Canada: Legal Year In Review 2018

Osler's insights on key developments in 2018 and their implications for Canadian business.

INTRODUCTION

By Jacqueline Code and Jeremy Fraiberg

As 2018 comes to a close, it is time again to share with our clients and friends our observations about some of the most significant legal developments affecting Canadian business over the past year and their implications for 2019 and beyond.

Without a doubt, the top legal story in Canada for 2018 was the legalization of cannabis for recreational use. The federal Cannabis Act took effect in October of this year, creating significant opportunities for businesses that can navigate the complex web of legislative and regulatory oversight at the federal, provincial and municipal levels. Canadian cannabis companies must also be mindful of differences in the legal stances of other jurisdictions – especially the U.S.

Despite the fact that the sale, cultivation and use of cannabis remains a crime under the federal Controlled Substances Act (CSA) in the U.S., four Canadian cannabis companies were successful in 2018 in obtaining U.S. stock exchange listings. These companies were able to take advantage of the fact that the CSA's prohibitions do not apply to activities that are carried out legally in another jurisdiction, such as Canada. We expect this will pave the way for more Canadian company listings in 2019.

Once again, 2018 was marked by ongoing uncertainty about the scope of the duty to consult in connection with project development decisions that affect Indigenous communities. The courts grappled with this issue on several notable occasions over the past year. The Federal Court of Appeal quashed the approval of the Trans Mountain Expansion Project for failure to satisfy the duty to consult, while the Supreme Court of Canada ruled that the duty to consult does not apply to the Government's legislative acts. Messages from the various courts are not entirely consistent and our top court appears more internally divided than ever. In this uncertain environment, the best practices for getting projects approved, while treating Indigenous Peoples fairly, is for project proponents and governments to exceed the standards currently articulated by Canadian courts.

Uncertainty also increased in the area of climate change regulation. The federal carbon pricing plan came into force, but without the near-unanimous provincial "buy in" that was expected. A number of provinces withdrew their support from the federal plan – including Ontario and Saskatchewan, which are bringing court challenges. Others are pursuing their own plans that may not comply with the federal plan. High carbon-emitters are well-advised to monitor this shifting landscape to identify efficient and cost-effective ways of complying. Other businesses may be able to take advantage of incentives and other opportunities, including offset credits and emissions reduction funding.

Turning to M&A, it has now been over two years since Canada's take-over bid regime was revamped to provide for a minimum 105-day bid period, a mandatory 50% minimum tender condition and a 10-day extension once the minimum tender condition has been satisfied. There were a number of unanswered questions about the new regime following its adoption. Two key questions were (i) whether the 105-day minimum bid period would have a chilling effect on hostile bids; and (ii) how would rights plans be treated by securities regulators under the new regime? Developments in 2018 may suggest answers to both of these questions.

Cryptoassets like bitcoin and ether began 2018 with prices at or just off record highs. It appears that the year will end with prices down 75% or more. The initial coin offering phenomenon of 2017 is now clearly on the decline. Meanwhile, securities regulators, primarily in the U.S., have announced an increasing number of settlements and enforcement actions against individuals and companies that have dealt in cryptoassets without complying with applicable securities laws. Nonetheless, institutional interest in cryptoassets has held steady, and has perhaps increased, over the past year. We foresee continued institutionalization and professionalization of cryptoassets in 2019.

In welcome news for those engaging in cross-border securities offerings, new rules have been introduced to facilitate the distribution and resale of securities outside Canada. OSC Rule 72-503 came into effect in March 2018 and provided clarity with respect to when a prospectus is required for treasury or secondary distributions of securities from Ontario to investors outside of Canada. The new rule includes four "safe-harbours" that provide for such distributions without the need to satisfy the Ontario prospectus requirement. Equivalent rules in British Columbia and Alberta have also recently been updated. In addition, there is a new exemption for Canadian accredited investors seeking to resell securities purchased through a private placement in a primarily non-Canadian offering.

South of the border, the Securities Exchange Commission (SEC) introduced new rules for property disclosure for mining companies that align more closely with current industry and global regulatory practices and standards. The SEC's settlement with Elon Musk over his "tweets" serves as a reminder to companies that material information publicized by them or their management teams using social media accounts is subject to disclosure requirements under U.S. securities laws. The SEC also further simplified disclosure requirements for registration statements used in securities offerings and periodic reports, including for foreign private issuers. Finally, the SEC issued guidance on disclosure requirements for cybersecurity risks and incidents.

In the mining sector, strategic investment transactions – in which major mining companies acquired significant minority equity stakes in junior exploration companies – became more prevalent. These transactions represent a win-win outcome for both parties. The junior companies, which had been experiencing a shortage of capital in an uncertain and risk-averse market, received much-needed financing. The major companies obtained a "toehold" in relation to future opportunities on potentially accretive projects.

Environmental, social and governance (ESG) issues – including climate change and diversity – continued to be top of mind for corporate boards and regulators this past year. Although there were few substantive changes to corporate governance requirements in 2018, this may well change in 2019 with the impending amendments to the CBCA and regulations, as well as potential CSA responses to consultations currently underway on governance topics.

While there was not a significant uptick in "on the ground" securities and white collar enforcement activity in 2018, there were a number of noteworthy developments, as regulators attempt to keep up with the ever-changing dynamics of white collar crime. Among other initiatives, the Government of Canada expanded its "integrity regime" which establishes the rules governing the eligibility of parties to contract with the federal government. Amendments to the Criminal Code introduced deferred prosecution agreements – namely, a form of settlement of criminal charges in exchange for undertakings by a corporate wrongdoer. Draft amendments to anti-money laundering legislation were introduced in June 2018. A number of key capital markets enforcement decisions were issued and regulators such as IIROC acquired expanded powers.

Of all the technological advances over the past year, artificial intelligence (AI) stands out as raising the most novel legal and ethical issues for users, advisers and policy-makers. In 2018, the federal government began to lay the groundwork for policies that will govern AI into the future. At the same time, change in the payments sector is also accelerating, including an end-to-end modernization of the Canadian payments infrastructure, which may well be the most ambitious of its kind ever initiated worldwide.

Privacy concerns continued to feature prominently on board agendas in the face of major data breaches, leading to increased scrutiny of management in relation to corporate data security and risk planning. The new mandatory data breach notification regime under PIPEDA came into force, imposing new reporting and record-keeping obligations on corporations in connection with privacy breaches. The EU General Data Protection Regulation also took effect, with implications for Canadian companies offering goods or services to EU data subjects. As AI becomes a growing reality, emerging principles of digital ethics may be the basis for future regulatory action.

The British Columbia Court of Appeal's decision in Brecknell also has important privacy implications. The Court's decision to grant a production order under the Criminal Code to compel disclosure of Canadian user information held by Craigslist in California is likely to be of interest to all foreign businesses that have a "virtual presence" in Canada and that possess data relating to Canadians.

On the Canadian tax front, the year was marked by the landmark victory for the taxpayer in the Cameco case, which was the first decision to address Canada's transfer pricing "recharacterization" rule. During the past year, Canada also introduced legislation (Bill C-82) to enact the OECD's Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI) into Canadian law. This is the next step in the process for Canada to ratify the MLI – which will make significant amendments to many of Canada's tax treaties.

Meanwhile, U.S. tax reform and its seismic shift in tax policy has important implications for Canadian businesses. The full impact of these changes will be better understood as further regulations and guidance emerge on issues such as the base erosion anti-abuse tax, interest deductibility, anti-hybrid financing rules, and others. We provide an overview of some of the issues on which Treasury is likely to issue further guidance and that could affect cross-border tax structuring or planning for Canadian businesses.

It was also an eventful 2018 for Canadian foreign investment review. Canada's national security regime took centre stage as a result of the federal government's decision to block the proposed acquisition of construction firm Aecon Group Inc. by a Chinese buyer. Meanwhile, increasing the monetary thresholds for review of acquisitions under Canada's long-standing net benefit regime meant that 60% fewer transactions were subject to review in the 2017- 2018 fiscal year, as compared to the prior year.

The unpredictable, and often volatile, renegotiation of the North American Free Trade Agreement (NAFTA) and the reciprocal application of duties on goods traded between Canada and the U.S. were undoubtedly the biggest international trade developments in years. The Canada-United States-Mexico Agreement (CUSMA) begins the ratification process that could ultimately lead to the replacement of NAFTA with this new trade deal. The Comprehensive and Progressive Trans-Pacific Partnership will also be brought into effect in Canada by the end of this year.

The CUSMA will require material amendments to Canadian laws in favour of intellectual property (IP) rights holders in areas such as trade secret protection, copyright, measures against counterfeit goods, patent delay and protection for biologics. Apart from the CUSMA, Canada updated its industrial design legislation in November 2018 and has recently introduced omnibus amendments apparently intended to implement new measures to protect Canadian companies using IP and to impose safeguards against overly aggressive assertions of rights.

We will monitor these and other legal developments in 2019 as they unfold and we would be happy to discuss them with you.

To read this Reveiew in full, please click here.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions