Undeniably, infrastructure projects keep the Canadian economy go round; from roads, bridges, utilities, and energy sources, the list goes on. Behind these projects are laws that govern the Canadian infrastructure investment projects. We'll discuss some of these laws, the ongoing investment programs to look out for, and the bodies involved in their implementation.
What are the laws related to Canadian infrastructure investment?
There are many laws when it comes to the sourcing out and the disbursements of Canadian infrastructure investment funds. While some are existing federal statutes, some are long-term projects created and implemented by the Housing, Infrastructure and Communities Canada (HICC) – the lead government authority for these transactions.
Here are some of the laws and projects related to Canadian infrastructure investment funds:
- Investing in Canada Plan (IICP)
- Canadian Infrastructure Bank Act (CIBA)
- Invest in Canada Act (IICA)
- Investment Canada Act (ICA)
While the rest of these are laws to govern how investments are managed, it’s the IICP that sets the overall policy of the Canadian government in implementing these investments.
Watch this video to learn more about the IICP:
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Investing in Canada Plan (IICP)
The federal government of Canada’s infrastructure investment program is laid out in the IICP. Although not a statute, it’s the government’s long-term infrastructure policy which affects how public funds are distributed to implement infrastructure projects across the country.
The IICP aims to build several infrastructure projects over the next 12 years, starting in 2016 from when it was launched. Canada plans to do this by investing over $180 billion into local infrastructure projects through different investment streams, such as:
- Public Transit
- Green Infrastructure
- Community, Culture and Recreation Infrastructure
- Rural and Northern Communities Infrastructure
During the COVID-19 pandemic, the IICP was also expanded to cover some COVID-19 Resilience projects.
Regular fundings are managed by different federal government departments, primarily the HICC, in coordination with the provincial, territorial, and municipal governments. They also closely work with groups representing the Indigenous Peoples and other private sector groups.
Components of the IICP
IICP has three main components, which guide the distribution of the investments according to their uses:
- Phase 1: $14.4 billion over five years to be spent for the rehabilitation of public transit and water and wastewater systems, improvement of affordable housing, and mitigation of climate change’s effects on existing Canadian infrastructures
- Phase 2: $81.2 billion over 11 years for long-term infrastructure investments in small- and large-scale projects that will help in Canada’s environmental progress, economic modernization, and in creating a more inclusive society
- Phase 3: $92.2 billion worth of legacy funding, specifically for infrastructure projects
All these spending is subject to several audits; an example was in 2020, upon motion by the House of Commons, which asked the Auditor General to audit the IICP.
Implementing the IICP
Infrastructure investment programs are implemented through bilateral agreements between the HICC and the implementing body of the projects. The program is expected to end by 2028, although some projects are not yet finished until then.
Application process under the IICP
Governments from the provinces, territories, or municipalities will first identify an infrastructure investment project that they need funding for. Then, they can submit an application to HICC, which will assess and approve the proposal.
It takes up to 60 days for HICC to make a funding decision. However, if the funding application also needs the approval of the Treasury Board of Canada (e.g., investments of more than $50 million), a funding decision will take more than 60 days.
Bilateral agreements
To finalize the infrastructure investment between the proponent and HICC, the parties will enter into a bilateral agreement. Here, certain cost-sharing arrangements, climate change assessments, and community assessments will be planned out.
As to cost-sharing, proponents will have to bear some of the project’s total cost, where the minimum is 33.33 percent. However, this may increase, depending on the maximum amount that the federal government is allowed to invest in the project.
Assessments
Some assessments and consultations are required before a project under the IICP will proceed, such as:
- Climate Lens assessment: to evaluate the projects’ possible environmental outcomes and their resiliency against possible climate change effects
- Community Employment Benefits assessment: to rate the social impacts of the project, such as employment opportunities it can offer to vulnerable communities
- Community consultations: this is part of the government’s duty to consult the Indigenous Peoples in affected communities by the proposed project
For instance, the consultations with the communities are done with the Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC). Guidelines by the CIRNAC and the HICC are there to help the proponents move forward with these community consultations.
Canadian Infrastructure Bank Act (CIBA)
The CIBA is the law that establishes the Canadian Infrastructure Bank (CIB), the body that puts Canadian infrastructure investments into income-generating projects. As stated in the CIBA, the purposes and functions of the CIB is to:
- support and invest in infrastructure projects
- structure proposals and negotiate agreements with proponents and investors
- attract investments from the private sector and institutional investors
- give advice regarding infrastructure projects
- research on, monitor, and assess the state of Canada’s infrastructure
Check out this video for one of the most recent investments by the CIB:
Bookmark our Legal FAQs page for more resources on Canadian infrastructure investment funds and other things related to infrastructure.
CIB’s priority sectors
The CIB focuses its infrastructure partnerships in five core priority sectors, which will also matter when reviewing proposals submitted to them. These priority sectors are the following:
- Public Transit
- Green Infrastructure
- Trade and Transport
- Broadband
- Clean Power
- Indigenous
Recent trend is that the CIB mainly supports the country’s efforts in achieving its net-zero goals and transitioning to a low-carbon economy. It also looks at investment opportunities for clean electricity and clean growth infrastructure projects.
How the CIB works
The CIB plays a huge role in managing a lot of Canadian infrastructure investment funds, including the projects where these funds go into. First off, the CIB invests in revenue-generating infrastructure projects for the benefit of the public.
Interested parties who want to acquire these investments can do so through the following process:
- intake: the CIB can receive investment opportunities or proposals, not just from governments (e.g. municipal, provincial), but also from the private sector
- filtering: these proposals are filtered using CIB’s mandate and priority sector filters to determine if they meet the base criteria
- appraisal: to determine if it qualifies for CIB’s Project Acceleration funding, an initial assessment will be conducted on the proposal’s feasibility, including its public and fiscal impact
- assessment: part of this is to define the investment’s structure, risk allocation, term, and pricing, still within the CIB’s investment framework
- negotiation: after these advisory and assessment stages, the CIB and the proponent will negotiate a Memorandum of Understanding and its term sheet
- closing: once approved by the CIB’s Board, the parties will proceed to the closing, and the funding of the project will soon start
Of course, these infrastructure partnerships with the CIB are conditioned on several aspects, such as continued due diligence, monitoring, and regular reporting requirements.
Invest in Canada Act (IICA)
Another law that facilitates the influx of Canadian infrastructure investment is the IICA. The main thrust of this law is the establishment of the Invest in Canada Hub, which is responsible for the following:
- promote Canada as an investment destination for foreign direct investment (FDIs)
- create Canada’s national policy in attracting FDIs
- facilitate FDIs that are coming into Canada by providing services to these investors
- coordinate the efforts of the different sectors and stakeholders for these FDIs
For 2024-2025, the Hub will try to focus on investment opportunities for:
- EV supply chain
- energy transition
- value-add agriculture
Invest in Canada Hub’s roles
As the country’s promotion agency for FDIs, the Hub directs these investments to where they matter most. For instance, the Hub can link these investors to a province where their businesses can flourish. This also includes possible investment and R&D partners in Canada.
For the most part, the Hub will refer these investors to:
- provincial, territorial, and municipal governments
- other investment promotion agencies
- industry associations related to the investor’s business
To help their businesses succeed, the Hub also helps these global investors discover Canada’s several incentives and tax credit programs. In effect, investors won’t have a hard time coursing through numerous Canadian laws just to know these supports and incentives.
Incentives and programs for FDIs
Individual and business investors may be eligible for any of the following incentives and benefits for FDIs:
- Global Skills Strategy (GSS): helps employers hire eligible and skilled international workers to Canada quickly and easily, such as through faster application processing times and work permit exemptions
- tax incentives for SR&ED: individuals and corporations that conduct eligible Scientific Research and Experimental Development (SR&ED) work can claim tax incentives with their income tax return for the year, specifically income tax deductions and investment tax credit (ITC)
- Accelerated Investment Incentive (AII): this provides eligible properties with an enhanced first-year allowance, where capital cost allowance rules would apply, resulting in write-offs for the costs of newly acquired capital assets
- Strategic Innovation Fund (SIF): eligible innovative projects can apply for investments under either of these project categories: Business Innovation and Growth or Collaborations and Networks
Investment Canada Act (ICA)
Another law related to Canadian infrastructure investments is the ICA. This federal law regulates how foreign investments can be allowed or not in the country. While it encourages investment for the Canada’s economic growth, the ICA also ensures that large and suspicious investments are properly reviewed by the government.
There are two types of review that the Canadian government will do under the ICA:
- if the financial thresholds of foreign investments are met, the parties involved in the investment must notify the Canadian government, and its review regime will be triggered
- regardless of the amount, and even without a notification, the Canadian government can review an investment transaction, especially when national security is involved
As such, a Canadian infrastructure investment must also be wary of the ICA, especially when it involves foreign investments. While the Invest in Canada Hub can also help with regards to these foreign investments, parties in the transaction can also reach out to a Canadian law firm for infrastructure law.
Canadian infrastructure investment: the country’s building blocks
As we recognize the continuous need for infrastructure investments in Canada, laws will always be in place to secure and support these investments programs. Mostly federal ones, these laws also cover provincial and territorial governments or even private entities, which are usually the proponents for these infrastructure projects. Stakeholders from both sides of the investment deal should have a good grip of these laws; to learn more, it would be best to hire infrastructure lawyers who are experts in these laws.
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