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On the heels of the US imposing broad based tariffs on Canada, on March 5, 2025, Innovation, Science and Industry Minister François-Philippe Champagne announced amendments to the "Guidelines on the National Security Review of Investments" (the "National Security Guidelines") under the Investment Canada Act ("ICA"). The revised guidelines, which are effective immediately, incorporate a new factor, under which the government may consider "the potential of the investment to undermine Canada's economic security" when determining whether a foreign investment should face a national security review and, ultimately, whether it is "injurious to national security" (the "March 5th Amendments"). The Minister explained that the change was necessary "as a result of the rapidly shifting trade environment", since "some Canadian businesses could see their valuations decline, making them susceptible to opportunistic or predatory investment behaviour by non-Canadians".
Dual Industrial Policy and National Security Policy Interests Under the ICA
Acquisitions of control of Canadian businesses, and establishments of new Canadian businesses, by non-Canadians are subject to one of two mandatory filing requirements: either an application for review for direct acquisitions of control of Canadian businesses (and indirect acquisitions of control of a Canadian cultural business) that exceed a prescribed financial threshold ("Reviewable Investments") or, for all other reportable investments, a notification ("Notifiable Investments"). Reviewable Investments cannot be closed (other than indirect acquisitions of control of Canadian cultural businesses) until the non-Canadian investor has filed its application for review and the Minister has approved the investment on grounds that is likely to be of "net benefit to Canada". Notifiable Investments are not subject to an approval requirement and the notification filing may be made at any time before or within 30 days after the completion of the investment.
Separate and apart from the above, Part IV.1 of the ICA sets out a national security review regime that applies not only to Reviewable Investments and Notifiable Investments, but also to investments by non-Canadians to acquire, in whole or in part, or to establish an entity carrying on all or any part of its operations in Canada, if the entity meets a connection to Canada test set out in s. 25.1(c) of the ICA. The government may start the national security review process at any time from when the responsible Minister becomes aware of the transaction until either 45 days from when a complete filing is made or, in cases where a filing is not required or is not voluntarily made, within five years after completion of the investment. The Minister may commence the national security review process where he concludes that the investment "could be injurious to national security".
National security reviews generally focus on the nature of the target Canadian business' operations and the risk profile of the non-Canadian investor, including the potential for the investor to be influenced by foreign states. The National Security Guidelines provide a non-exhaustive list of factors that may raise national security concerns, including the potential impact of the investment on defence, law enforcement, sensitive technology, controlled goods, critical infrastructure, critical minerals, sensitive personal data, the supply of critical goods and services, and government contracts in Canada.
"Economic Security" Becomes a Relevant Factor
The March 5th Amendments expand this non-exhaustive list of factors to include "the potential of the investment to undermine Canada's economic security through the enhanced integration of the Canadian business with the economy, or any sector of it, of a foreign state." The press release announcing the change to the guidelines explains that, in applying this new factor, "the Government will consider, among other things, the size of the Canadian business, its place in the innovation ecosystem, and the impact on Canadian supply chains."
For now, the practical impact of these changes is unclear. It remains the case that, for a national security review to be initiated, the government's decision must be rooted in an overall concern for national security and not purely economic concerns given "national security" is the only enumerated factor set out in Part IV.1 of the ICA. The existing guidelines already deal at length with the criteria for national security reviews, enhanced scrutiny for state-owned investors (or private investors assessed as being closely tied to or subject to direction from foreign governments), and provide a Sensitive Technology List and a Critical Minerals List.
As it must be assumed that the Minister intended for the March 5th Amendments to be accretive to the existing guidance, and given the timing of the announcement, we infer that it is intended to capture scenarios where a Canadian business — whether public or private — has seen its value diminished, for example owing to the anticipated depreciation of the Canadian dollar or declining enterprise values due to the challenging business environment brought on by the tariff war between Canada and the US, and is therefore at risk of being acquired; the consequence of such "predatory acquisitions" include the hollowing out of the business' assets, intellectual property and capital in Canada, thereby injuring Canada's economic security.
This is not the first time that the Canadian government has revised its ICA guidance in response to extraordinary economic events. On April 18, 2020, the Minister issued a statement outlining the government's intention to increase scrutiny of certain foreign investments under the ICA as a measure to protect the health and safety of all Canadians and to stabilize the Canadian economy during the COVID-19 pandemic. Similar to the March 5th announcement, in 2020 the Minister indicated that he was acting in response to Canadian businesses seeing "their valuations decline as a result of the pandemic". In the year following this announcement, national security reviews more than doubled from 10 reviews in 2019-2020 to 23 in 2020-21. It remains to be seen whether the March 5th Amendments will drive a similar increase in national security reviews in Canada.
Separately, while the ICA applies to investments by "non-Canadians" irrespective of the nationality of an investor, and thus the National Security Guidelines similarly applies agnostically, it remains to be seen whether the Canadian government will focus its review of economic security considerations only to investments by US investors, particularly if the US dollar strongly appreciates and if there is a risk that the acquired Canadian business will be relocated to the US.
Finally, it is not clear whether the focus on economic security will apply only to those investments where control of the Canadian business is acquired directly or whether the government will also apply this factor to indirect acquisitions of control of Canadian businesses where the Canadian business represents a relatively limited proportion of the target's overall enterprise value.
Certainly, this most recent amendment to the National Security Guidelines will give the Canadian government an additional hook to review investments on national security grounds where they raise strategic economic concerns for Canada, though whether any given transaction is at risk of being subject to a national security review for economic security concerns will need to be assessed on a transaction by transaction basis.
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