Pursuant to amendments made to the Investment Canada Act (the “Act”) by Bill C-10, in force in March 2009, the pre-existing low $5 million threshold for Industry Canada review of foreign investments in the uranium sector has been substantially increased.
The new threshold for review for proposed foreign direct acquisitions of Canadian companies involved in uranium production activities is $600 million in "enterprise value" for investments made in the first two years after entry into force of the amendments increasing progressively to $1 billion by 2013 and thereafter increasing under a formula contained in the Act.
A second major change to the Act is the introduction of provisions in Part IV.1 regarding "investments injurious to national security" which has been somewhat controversial in Canada owing to their vague nature. In particular, the phrase "injurious to national security" is not defined in the Act and the Canadian Government has not indicated its intention to pass any regulations or issue policy guidelines to clarify the legislative intent. This is in marked contrast to the situation in the United States where extensive written guidance on the nature and scope of US national security reviews of foreign investment is readily available.
Another somewhat controversial feature of the new national security-related screening provision is its application to a number of investment categories that hitherto had been exempt from review. Examples of this include operating farms. From a foreign perspective, the good news is that the Canadian government has indicated that it intends to use the national security provisions sparingly. However, the lack of precise legislative or other definitions of the scope of the concept and the government's intentions in applying legislation has left a number of foreign investors somewhat confused.