Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
Issue link: https://digital.carswellmedia.com/i/1544329
www.lexpert.ca 11 "Indigenous groups have very much… expressed their concerns on how this would negatively impact their rights to consulta- tion," Shams says. Forthcoming Investment Canada Act regulations When Bill C-34 received Royal Assent in 2024, it introduced significant changes to the Investment Canada Act, giving the federal government broader authority to address national security concerns in foreign invest- ments. Since then, "national security consid- erations have become a central part of cross- border deal planning," says Shams. "Even smaller minority investments by non-Cana- dian entities are attracting a lot more scrutiny under the Investment Canada Act, especially when you're talking about critical minerals, technology, and infrastructure." This year, provisions of the ICA that are not yet in force are expected to take effect via new regulations. One of the most notable provisions – which will require foreign entities to notify the government before they close on investments in certain sectors – will introduce another layer of regulatory complexity to the deals covered by the change. According to the federal government, the 2024 amendments to the ICA – which represented the most substantial changes to the statute since 2009 – aim to make Canada's regulatory regime more predict- able for foreign investors while ensuring it has the tools to act quickly in cases where deals pose a threat to national security. Many of its provisions have been in force since September 2024, including expanding the Minister of Innovation, Science and Industry's authority to initiate national secu- rity reviews, impose interim conditions on investors during the course of a review, share information about deals with foreign investment review agencies when there are national security concerns, and conclude a review based on undertakings. The government said it would roll out other provisions of the act later through regulations. This includes the requirement to notify the government before closing on a transaction involving foreign investors, which applies to specific "sensitive sectors." While the government has not yet revealed which industries are included among these sectors, Shams says the final list will likely align with the Sensitive Technology List the government published in early 2025. The non-exhaustive list identifies "broad technology areas" that may have national security implications, including artificial intelligence and big data, critical materials, advanced weapons, robotics and autono- mous systems, advanced energy technology, and more. Mallia-Dare notes that under the ICA, the government already has 45 days to review a deal and determine whether to allow it, "which is a significant period of time when you're doing a transaction." Adding another regulatory hurdle in the form of pre-closing notification require- ments will further extend the transaction process, Mallia-Dare adds. Shams notes that Bill C-34 effectively modernized Canada's national security review process so that it more closely aligns with those of the United States and the United Kingdom, where "from a permitting standpoint and review of M&A transac- tions, there is a bit more rigorous screening when it comes to national interests." He adds that this close alignment has given the three jurisdictions "more of a uniform stance" on Chinese deals, for example. As Canada continues to readjust its approach to foreign trade and investment, though, Shams says a tension has emerged. "The government right now is a bit capricious because we're seeing changes on the regulatory side that will affect review processes, [make] it a bit more stringent," he says. "But at the same time, on the business side, we're trying to strengthen some rela- tionships with China and other countries to allow for businesses to again explore [other] types of investments such as joint ventures and strategic alliances." "Even smaller minority investments by non-Canadian entities are attracting a lot more scrutiny under the Investment Canada Act, especially when you're talking about critical minerals, technology, and infrastructure" Mahdi Shams MLT AIKINS LLP