Lexpert US Guides

10 | LEXPERT • June 2017 | www.lexpert.ca/usguide-corporate/ technology company specializing in fiber compo- nents and modules. On consent, the court ordered the Minister of Innovation, Science and Economic Development to conduct a fresh review. While le- galities may have dictated the government's decision to consent to the order, it's likely more than coinci- dental that the Fall Economic Statement, including its promise to amend the ICA, was issued just eight days previously. As it turns out, it was Stephen Harper's Conserva- tives who issued the divestiture order against O-Net in July 2015. Cabinet resorted to a rarely used provi- sion to keep the order-in-council secret and unpub- lished. The Conservatives also refused to provide any details about their reasons for the order. O-Net applied for judicial review that August. The application was based on a failure of procedural fairness and natural justice, a common criticism of the review process. "The challenge for both foreign investors and the government has been to balance a need to understand the government's concerns in order to address them in a meaningful way, while at the same time preserving the integrity of the nation- al security review process," Wakil says. "This can be a challenge where the information that the govern- ment possesses is highly secret and where its ability to disclose that information may be limited. How- ever, even in complex cases there can be some level of disclosure." On an operational level, the Minister of Innovation, Science and Economic Development has 45 days, which can be extended for a further 45 days, after an application has been made or noti- fication given, to refer an investment to Cabinet for an order re- quiring a national security review. The Minister also has 45 days to do so after the implementation of a transaction that was not subject to notification or review. "Where a transaction gives rise to national security risks, investors are encouraged to contact the Investment Review Division at the earliest stage of the develop- ment of their investment projects to discuss their investment and, where applicable, to file a notification or an application for review at least 45 days prior to the planned closing date," Borgers advises. The new national security review guidelines advocate for an open door on pre-filing discussions with Investment Review Di- vision personnel. "The general attitude of regulators under this government has been one of cooperation and engagement," Borg- ers says. "A number of transactions I worked on last year, includ- ing some involving a number of Asia-based clients, all went very smoothly. My sense, then, is one of real acceptance of looking at foreign investment constructively. Efficiency is improving and timelines are being reduced, all of which is helpful to getting the deals done — so much so that we're getting bullish in advising our clients on how long review and clearance under the ICA will take. It's always nice to get a 'yes,' but it sure helps if that answer comes within three months." Campbell points out that the openness to foreign investment is a significant change from previous experience. "Historically, there wasn't always a feeling that pre-filing dialogue and consul- tation was welcome or even possible," he says. cial threshold for investments under the national security review regime," says Oliver Borgers of McCarthy Tétrault LLP. "Review can occur before or after closing and may apply to corporate reor- ganizations where there is no change in ultimate control." Equally significant to the future of foreign investment in Canada, then, was the Economic Statement's promise "to publish guidelines under which investments are examined under national security provisions," a promise fulfilled in December 2016 when the Liberals released guidelines that shed considerable light on the circumstances that may attract a national security review — a process previously widely criticized for its lack of transparency and procedural fairness. The stated aim of the guidelines was to "help investors better understand and navigate the review pro- cess" while ensuring the integrity of the national security process. "The guidelines are relatively short and don't go into gory detail, but they are a significant positive step in messaging that we're in- terested in dealing fairly with foreign investors," Campbell says. Even before that, on November 9, the feds sent a clear signal about where the government was headed by consenting to a land- mark Federal Court order setting aside a Cabinet order requir- ing a Chinese investor to divest control of a Canadian business for national security reasons. What's also of interest is that, thus far, the Liberals have not refused any applications for national security review: all have been approved or are pending. "It looks like this government is more committed to transparency than the previous government and also wants to reset the relationship with China," says Omar Wakil of Torys LLP in Toronto. The recent consent order stemmed from a Cabinet order di- recting O-Net Communications Holdings Ltd. to divest itself of the shares it had acquired in ITF Technologies, a Montréal-based "It looks like this government is more committed to transparency than the previous government and also wants to reset the relationship with China." Omar Wakil Torys LLP INVESTMENT LIBERALIZATION

• cover
• TOC
• features
• Bios