When is a name change more than a name change? When the change is a reflection of shifting government priorities and an enhanced focus on national security scrutiny of inbound foreign investment in Canada.

The Foreign Investment Review and Economic Security (FIRES) Branch is the new name of the government department most recently known as the Investment Review Division (IRD) of Innovation, Science and Economic Development Canada. The shift in emphasis on economic security is the latest in a series of moves by the Canadian government which have increased the use of and focus on the national security review provisions of the Investment Canada Act as part of Canada's national security strategy.

In 2017-2018, the Canadian government only issued four (4) notices of potential review under the national security provisions – a few small sparks of concern. By 2021-2022, the embers of national security interest were clearly glowing, and the number of notices flared up to 24. The government has not yet released figures for the 2022-2023 fiscal year, but based on our experience we expect there will be a further significant increase in potential national security reviews conducted by the government.

Other examples of this heightened focus include the recent personnel appointments within the FIRES Branch. Jamieson McKay, the new Director General, has significant background with national security roles within the Canadian government, including experience at the Department of National Defence, while Marie Eve Roy Marcoux, the new Director of the Investment Review Directorate, was previously the Director, Financial Sector Integrity and National Security at the Department of Finance. These appointments of civil servants with significant national security experience demonstrates the Canadian government's focus on managing national security threats through the Investment Canada Act.

Finally, proposed amendments to the ICA are slowly burning their way through Parliament which, if passed, would require mandatory pre-closing notification for proposed investments by foreign investors in Canadian businesses that operate in to-be-prescribed "sensitive" sectors and give the Minister of Innovation, Science and Industry greater powers during national security reviews. For more information on these amendments, see our blog post.

Key Takeaway

National security has become a hot topic and is clearly a major priority for the Canadian government. Foreign investors looking to invest in Canadian businesses (including foreign businesses with Canadian subsidiaries), especially those which operate in sensitive sectors, should engage Canadian counsel in advance of implementing such investments to help mitigate potential risks and avoid getting burned.

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