While the USMCA or CUSMA (as Canadians prefer to call it) remains in force (or for however long it remains in force), acquisitions of Canadian assets by American entities are exempt from the requirement to pre-notify Investment Canada about the transaction.
Over the last decade, Canada has moved to bolster its power to review and challenge acquisitions by adding “Guidelines” under the Investment Canada Act that establish screens for: national security; to protect critical minerals, critical infrastructure, the supply chain, and sensitive technology; and to prevent state-owned enterprises (“SOEs”) from acquiring assets in Canada. It was pretty much China that the Government had in mind with these Guidelines.
Yesterday the Government released “Updated Guidelines on the National Security Review of Investments” clearly aimed at opportunistic investments that might be made by foreign (read American) acquirers in the current context – weak dollar and trade and tariff threats. Call this one the “Blackrock Rule”.
Blackrock’s recent surprise acquisition Hong Kong’s CK Hutchinson’s interest in Panama Ports Company, was clearly an opportunistic investment. If the deal was not made at the behest of the US government, then certainly it was done with its enthusiastic support. This raised the question for our Government of what would happen if a deep pocketed US entity were to seek to buy vulnerable Canadian assets.
Before the Investment Canada Guidelines were updated, the Canadian Government might have been able to force a review of a such a transaction on the basis of a Blackrock being a state-owned enterprise because the definition of an SOE includes an entity influenced directly or indirectly by a foreign government. That would be a messy and consequential finding.
If a buyer wanted to challenge such a finding it would have to look to the dispute resolution provisions of the USMCA or CUSMA , or the dispute resolution provisions of the WTO. Given President Trump’s antipathy to and rejection of both, a major US entity going that route would be ironic. Changing the review Guidelines to add “economic security” in assessments of national security clears things up. With this change, a Panama Ports type deal could be challenged.
(US) investors beware. The Government has moved very quickly to close a loophole and to say loudly and clearly: “Canada Is Not For Sale”.