Recent Trends in Foreign Investment Review

The Investment Canada Act (ICA) is Canada’s foreign investment review legislation, providing for notification and review of certain investments by non-Canadians in Canada. Since 2009, it has also served as the mechanism for national security reviews by foreign investors in Canada. Heading into 2018, this note provides an update on relevant developments related to economic and national security reviews in Canada.

Economic reviews

The ICA has long been criticized as impeding inbound investment to Canada by imposing costs on foreign investors not borne by Canadian investors. Such costs arise for investments that trigger a (usually pre-closing) review, which virtually always results in the negotiation of undertakings by the investor to secure a “net benefit to Canada” approval from one or both of the Minister of Innovation, Science and Economic Development (formerly the Minister of Industry) or the Minister of Canadian Heritage. As a result of expanded exemptions and increases in review thresholds, however, the vast majority of investments now trigger only a notification requirement, which can be filed post-closing and is in most cases an administrative formality. Reviews are now effectively limited to direct acquisitions of large Canadian companies or of Canadian businesses with activities designated as “cultural” under the ICA.

Recent trends

In the mid-2000s, Canada experienced a period of somewhat heightened scrutiny of foreign investment under the ICA. Such scrutiny was prompted largely by concerns of a “hollowing out” of corporate Canada in the wake of a number of high profile transactions, and even saw the rejection of two investments.

2017 saw the continuation of what may be an emerging “lighter touch” to ICA foreign investment review, as evidenced by:

a higher “enterprise value” threshold of C$1B for non-cultural reviews by “WTO investors” following implementation of a previously announced acceleration of the timetable for increasing this threshold from C$600M to C$1B (two years earlier than previously planned);

a new “enterprise value” threshold of C$1.5B for non-cultural reviews by “trade agreement investors”, defined as investors controlled by nationals of certain countries that have trade agreements with Canada (i.e., the EU, NAFTA, Chile, Peru, Colombia, Panama, Honduras and Korea);

  • more focused undertakings for net benefit to Canada approvals;
  • more flexible application of government policies relating to investments respecting certain cultural sector;
  • fewer “discretionary reviews” ordered following notification of cultural sector investments; and
  • expedited reviews for investments involving de minimis or ancillary cultural activities.

When does the ICA apply?

Subject to certain exemptions, every acquisition of control by a non-Canadian of a Canadian business, even where such business is already controlled by a non-Canadian, requires the filing of either a notification or an application for review. Notifications can be filed at any time up to 30 days after implementation of an investment, whereas applications for review usually trigger a pre-closing approval requirement.

Whether a transaction is subject to notification or review depends on whether certain asset thresholds are satisfied, which thresholds depend on several factors, including transaction structure (i.e., whether the Canadian business is acquired directly, or indirectly through a foreign corporate parent), nationality of the investor and/or vendor, whether the investor is owned or influenced by a foreigner (making it a “state-owned enterprise”, or “SOE”) and whether the Canadian business is a “cultural business” (i.e., it publishes, sells, distributes or exhibits such products as books, magazines, music, film or video , even to a de minimis degree). 

The ICA’s application in any given case can be highly technical and complex. For Stikeman Elliott’s full report on Canadian Competition and Foreign Investment Outlook 2018 and access
to the foreign investment notification assessment tool, please visit our Knowledge Hub at