Order Fixing September 3, 2024 as the Day on which Certain Provisions of An Act to amend the Investment Canada Act Come into Force: SI/2024-32
Canada Gazette, Part II, Volume 158, Number 14
Registration
SI/2024-32 July 3, 2024
AN ACT TO AMEND THE INVESTMENT CANADA ACT
Order Fixing September 3, 2024 as the Day on which Certain Provisions of An Act to amend the Investment Canada Act Come into Force
P.C. 2024-814 June 21, 2024
Her Excellency the Governor General in Council, on the recommendation of the Minister of Industry, under section 23 of An Act to amend the Investment Canada Act, chapter 4 of the Statutes of Canada, 2024, fixes September 3, 2024 as the day on which section 1, subsections 4(1), (3) and (4), sections 5 and 6, subsection 7(1.1), sections 8.1 to 11 and 13, subsections 14(2) and (3), sections 15 to 19.1, subsections 20(3) and (4) and 21(4) and section 22 of that Act come into force.
EXPLANATORY NOTE
(This note is not part of the Order.)
Proposal
This Order, pursuant to section 23 of An Act to amend the Investment Canada Act (chapter 4 of the Statutes of Canada, 2024), fixes September 3, 2024 as the day on which section 1, subsections 4(1), (3) and (4), sections 5 and 6, subsections 7(1.1), sections 8.1 to 11, section 13, subsections 14(2) and (3), sections 15 to 19.1, subsections 20(3) and (4), subsection 21(4) and section 22 of that Act come into force.
Objective
The objective is to bring into force amendments to the Investment Canada Act that are designed to modernize foreign direct investment review including by improving the efficiency and flexibility of the national security review process while enhancing transparency for stakeholders and Canadian businesses in the foreign investment regime.
Background
The Investment Canada Act permits the Minister of Industry to conduct a review of significant foreign direct investments resulting in the acquisition of control of a Canadian business to determine whether the investment would be of likely net benefit to Canada’s economy. The Investment Canada Act also allows the Minister of Industry to conduct reviews of foreign investments of any size to assess their risks to Canada’s national security. The Governor in Council (GIC) may take any measure it considers necessary to protect national security, including to block the investment or order its divestiture.
The Investment Canada Act balances a positive investment climate to promote economic prosperity with safeguarding Canada from malicious actors that would attempt to gain ownership or control of sensitive Canadian goods, technology, infrastructure, or personal data for purposes that could be injurious to Canada’s national security.
On December 16, 2021, the Ministerial Mandate Letter for the Minister of Innovation, Science and Industry was published. The letter asked the Minister to “contribute to broader efforts to promote economic security and combat foreign interference by reviewing and modernizing the Investment Canada Act to strengthen the national security review process and better identify and mitigate economic security threats from foreign investment.” The last set of substantive amendments to the Investment Canada Act was made in 2009, adding the provisions on the national security review of foreign investments. The modernization effort seeks to introduce new authorities and bolster existing ones in the Investment Canada Act for the government of Canada to address changing threats that can arise from foreign investments.
Bill C-34, An Act to amend the Investment Canada Act, which was tabled on December 7, 2022, is the result of the modernization effort to fulfil this mandate commitment, with further amendments introduced by the Standing Committee on Industry and Technology (INDU) and approved by the House of Commons.
Bill C-34 received royal assent on March 22, 2024. This Order will bring into force amendments to the Investment Canada Act that can be operationalized immediately. These provisions are as follows:
- (1) The new Ministerial authority to order the extension of a national security review under subsection 25.3(1). The amendment makes the national security review process more efficient by providing the Minister of Innovation, Science and Industry, in consultation with the Minister of Public Safety, the power to extend reviews under the subsection 25.3(1) stage of review, whereas previously a GIC order was required at this stage in the multi-step process. Removing the additional step of getting an order by the GIC will provide more time for security and intelligence partners to complete their analysis.
- (2) The new ministerial authority to impose interim conditions. The amendment allows the Minister of Innovation, Science and Industry, after consultation with the Minister of Public Safety, to impose interim conditions on an investment during the national security review. This will reduce the risk of national security injury taking place during the course of the review itself, such as through the possible access to or transfer of assets, intellectual property or trade secrets before the review is complete. Once the national security review of the investment is complete, if an investment is allowed to proceed, similar conditions may be imposed by the GIC in an order under subsection 25.4(1).
- (3) The new ministerial authorities to allow an investment on the basis of undertakings provided by the parties to mitigate national security risks. Previously, the imposition of conditions on a transaction to mitigate national security risks could only occur through a GIC order under subsection 25.4(1). The amendments would allow new undertakings to be accepted at the ministerial level that would continue to address the risks of injury to national security and to release parties from undertakings if they are no longer necessary, which was not previously possible for the GIC. These undertakings will have to satisfy the Minister of Innovation, Science and Industry, with the concurrence of the Minister of Public Safety, that they sufficiently address the national security injury that would result from the investment.
- (4) Improved sharing of case-specific information with a government of a foreign state for the purpose of national security reviews of foreign investments. The amendments facilitate international cooperation and information exchange by allowing the Minister of Innovation, Science and Industry to disclose information that would otherwise be privileged under section 36, including information about an investor, to a government of a foreign state to support their foreign investment review and national security assessments, on terms and conditions that the Minister deems appropriate. This change will allow for better information sharing where an investor may be active in several jurisdictions seeking the same technology, for example, and where there is a common national security interest.
- (5) Clarifying existing exceptions to the prohibition of disclosure of privileged information by expressly noting that the Minister of Innovation, Science and Industry may disclose that an order made under subsection 25.4(1) authorized an investment on the basis of terms and conditions, as well as the identities of the parties when issuing an order under subsection 25.4(1).
- (6) The new requirement to notify the National Security and Intelligence Review Agency as well as the National Security and Intelligence Committee of Parliamentarians of, among other things, when an investment is allowed on the basis of undertakings provided by the parties to mitigate national security risks or when the GIC’s authorities to make an order under subsection 25.4(1) are used. These changes increase transparency and accountability by providing greater national security oversight during the review process.
- (7) Providing the disclosure of information on the exercise of the Minister’s power and duties during national security review in the Annual Report. The Investment Canada Act specifies that the Director of Investments shall, for each fiscal year, submit a report on the administration of the Act. The amendments clarify this reporting requirement by ensuring that the Annual Report will include details on the use of the ministerial duties and powers such as the new authority to impose interim conditions and to allow an investment on the basis of undertakings provided by the parties to mitigate national security risks.
- (8) Clarifying the net benefit review factors. Section 20 of the Investment Canada Act sets out a series of factors that the Minister of Innovation, Science and Industry considers in determining whether investments are likely to be of net benefit to Canada. The amendments provide additional clarification on what can be considered by expressly noting that they include the consideration of intellectual property rights developed with government funding and the use and protection of Canadians’ personal information.
- (9) Closed proceedings to allow for reliance on sensitive information in judicial reviews while protecting it from disclosure as ordered by a judge. Decisions made under the national security review processes in the Investment Canada Act can rely heavily on the use of sensitive information that, if publicly disclosed, would be potentially injurious to international relations, national defence or national security or would endanger the safety of any person. To strengthen the government’s ability to defend such decisions in the event of a judicial review, the Crown may use closed proceedings to protect sensitive information that forms part of the evidentiary record that was relied upon in making these decisions. This will ensure that judges in these proceedings can consider a more complete set of factors driving the decision making at issue, even where all the information in the record may not be disclosed to a non-government party.
- (10) Other matters, including amendments that reduce the misperception of the national security review timeline; clarifying the French text of certain provisions so that the language is better aligned with the English text of those same provisions, updating or adding cross-references to the sections of the Investment Canada Act to reflect the newly added provisions, updating the timeline for reviews made under section 15 for investments related to Canada’s cultural heritage or national identity, and clarifying the minimum threshold requirement for Canadian membership for certain key terms of the Act.
Implications
The Investment Canada Act aims to strike the right balance between promoting foreign direct investment and protecting Canada’s interests. The amendments reflect this objective and are tailored to allow the government of Canada to address changing threats that can arise from foreign investments without introducing unnecessary burden on foreign investors and Canadians. The timely coming into force of the amendments will enable the Minister of Innovation, Science and Industry to invoke the new authorities in order to more effectively conduct national security reviews of foreign investments, thereby streamlining and adding nimbleness to the review process to match the speed in which business is conducted. The amendments will also reduce ambiguity of both net benefit and national security review processes for investors, Canadian businesses, and stakeholders.
Innovation, Science and Economic Development Canada is developing internal processes and guidance material for stakeholders on the new provisions, which are expected to be in place when the Order comes into force. Further, consultation with international partners are ongoing to determine best practices for information-sharing. These new best practices will be implemented after the Order is in force.
The financial implications of implementing this Order will be met from the existing reference levels of Innovation, Science and Economic Development Canada.
Consultation
No additional consultations were undertaken in terms of the timing for coming into force of these amendments. As part of the development of the Bill C-34 amendments, the Government of Canada undertook extensive consultations, including with the Canadian Bar Association. Further, stakeholders appeared before, and provided submissions to, the INDU committee and the Senate committee on the Banking, Commerce and the Economy during their study of the Bill.
Contact
For more information, please contact
James Burns
Senior Director
Policy and Outreach, Foreign Investment Review and Economic Security Branch
Innovation, Science and Economic Development Canada
Telephone: 613‑410‑3133
Email: james.burns@ised-isde.gc.ca