On April 26, 2012, the government introduced amendments to the
Investment Canada Act (ICA) that are designed, among other
things, to increase the transparency of the investment review
process and strengthen compliance with Ministerial undertakings. In
particular, the amendments would:
Allow the responsible Minister under the ICA to provide public
notice of a decision to approve a reviewable transaction;
Empower the Minister to provide public notice of a provisional
decision that a transaction is not likely to be of net benefit to
Canada, in which case, under the ICA, the investor has 30 days to
make additional representations or undertakings;
Allow the Minister to provide reasons for any such provisional
Authorize the Minister to accept security from a foreign
investor to ensure compliance with the investor's
Under the ICA, information obtained by the Minister while making
a determination as to whether a foreign investment constitutes a
net benefit to Canada is deemed privileged and confidential. For
this reason, absent consent from an investor, the Minister is
precluded from providing reasons for provisional decisions under
the ICA. Indeed, no reasons have been provided in the few cases
where the Minister has provisionally determined that a proposed
investment was not likely to be of net benefit to Canada.
The government's proposed amendments are intended to make
the review process more transparent to the investment community,
interested third parties and Canadians more generally. The release
of reasons as to why, in the Minister's view, a particular
transaction would not represent a net benefit to Canada can be
expected, over time, to generate a limited body of precedent that
will allow foreign investors and their counsel to better assess
regulatory risks before deciding whether to proceed with an
investment in Canada. This said, very few cases are provisionally
rejected and, in this respect, there should remain very few cases
where the Minister will provide reasons under the amended provision
of the ICA.
In announcing the proposed amendments, the government recognized
that "strong confidentiality protection is critical to ensure
that investors provide the information necessary to conduct reviews
as well as to prevent the harm that could come from
Regarding the posting of security, there were some concerns
expressed during the
U.S. Steel case with respect to a perceived lack of
compliance with undertakings. The amendments clarify the
Minister's right to accept security in the form of performance
bonds from the foreign investor to backstop the investor's
undertakings. The posting of security is expected to be a
relatively rare occurrence, to be reserved for those cases where
the Minister has concerns regarding the fulfillment or
enforceability of undertakings and where the Minister requires
additional comfort before determining that the investment is of net
benefit to Canada. It is anticipated that the security will attach
only after a court has found that an investor has not complied with
its undertakings. The mechanics of how security would be posted
raises a number of questions which remain open, including the type
of security that would be acceptable to the Minister, and how the
security would rank against other creditors.
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