On April 26, 2012, the government introduced amendments to the Investment Canada Act (ICA) that are designed, among other things, to increase the transparency of the investment review process and strengthen compliance with Ministerial undertakings. In particular, the amendments would:

  • Allow the responsible Minister under the ICA to provide public notice of a decision to approve a reviewable transaction;
  • Empower the Minister to provide public notice of a provisional decision that a transaction is not likely to be of net benefit to Canada, in which case, under the ICA, the investor has 30 days to make additional representations or undertakings;
  • Allow the Minister to provide reasons for any such provisional decision; and
  • Authorize the Minister to accept security from a foreign investor to ensure compliance with the investor’s undertakings.

Under the ICA, information obtained by the Minister while making a determination as to whether a foreign investment constitutes a net benefit to Canada is deemed privileged and confidential. For this reason, absent consent from an investor, the Minister is precluded from providing reasons for provisional decisions under the ICA. Indeed, no reasons have been provided in the few cases where the Minister has provisionally determined that a proposed investment was not likely to be of net benefit to Canada.

The government’s proposed amendments are intended to make the review process more transparent to the investment community, interested third parties and Canadians more generally. The release of reasons as to why, in the Minister’s view, a particular transaction would not represent a net benefit to Canada can be expected, over time, to generate a limited body of precedent that will allow foreign investors and their counsel to better assess regulatory risks before deciding whether to proceed with an investment in Canada. This said, very few cases are provisionally rejected and, in this respect, there should remain very few cases where the Minister will provide reasons under the amended provision of the ICA.  

In announcing the proposed amendments, the government recognized that “strong confidentiality protection is critical to ensure that investors provide the information necessary to conduct reviews as well as to prevent the harm that could come from disclosure.”  

Regarding the posting of security, there were some concerns expressed during the U.S. Steel case with respect to a perceived lack of compliance with undertakings. The amendments clarify the Minister’s right to accept security in the form of performance bonds from the foreign investor to backstop the investor’s undertakings. The posting of security is expected to be a relatively rare occurrence, to be reserved for those cases where the Minister has concerns regarding the fulfillment or enforceability of undertakings and where the Minister requires additional comfort before determining that the investment is of net benefit to Canada. It is anticipated that the security will attach only after a court has found that an investor has not complied with its undertakings. The mechanics of how security would be posted raises a number of questions which remain open, including the type of security that would be acceptable to the Minister, and how the security would rank against other creditors.