Economic reviews
The ICA has long been criticized
as impeding inbound investment to
Canada by imposing costs on foreign
investors not borne by Canadian
investors. Such costs arise for
investments that trigger a (usually
pre-closing) review, which virtually
always results in the negotiation
of undertakings by the investor to
secure a "net benefit to Canada"
approval from one or both of the
Minister of Innovation, Science and
Economic Development (formerly the
Minister of Industry) or the Minister
of Canadian Heritage. As a result of
expanded exemptions and increases
in review thresholds, however, the vast
majority of investments now trigger
only a notification requirement,
which can be filed post-closing and
is in most cases an administrative
formality. Reviews are now effectively
limited to direct acquisitions of large
Canadian companies or of Canadian
businesses with activities designated
as "cultural" under the ICA.
Recent trends
In the mid-2000s, Canada
experienced a period of somewhat
heightened scrutiny of foreign
investment under the ICA. Such
scrutiny was prompted largely by
concerns of a "hollowing out" of
corporate Canada in the wake of a
number of high profile transactions,
and even saw the rejection of two
investments.
2017 saw the continuation of what
may be an emerging "lighter touch"
to ICA foreign investment review, as
evidenced by:
• •
a higher "enterprise value"
threshold of C$1B for non-cultural
reviews by "WTO investors"
following implementation of a
previously announced acceleration
of the timetable for increasing this
threshold from C$600M to C$1B
(two years earlier than previously
planned);
• •
a new "enterprise value" threshold
of C$1.5B for non-cultural reviews
by "trade agreement investors",
defined as investors controlled
by nationals of certain countries
that have trade agreements with
Canada (i.e., the EU, NAFTA, Chile,
Peru, Colombia, Panama, Honduras
and Korea);
• •
more focused undertakings for
net benefit to Canada approvals;
• •
more flexible application of
government policies relating to
investments respecting certain
cultural sector;
• •
fewer "discretionary reviews"
ordered following notification of
cultural sector investments; and
• •
expedited reviews for investments
involving de minimis or ancillary
cultural activities.
When does the ICA apply?
Subject to certain exemptions, every
acquisition of control by a non-
Canadian of a Canadian business,
even where such business is already
controlled by a non-Canadian, requires
the filing of either a notification or an
application for review. Notifications
can be filed at any time up to 30 days
after implementation of an investment,
whereas applications for review
usually trigger a pre-closing approval
requirement.
Whether a transaction is subject to
notification or review depends on
whether certain asset thresholds are
satisfied, which thresholds depend on
several factors, including transaction
structure (i.e., whether the Canadian
business is acquired directly, or
indirectly through a foreign corporate
parent), nationality of the investor
and/or vendor, whether the investor
is owned or influenced by a foreigner
(making it a "state-owned enterprise",
or "SOE") and whether the Canadian
business is a "cultural business" (i.e., it
publishes, sells, distributes or exhibits
such products as books, magazines,
music, film or video , even to a de
minimis degree).
The ICA's application in any given case
can be highly technical and complex.
For Stikeman Elliott's full report on
Canadian Competition and Foreign
Investment Outlook 2018 and access
to the foreign investment notification
assessment tool, please visit our
Knowledge Hub at stikeman.com/kh.
Jeffrey Brown, Stikeman Elliott LLP
jbrown@stikeman.com
Ashley Piotrowski, Stikeman Elliott LLP
apiotrowski@stikeman.com
Recent Trends in
Foreign Investment Review
The Investment Canada Act (ICA) is Canada's foreign
investment review legislation, providing for notification and
review of certain investments by non-Canadians in Canada.
Since 2009, it has also served as the mechanism for national
security reviews by foreign investors in Canada. Heading into
2018, this note provides an update on relevant developments
related to economic and national security reviews in Canada.
Stikeman Elliott LLP / stikeman.com
