investors now have the right to make representations and submit written undertakings to the Minister as part of a national security review. The Minister may, with the concurrence of the Minister of Public Safety, determine that an investment will not be injurious to national security based on undertakings that have been made by the investor concerned. The Minister may subsequently accept additional undertakings from the investor to ensure that the national security risks posed by the proposed investment continue to be addressed; or, release the investor from the undertakings it has made if they are no longer considered necessary. Finally, the investor may be required to provide information relating to the investment to demonstrate that it is meeting its undertakings.
Judicial review
- Judicial Review: New rules have been introduced regarding the judicial review of decisions, orders and orders made in respect of national security reviews. In particular, where a judge considers that the disclosure of evidence or other information could be injurious to international relations, national defence, national security or the safety of any person, the judge must, at the request of the Minister, hear submissions on that evidence or other information in camera and in the absence of the applicant and their counsel. The judge must also ensure that the evidence and information is kept confidential throughout the proceedings. The judge must also ensure that the applicant is provided with a summary of the evidence or other information in the applicant's possession that allows the applicant to be adequately informed of the Government of Canada's position, but does not include any material the disclosure of which, in the judge's opinion, would be injurious to international relations, national defence, national security or the safety of any person. Note, however, that the judge may base his decision on evidence or other information available to him, even if a summary of the evidence or other information has not been provided to the applicant.
Sharing information and notices
- Notice: The Minister is required to notify the National Security and Intelligence Committee of Parliamentarians and the National Security and Intelligence Review Agency of: (i) any investment that has been authorized following undertakings given by the investors concerned, taking care to disclose the identity of the investor and the company targeted by the investment; and (ii) any investment subject to an order made by the Federal Cabinet for the purpose of establishing measures to protect national security, taking care to disclose the identity of the investor and the company targeted by the investment, and to provide details on the content of the order in question.
- New information sharing powers: The Minister may now disclose information obtained in the course of the administration or enforcement of the ICA to foreign states or bodies for the purposes of a national security review of a foreign investment.
- Expanded public disclosure : The Minister is now authorized to disclose the identity of the investor and the company that is the target of the investment when communicating that the federal Cabinet has made an order to protect national security in respect of an investment. In addition, the annual report on the administration of the ICA will in future include information on the exercise of the Minister's powers, duties and functions under applicable national security provisions.
Broader approach to net benefit reviews and reviews in the cultural sector
- Extension of the applicable period for ordering the review of an investment in the cultural sector : The period during which the federal government can order the review of an investment in the cultural sector that is not otherwise subject to review has been extended from 21 to 45 days.
- Expanded factors for net benefit reviews: The factors to be considered in assessing whether an investment is of net benefit to Canada have been updated to include (i) the impact of the investment on rights related to intellectual property whose creation was funded by the Government of Canada; and (ii) the impact of the investment on the use and protection of personal information about Canadians.
Strengthening of sanctions
- Increased financial penalties: The penalty for failing to comply with a formal notice issued by the Minister requiring an investor to comply with the ICA has increased from CA$10,000 to CA$25,000 for each day on which the contravention occurs or continues.
Key takeaways for businesses
- Investors should expect communications with the Minister to be more extensive in the future in connection with potential national security reviews, including with respect to the taking of interim measures and undertakings.
- In their transaction documents, parties should take into account the extended review periods and updated definitions.
- Investors should ensure that they understand the new powers that have been given to the Minister, as well as the new obligations incumbent on the Minister, with respect to the sharing of information, whether or not it is confidential under section 36 of the ICA.
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