Hon. Clément Gignac: Honourable senators, I am pleased to stand before you today and speak to Bill C-34, An Act to amend the Investment Canada Act.
The Investment Canada Act, or ICA, is a major asset to the economy, because its clear and predictable regulatory regime makes Canada an attractive destination for foreign investment.
The ICA seeks to encourage economic growth and employment and provides for intervention only if an investment is injurious to Canada’s national security.
However, it also gives the government the authority to act quickly and decisively when needed.
Over the years, the government has identified three major areas where the act needs to be modernized: strategic and geopolitical concerns; improved certainty and transparency for investors; and protection for innovations in Canada.
The geopolitical context in which Canada operates continues to shift rapidly. Hostile state and non-state actors pursue deliberate strategies to acquire goods, technologies and intellectual property. They do so in ways that are incompatible with Canada’s interests and principles. We also know that foreign investment can be used as a conduit for foreign influence activities that seek to weaken our norms and institutions.
The nexus between technology and national security is clear and here to stay for the long run. Rapid technological innovation has provided Canada with new opportunities for economic growth, but it has also given rise to new and difficult policy challenges.
At the same time, we must support a welcoming investment climate for beneficial investments. That means that ICA operations must be clear, transparent and effective. We know that regulatory certainty and the speed of reviews are important factors in attracting investments to Canada.
Canada’s foreign investment regime also needs to adapt to the speed of innovation. Intangible assets, such as intellectual property and data, have grown in importance in defining Canada’s economic strength, and at the same time they pose new challenges in terms of how these are to be managed.
Canada is an open economy with many natural resources, an economy that is the envy of the world and a source of wealth creation. However, Canada is also increasingly targeted by hostile actors. This is a threat to our national security and our prosperity. That is why the government is taking steps today to protect the Canadian market by developing our tools to provide better protection against current threats.
We are living in unprecedented times, when foreign investments around the world are being examined more closely from a national security perspective.
Some of the reasons for this include the COVID-19 pandemic, the security implications of climate change, global supply chain disruptions and changing geopolitical considerations. Only by taking appropriate action today to address the threats of tomorrow will we ensure that Canada remains a top destination for foreign investors.
The time is right to pursue the modernization of the Investment Canada Act. Now more than ever, the government must take concrete actions to foster an innovative and healthy economy. The global environment has evolved significantly in recent years, including in global competition, investment, technology and access to critical minerals.
This last area is of particular importance: the accessibility of critical minerals. In fact, BloombergNEF ranked Canada second among the top 10 producers of critical minerals, and this ranking accounts for sustainability requirements.
Earlier this year, Rio Tinto CEO Jakob Stausholm spoke about mining and metal projects around the globe and stated, “I would say there is no place on the planet that I get more optimistic about than Canada.” These are encouraging signs and ones we must protect.
Canada’s well-known excellence in emerging and sensitive technologies and critical minerals makes us an attractive target for hostile states. With the amendments proposed in Bill C-34, the government is making sure it has the right tools to protect these sectors as well as Canadian intellectual property, personal data and infrastructure.
Colleagues, honourable senators, the volume and complexity of foreign investment reviews are increasing, and this significant change provides a strong rationale for supporting the modernization of the Investment Canada Act.
Fundamentally, the government has established that an effective review system must be robust, transparent and flexible in order to adapt to a changing world, and now is the time to make these changes.
This bill represents the most significant update of the Investment Canada Act since 2009. Now the government is taking significant steps to review and modernize key aspects of the legislation while ensuring that the overarching framework for supporting the foreign investment needed to grow our economy remains strong and open.
Honourable senators, we all need to recognize the importance of Bill C-34, even if bills ending in “34” are not very popular these days in this chamber. The other place voted unanimously to support the bill after having studied in committee, without presuming what would happen here.
In its study, the House of Commons Standing Committee on Industry and Technology worked to refine the bill. The committee focused on making sure the amendments were balanced so that they could protect Canada’s national security without chilling beneficial foreign investment.
The committee met 12 times and heard from multiple subject-matter experts who provided meaningful and valuable insight into Canada’s investment screening regime, on matters of national security, on the treatment of intangible assets and on ensuring that Canada’s economy remains healthy.
Now allow me to go over the seven key amendments to the Investment Canada Act proposed in Bill C-34.
First, there is a new pre-implementation filing requirement for certain investments. This will provide the government with earlier visibility on investments in prescribed sectors, especially where there is a risk that the foreign investor would gain access to material assets or material non-public technical information, such as cutting-edge intellectual property or trade secrets, immediately upon closing.
The government can therefore ensure that such irremediable harm does not occur. Investors will now be required to file notifications in time periods set out in regulations.
An across-the-board pre-implementation filing requirement without regard to nuance of business sector, type of transaction or other relevant facts would have an unnecessarily burdensome impact on needed and beneficial investment into Canada without providing improvements to national security analysis. A targeted approach will support transparency and certainty for investors.
Second, the bill makes the national security review process more efficient by providing the Minister of Innovation, Science and Industry, in consultation with the Minister of Public Safety, the authority to extend the national security review of investments, whereas previously an order was required at that stage. As I know from my former life, having to get an order can really slow things down.
Removing the additional step of getting an order will give our interdepartmental experts in security and intelligence more time to complete their vital work, including the intelligence analysis assessing the national security risks of a transaction.
Third, the amendments update the penalties for non-compliance with Investment Canada Act provisions. The penalties were established several decades ago and no longer correspond to current deal valuations or inflation.
For example, the maximum penalty of $10,000 per day that was established in 1985 under the current Investment Canada Act will go up to $25,000 per day per offence with no time limit. There is also a new penalty for investors who fail to comply with the pre-implementation filing requirement. They will be fined $500,000 or the amount specified in the regulations, whichever is higher.
This update will make the penalties more effective deterrents.
Fourth, the bill authorizes the Minister of Innovation, Science and Industry, after consultation with the Minister of Public Safety, to impose interim conditions on a foreign investment.
This will reduce the risk of national security injury taking place during the course of the review itself, such as through the possible access to or transfer of assets, intellectual property or trade secrets before the review is complete.
Fifth, the act provides for greater flexibility in mitigating national security risks by allowing investors, through the collaboration between the Minister of Innovation, Science and Industry and the Minister of Public Safety, to submit binding undertakings. These undertakings must show that that they sufficiently address the national security injury that would result from the investment.
Previously, the imposition of such conditions on a transaction to mitigate national security risks could only occur through a Governor-in-Council order. Allowing binding undertakings that can be discussed and accepted at the ministerial level also means these can be amended, or even ended, as needed.
Sixth, the bill allows Canada to share specific information with its international counterparts to help protect common security interests.
This kind of cooperation is important when considering an investor who may be active in several jurisdictions seeking the same technology, for example. The government would have more discretion to share such information, though it would of course be based on the evaluation of confidentiality and other concerns in doing so.
Canada’s investment review regime strives for excellence, and achieving that excellence requires close collaboration with our allies, several of whom, including the Five Eyes — Australia, New Zealand, Canada, the United Kingdom and the United States — have either updated or introduced new screening mechanisms in response to evolving geopolitical threats. This bill allows the government to adopt a coherent approach to dealing with our allies and our common national security concerns, particularly with respect to the transfer of technology.
Finally, the legislation introduces new provisions for the protection of information in the course of judicial review of decisions. This change will allow the government to rely on sensitive information to defend its national security decisions, while protecting that information from disclosure. These new provisions will also allow applicants to participate more fully in the process.
Colleagues, I would like to take a moment to discuss some amendments adopted by the other place when the Standing Committee on Industry and Technology studied the bill.
First of all, all of the parties in the other place agreed to present amendments that emphasize the importance of transparency.
They include authorizing the minister to disclose the identity of parties who are subject to final orders under the Investment Canada Act once the national security review is complete, and introducing the obligation to report to oversight bodies when certain powers are exercised under the Investment Canada Act.
Second, as a result of amendments proposed by a Conservative MP from Nova Scotia, the committee proposed that the minister be given a new power. Going forward, the minister will be able to request an order to examine the net benefit of any investment from a state-owned enterprise from investors with no trade agreement, regardless of the threshold. That is not the case right now. However, if Canada does not have a trade agreement with another country, then the thresholds do not apply and the first dollar is what gets analyzed. This provision applies only to investors with whom Canada does not have a trade agreement. For example, we do not have a trade agreement with China.
Third, the amendments will specify that the sale of assets falls under the general scope of the national security review authorities provided for in the act. That clarifies the application of the Investment Canada Act for stakeholders, both Canadian companies and foreign investors.
Fourth, through a series of amendments tabled by the NDP member for Windsor West and the Liberal member for Mississauga—Malton, the amended bill clarifies the consideration of the treatment of Canadians’ intellectual property and personal data when examining net benefit.
Fifth, with an amendment proposed by a Conservative MP from Nova Scotia, the amended bill will speed up the national security review process if an investor has been convicted of corruption in any jurisdiction.
All these amendments, which were accepted by the government, demonstrate that bills can be improved after they are introduced. I applaud the government’s open-mindedness. This demonstrates the importance of committee work. It is the work of the committee in the other place that made it possible to improve this bill.
Bill C-34 is an important tool for keeping pace with evolving economic and geopolitical circumstances. While the Investment Canada Act provides broad authorities to intercede and address national security risks that can arise through foreign investment, the amendments to this bill build upon that strong foundation and improve the mechanisms of the process around the national security reviews of investments.
Taken together, these legislative amendments will help ensure Canada is able to continue to reap the economic benefits of foreign investments while strengthening our ability to move quickly and decisively to address threats to our national and economic security.
Colleagues, it is worth noting that for the first six months of 2023, Canada was ranked third behind the U.S. and Brazil among Organisation for Economic Co-operation and Development, or OECD, countries as far as foreign direct investment is concerned. This is just one additional reason why we need up-to-date legislation that provides clarity and predictability to foreign investors.
The act encourages economic growth and gives the government the possibility to act quickly if the circumstances call for it. There is no doubt that the time has come to modernize the Investment Canada Act and adapt it to today’s world.
Honourable senators, as the unanimous vote in the other place indicates, if there is one thing we can all agree on, it is the importance of protecting our assets and safeguarding our prosperity.
I am eager to work with the designated opposition critic, Senator Carignan, and with all of you to move this bill forward.