Lexpert Magazine

60 LEXPERT MAGAZINE | JULY/AUGUST 2016 vestments and some just minority invest- ments. A little over half are US investors, unlikely to move into a full-fledged nation- al security review, while only about a dozen are large enough to be "reviewable" under the Act's net-benefit provision. But large or small, they all need to be screened for security. e foreign-investment group that quar- terbacks national security reviews and net benefit tests only comprises about 15 peo- ple, says Halucha. "Six or seven, I'd say their principal job is the net-benefit test, three or four are market watchers — we do a watch to try and understand what's happening around transactions both in Canada and inter- nationally to try and provide perspective to the Minister. en we have a group of three or four people whose role is to inter- face with public safety and security and intelligence agencies that are obviously the backbone of national security in Canada, including for this Act. "So I don't have a spy agency here. I don't have the competent authority from an intelligence-gathering perspective. But we interact with those organizations readily." Halucha, who has been in his current position for three years, says while his group doesn't have a ton of experience in helping guide potential targets with mul- tiple bidders, it can indicate which deals might be more challenging to get through a security review. "We can't throw out red flags but we are in a position to effectively signal easy, medium or hard." Will buyers or investors from one of the so-called "Five Eyes" countries (Canada, the United States, Australia, New Zealand and the UK) automatically get an easier ride on security than their counterparts from other countries? "I can't really say yes but intuitively, it makes sense. Obviously the US and Euro- pean countries invest heavily in Canada. I wouldn't say they get an easier ride from the perspective that they're not analyzed, but from an outcome's perspective there's just a longer history with those countries and we're very comfortable with those in- vestors in the Canadian economy." Assaf says there were some impor- tant lessons learned from the initial Accel- ero rejection. e first is "that with national security reviews, there is an international compo- nent and it's tied to what we all know is im- portant national security cooperation be- tween Canada and its major allies. Within that, we learned about this alliance called the Five Eyes. "So when you're looking at these deals you have to think of how national security is integrated between these allies and oth- ers and how any part of your deal may im- pact the national security concerns of any one of those countries. You have to assume they'll talk to one another and that will be a relevant consideration." e challenge, he says, is "you don't know whether there's a question raised out of that alliance that becomes relevant to your deal. You don't know whether there's something that happens internationally in real time in a relevant country, or where the investor's from, that raises questions. Its relationships with the Canadian government, services to the Canadian government, to the defence establishment — those are the kinds of things you look to and see whether there's anything to deal with." Assaf says "you really do have to think creatively about what may impact national security. You have to think about it from the top down, the bottom up and across relevant geographies with major allies. You have to think: Who are the customers and the users of these products and services and how do they directly or indirectly connect into the Canadian security or defence ap- paratus, or provide exposure to somebody into those areas? at's a big lesson here." e second one, he says, is to look at your relationship with ISED as only part of the puzzle. "ey're oen going to be the coor- dinator of the other relevant departments — not necessarily the decision maker or the only decision maker in some cases. So, again, look beyond the traditional process at who are the key players and look at how to connect with them in a different way. "is is all evolving, you deal with ISED, but maybe issues get identified and isolated and you talk directly with those relevant departments. We don't know who they are but we assume it's Defence and CSIS and the intelligence services. "ere may also be relevant industry departments. If it's a resource transaction it may be the Ministry of Natural Re- sources, if it's telecoms obviously you have to deal with the telecoms folks, if it's agri- culture you maybe deal with the Agricul- ture Department. at's the creative part, to think of other government departments who would have an interest in this from a national security perspective. ey may be consulted for their perspective to see if there are any risks there, so they may be in- directly involved." If Assaf were to pick up the phone and call someone at the Defence Department about a prospective deal, would anyone talk to him? He says no. "at's the other thing, you have to work within the process but get directly to the | IN-HOUSE ADVISOR: NATIONAL SECURITY REVIEWS | OLIVER BORGERS > MCCARTHY TÉTRAULT LLP The uncertainty of a potential outcome raises concerns so you attempt to mitigate it to the best of your abilities. But ultimately, because of the very nature of national security, much of the decision-making and even information may not be known to the advisors or the merging parties — classified information may be coming to the Canadian intelligence and security community that gives the reviewing officials information and insight that you as counsel may not even have.

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