Canadian government responses to two requests made by Fasken Martineau under the Access to Information Act (AIA) and the recent publication by Innovation, Science and Economic Development Canada (ISED) of its Annual Report Investment Canada Act 2015-16 evidence that Canada’s power to conduct national security reviews under the Investment Canada Act (ICA) in respect of foreign investments in Canada has rarely been invoked during the almost 8 years that such power has existed.

Because of the confidentiality obligations imposed on government officials by the ICA and the sensitive nature of the assessment process which is intended to safeguard Canada’s national security interests, the Government historically has been reluctant to comment publicly on specific investments that it has subjected to national security reviews or on the review process in general. For a considerable period of time, this reluctance extended to even providing statistics on the number of national security reviews that it had actually undertaken.

In response to this secrecy, Fasken Martineau submitted an access to information request to Industry Canada in July, 2013 requesting disclosure of information regarding the number of notices and orders issued under the national security provisions of the ICA for the time period from April 1, 2009 to March 31, 2013. Industry Canada refused that request claiming that disclosure of the requested information was, among other things, prohibited under the confidentiality provisions of the ICA. Following the filing of a complaint with the Office of the Information Commissioner of Canada under the AIA, in May, 2016 Fasken Martineau received the requested information which included copies of heavily redacted notices which had been issued under the ICA. Fasken Martineau subsequently made a second disclosure request with respect to the period ending March 31, 2016 to which ISED responded in August of last year.

Based on the above described disclosure, during the period from March 12, 2009 to March 31, 2016, 4,359 notifications and 112 applications for review were filed under the ICA. All of these filings would have been assessed from a national security perspective. In addition, the Government stated that an undisclosed number of other foreign investments which did not require a filing under the ICA had been reviewed during that period.

Of all the foreign investments reviewed for national security, only 12 foreign investments generated sufficient interest from Canada’s security agencies to cause the Minister responsible for the ICA to alert the foreign investor under section 25.2(1) of the ICA that the Minister had reasonable grounds to believe that the foreigner’s investment could be injurious to Canada’s national security and that a formal review under the national security provisions of the ICA could be ordered. The Governor-in-Council (GIC) (i.e., the Federal cabinet) formally ordered national security reviews in respect of only 8 of those investments.

One foreign investment for which a formal national security review was likely not ordered was, based on press reports, the 2009 proposed take-over of Forsys Metals Corporation, a Canadian mining company with a uranium project in Africa, by George Forest International Afrique SPRL of Belgium. That transaction was abandoned by Forsys shortly after George Forest received the Minister’s initial section 25.2(1) alert. In 2 other cases, notices appear to have been sent to the foreign investors confirming that review orders would not be sought possibly because the Minister had been satisfied that, after further investigation, formal reviews were not warranted for those transactions. With respect to the 2 remaining section 25.2(1) notices, it is possible that those transactions were abandoned which would have removed the need for the Minister to continue with the review process.

With respect to the 8 foreign investments for which a national security review was ordered by the GIC, 3 proposed foreign investments were ordered not to proceed, divestitures were ordered in respect of 2 transactions that had been completed and 2 transactions were permitted to proceed with conditions that mitigated the identified national security risk. The 1 remaining transaction was withdrawn prior to a final decision being made by the GIC.

The Government has largely kept secret the facts surrounding the investments that have been subject to national security reviews. What is publicly known about those transactions is generally based on public comments made by the transaction parties and press reports.

In December 2016, ISED issued Guidelines on the National Security Review of Investments under the ICA. Those Guidelines stated that the two principal factors that are taken into consideration by the Canadian security agencies in assessing whether a transaction may have national security issues are the nature of the asset or business activity that is the subject of the investment and the identity of the foreign investor (including any third parties who may have the ability to influence the foreign investor which presumably includes foreign governments). What is publicly known about the transactions that have attracted the attention of the Canadian government appears consistent with the Guidelines. Investors with connections to China, Russia, Egypt and possibly one “rogue state” appear to have been involved in those transactions. And the target assets or businesses have generally been connected with a sensitive industry sector such as uranium extraction, telecommunications and high technology. Only in one case does it appear that the target’s business was not arguably within a sensitive industry sector and that case is reported to have raised national security concerns due to the location of the foreign investor’s business near a sensitive government facility.

In summary, of approximately 4500 filings under the ICA (plus an unknown number of other investments that have come to the attention of Canada’s security agencies) over an almost 8 year period, only 12 foreign investments generated sufficient interest from Canada’s security agencies such that the Minister felt it reasonable to invoke the ICA’s national security review process. In other words, less than 0.3% of all filings under the ICA have resulted in the Minister exercising his right to use the national security review mechanism provided in the ICA. And, in most of those cases in respect of which we have some information, both the nature of the business activities which were the subject of the investment and the identity of the foreign investor appear to have been relevant to the decision to take such action. Based on this information, it may be reasonable to conclude that, while foreign investors with the assistance of their professional advisers should, as part of their customary transaction due diligence, always conduct an assessment concerning whether a national security review might occur, very few transactions will actually attract the attention of the Canadian government from a national security perspective and, in most cases, the identity of the foreign investor and nature of the activities of the target will be a good indicator as to the likelihood of such an action being taken.