The Lexpert Guides to the Leading US/Canada Cross-Border Corporate and Litigation Lawyers in Canada profiles leading business lawyers and features articles for attorneys and in-house counsel in the US about business law issues in Canada.
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FOREIGN INVESTMENT GUIDELINES FOR FOREIGN INVESTORS BY SANDRA RUBIN PHOTO: REUTERS CANADA'S FEDERAL GOVERNMENT FINALLY PUBLISHED LONG-AWAITED CLARIFICATIONS TO ITS FOREIGN TAKE-OVER RULES. BUT FOR FOREIGN INVESTORS, MANY FRUSTRATIONS STILL REMAIN IF YOU WANT to get a sense of the foreign investment climate in Canada, you could do worse than think of the film Argo. While the rescue of six American diplomats in the Iran hostage crisis won the Oscar for best picture, in Canada it won stinging criticism for downplaying Ottawa's role. Former Ambassador Ken Taylor even went public with his displeasure in an interview with the New York Times. Nice, polite Canada has been getting more assertive — and some corporate practitioners say that is true in the foreign investment arena as well. Buyers planning to acquire control of a Canadian company can no longer assume the traditional undertakings will be enough to get the deal past review mandated under the Investment Canada Act. "We've seen an evolution over the past several years in how Investment Canada has applied the Act," says Montréal-based John Leopold, co-chair of the mergers and acquisitions group at Stikeman Elliott LLP. "Clearly there's a greater rigor. "What does that mean? It means they are being more demanding in terms of undertakings, requiring undertakings with broader scope and longer duration, the negotiation process is taking longer, the process for monitoring undertakings after closing has ratcheted up — and all that has an impact on buyers." The climate started to change in 2010 when Ottawa blocked BHP Billiton's bid for Potash Corp., finding in an initial ruling it would not be of "net benefit" to Canada despite what were then unprecedented undertakings. It was a development that stunned the mergers and acquisitions community. The government promised to clarify the net benefit test, which gives it a lot of discretion to nix take-overs that, like Potash, prove unpopular with Canadian voters. With no clarifications issued, Ottawa again found its feet to the fire in 2012 when China National Offshore Oil Corp. made a $15.1-billion take-over bid for Calgary oil and gas producer Nexen Corp. The proposed deal reignited the debate about selling off Canada's natural resources to foreign governments. www.lexpert.ca | LEXPERT • June 2013 | 19 B-00-Features.indd 19 13-05-17 9:30 AM