The Carney government’s fundamental reorientation of how the federal government approaches Canadian defence procurement gained further momentum with the release of Canada’s new Defence Industrial Strategy (the “DIS”). With targets to direct 70% of defence acquisitions to Canadian firms, increase aggregate industry revenues by over 240%, boost defence exports by 50%, and create 125,000 new jobs by 2035, the DIS creates substantial commercial opportunities across multiple sectors. For businesses seeking to capitalize on this shift, understanding the evolving legal landscape will be essential to competing effectively and managing risk.

An Evolving Procurement Framework

The DIS introduces a “Build-Partner-Buy” framework as the central guiding principal of Canadian defence procurement going forward. Under this approach, procurements involving “sovereign capabilities” will be directed to domestic firms as a matter of policy, and new Canadian Content Value requirements—including a proposed Canadian Company Boost for firms meeting 70-100% domestic content thresholds—will impact bid evaluation and contract eligibility.

For established defence contractors, these changes may require adjustments to supply chains, corporate structures, and bidding strategies. For businesses considering entry into the defence sector, the framework creates pathways that did not previously exist but demands careful attention to eligibility requirements and Industrial and Technological Benefits (ITB) Policy obligations, among other considerations. Experienced counsel can help organizations assess how the new rules apply to their circumstances, structure compliant bids, and identify where their offerings align with Canada’s stated priorities.

Corporate and Transactional Activity

The DIS explicitly aims to catalyse growth through expanded access to capital for defence and dual-use companies, increased participation by small and medium-sized enterprises, and the development of “national champions” through strategic partnerships. Combined with Budget 2025’s $81.8 billion in defence investment, these objectives are likely to drive increased transactional activity—including mergers and acquisitions, joint ventures, strategic alliances, and investment and financing arrangements—as domestic and foreign investors seek exposure to the sector.

Businesses pursuing these opportunities will benefit from legal support across several areas. Corporate structuring advice can help clients meet Canadian ownership thresholds necessary for procurement eligibility. Transactional and strategic legal advice for M&A, lending, and investment arrangements requires attention to sector-specific considerations, including how foreign ownership restrictions may affect deal structure. Due diligence processes must account for regulatory requirements around safeguarding Canadian technologies and supply chains, and organizations should anticipate heightened scrutiny under the Investment Canada Act for transactions involving foreign acquirers or investors.

Canadian Intellectual Property

The DIS places significant emphasis on Canadian intellectual property creation, ownership, and protection. For businesses engaged in defence innovation or technology development, the legal framework governing IP ownership structures, licensing arrangements, and technology transfer agreements will require careful navigation, particularly in co-development arrangements and partnerships with foreign allies.

Organizations should consider how to structure IP rights to preserve Canadian sovereign control while enabling productive collaboration, and how technology transfer agreements can be negotiated to protect proprietary innovations. These considerations are particularly relevant for dual-use technologies with both defence and commercial applications.

Regulatory Compliance

Defence procurement operates within a tightly regulated environment, and the DIS’ ambitious export targets will increase the importance of compliance with tariffs, export controls, and programs such as the Contract Security Program and Controlled Goods Program. Businesses new to the sector should invest early in understanding these requirements, while established participants should assess whether the changing regulatory landscape affects their current operations.

The DIS’ focus on expanding access to capital for the defence sector will encourage traditional debt financing by Canadian banks (which have historically avoided lending to the defence sector), raising Bank Act considerations regarding protecting sensitive information and technology by financial institutions. Organizations across the sector will benefit from proactive regulatory guidance to maintain compliance while pursuing growth opportunities.

Indigenous Engagement

The DIS commits to collaboration with First Nations, Inuit, and Métis rights holders and contemplates significant investment in northern infrastructure through programs such as the Northern Operational Support Hubs. For businesses involved in defence infrastructure projects—particularly in northern regions—these commitments carry legal implications.

Duty to consult and accommodate obligations, Indigenous procurement requirements, and benefit agreements for affected communities will be relevant considerations. Organizations should engage experienced counsel early in project planning to ensure Indigenous engagement strategies are appropriately structured and procurement opportunities are positioned to meet the DIS’ stated objectives.

Employment/Labour Considerations

The DIS’s target of 125,000 new jobs will create substantial workforce planning challenges across the defence sector. Businesses expanding operations will need to address immigration pathways for skilled workers, employment agreements tailored to the defence context, and—where applicable—collective bargaining considerations. Proactive attention to employment law matters can help organizations scale efficiently while managing legal risk.

Positioning for Success

The DIS represents a generational shift in Canadian defence policy, creating opportunities for businesses prepared to engage strategically with the new framework. Whether your organization is an established defence contractor, a supplier considering entry into the sector, or an investor evaluating opportunities, timely legal guidance can help you navigate the evolving landscape with confidence. We welcome the opportunity to discuss how these developments may affect your business.