Next Steps in the Overhaul of the Investment Canada Act Come into Force

On September 3, 2024, another wave of amendments to the Investment Canada Act’s (ICA) national security provisions came into effect. In particular, these amendments: (i) significantly alter the landscape for national security reviews under the ICA by providing the Minister of Industry (Minister) with greater control and autonomy over the national security review process; (ii) enhance the Minister’s information sharing rights and obligations; and (iii) clarify the approach to the judicial review of national security reviews. Taken together, the amendments appear to effectively shift greater responsibility for national security reviews from centralized executive control by the federal Cabinet to Ministerial oversight with a view to creating a more effective national security review process.

More changes are coming. These changes are the latest set of amendments to come into effect following the passage of Bill C-34, the National Security Review of Investments Modernization Act. They represent the most significant update to the national security provisions of the ICA since they were first adopted in 2009. Additional amendments, including, most significantly, a new mandatory pre-closing filing regime for all investments in certain prescribed sectors where certain specified criteria are met, are currently expected to come into force in 2025.

These amendments, and those yet to come into effect, reflect the continuing expansion of enforcement under the ICA regarding whether foreign investments may be injurious to Canada’s national security. 

Modified National Security Review Procedures and Expanded Information Sharing

Expanded Ministerial Powers

• Minister may order a national security review: An order for a national security review no longer requires an order from the federal Cabinet; instead, the Minister may issue such an order after consultation with the Minister of Public Safety and Emergency Preparedness (Public Safety Minister). 
• Interim conditions: Where a national security review has been ordered, the Minister shall, after consultation with the Public Safety Minister, impose interim conditions deemed necessary to prevent injury to national security that could arise during the review, provided such conditions do not themselves introduce significant risk of injury to national security. The Minister may subsequently delete a condition if satisfied that it is no longer necessary for that purpose. 
• Representations and undertakings: Investors now have the right to make representations and submit written undertakings to the Minister in connection with a national security review. With the concurrence of the Public Safety Minister, the Minister may accept that the investment will not be injurious to national security based on the investor’s undertakings. The Minister may subsequently accept new undertakings that continue to address the risk of injury to national security or release the investor from the undertakings if they are deemed no longer necessary to address those risks. The investor may be required to submit information relating to the investment to determine compliance with such undertakings.

Judicial Review 

• Judicial review: New rules have been introduced regarding judicial review of orders or decisions made with respect to a national security review. Notably, where the judge considers that the disclosure of the evidence or other information could be injurious to international relations, national defence or national security or could endanger the safety of any person, the judge shall, at the request of the Minister, hear submissions on evidence or other information without the public, applicant or their counsel present. The judge shall also ensure the confidentiality of any such evidence and information throughout the proceeding and shall ensure that the applicant is provided with a summary of the government’s case, provided that the summary does not include any such information. However, the judge’s decision may be based on evidence or other information, even if the applicant has not been provided a summary of that evidence or other information. 

Information Sharing and Reporting

• Reporting obligation: The Minister is required to notify the National Security and Intelligence Committee of Parliamentarians and the National Security and Intelligence Review Agency regarding (i) any investment allowed to proceed based on undertakings, including the identity of the investor and the business subject to the investment; or (ii) any investment subject to an order by the federal Cabinet taking measures to protect national security, including the identity of the investor and the business subject to the investment, and what the order entailed.
• New information-sharing powers: The Minister can now share any information obtained during the administration or enforcement of the ICA with foreign governments or agencies for the purposes of national security reviews of foreign investments. 
• Expanded public disclosure: The Minister is now permitted to disclose the investor’s identity and the business subject to the investment when disclosing that the federal Cabinet has issued an order taking measures to protect national security regarding an investment. In addition, the ICA annual report will now include information on the exercise of ministerial duties and powers under the national security provisions.

Expanded Approach to Cultural and Net Benefit Reviews 

• Extended period to order a cultural review: The period during which the government can order a cultural review of an investment that is not otherwise subject to review has been extended to 45 days from 21 days.
• Expansion of Net Benefit Review Factors: The factors to be considered in assessing whether an investment is of net benefit to Canada have been updated to include (i) the effect of the investment on any rights relating to intellectual property funded by the Canadian government; and (ii) the effect of the investment on the use and protection of personal information about Canadians.

Enhanced Remedies

• Increased financial penalties: The penalty for failing to comply with the Minister’s demand to comply with the ICA has been increased from C$10,000 to C$25,000 per day of contravention. 

Key Takeaways for Businesses

• Investors should plan for greater dialogue with the Minister as part of a national security review, including with respect to interim measures and undertakings.
• Parties will need to account for longer review timelines and updated definitions in their transaction documents.
• Investors should understand the newly expanded information-sharing powers of, and reporting obligations on, the Minister with respect to the information being provided, regardless of whether it is privileged under section 36 of the ICA.

If you have any questions, please do not hesitate to contact your usual Blakes contact or any member of the Blakes Competition, Antitrust & Foreign Investment group.