New guidelines under the Investment Canada Act (“ICA”) now mandate a national security review of a wider range of acquisitions by non Canadians in certain sectors, or by state owned or state influenced enterprises. The new guidelines signal that Canada is NOT “open for business” as governments have preferred to boast.
Canada is acting in lock step with other countries concerned about certain foreign actors (state owned or state influenced) and the targeting by foreign buyers of sensitive sectors or technologies. Companies should note that areas identified as presenting national security concerns now include sensitive personal data, critical minerals and sensitive technologies (see Annex A). A review can result in undertakings or rejection of the proposed transaction. Deals can also be unwound.
The new guidelines were preceded by guidelines last Spring subjecting investments in critical goods and services in the health sector to enhanced scrutiny under the Investment Canada Act. These remain in effect (vaccine production or the lack of it is a whole other story).
The new provisions aim to protect Canadian companies which possess sensitive personal data or develop and manufacture sensitive technologies that form part of critical supply chains. Factors to be considered in a national security review process include: impact on defence capabilities and interests, transfer of sensitive technology, goods under the Defence Production Act, impacts on the supply of critical goods and services, impact on critical minerals, security of critical infrastructure, potential to enable foreign surveillance (read Huawei) and impact on foreign relationships. An interesting factor on this list is the potential for the investment to enable access to personal data including health, financial and communications data. This list of factors is a guide only as the government has reserved the right to look to additional concerns.
The national security review is in addition to any “net benefit” review that might be required under the ICA. A national security review is not related to the dollar threshold of a investment.
The new guidelines can be found here.
The government is also moving to protect Canada’s research ecosystem to balance openness to collaboration with appropriate safeguards for Canadian researchers, knowledge, data and intellectual property. These provisions may be found here.
For more information, please contact:
Barry Campbell: barry@campbellstrategies.com