Originally published in Blakes Bulletin on Competition, June 2007
Earlier this year, The Honourable Jim Flaherty, Minister of Finance, announced that the Government will review the rules governing foreign acquisitions. It will also consider, among other things, Canada’s competition policy. The review will be conducted by a panel of experts who will be appointed by Industry Minister Maxime Bernier. The panel is expected to issue its report prior to the release of the next federal budget.
Currently, the acquisition of control of a Canadian business, and the establishment of a new Canadian business, by a non-Canadian is subject to the Investment Canada Act. Where certain thresholds are exceeded, the acquisition of a Canadian business is subject to substantive review on grounds of whether the acquisition is “likely to be of net benefit to Canada”. National security is not one of the factors considered under this test. Transactions that do not exceed the prescribed thresholds are subject to a simple notification requirement and not to substantive review.
The previous Liberal government had proposed Bill C-59 under which the Investment Canada Act would have been amended to incorporate a national security test. In this respect, Canada would have moved closer to the mechanism available to the government of the United States under Exon-Florio to review transactions on national security grounds. In December 2006, the Department of Finance issued a policy paper that suggested that increased scrutiny should be given to acquisitions of Canadian businesses by state-owned entities. As well, there is currently a Private Member’s Bill, Bill C-386, before Parliament that, if introduced, would potentially make it easier for the government to challenge transactions.
The recent press attention to foreign takeovers has accelerated the debate about whether amendments are needed to the Investment Canada Act. Of course, any amendments would need to comply with Canada’s international obligations, including those under the WTO and NAFTA.
Blake, Cassels & Graydon LLP will continue to monitor the situation and will report any updates. If you wish to discuss this matter further, do not hesitate to contact any member of the Competition Group.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
