Publications & Media

Criteria for national security review of foreign investments expanded

Competition and Foreign Investment Bulletin
26.03.21
By Brittney LaBranche and Robyn Finley

On March 24, 2021, Minister of Innovation, Science and Industry, the Honourable François-Philippe Champagne (the Ministerreleased a statement regarding an update to the Guidelines on the National Security Review of Investments (the Guidelines), issued under section 38 of the Investment Canada Act (the ICA), which set out the Canadian government's approach to national security reviews of foreign investments.

A specific mandate has been added to subject all investments by state-owned enterprises, or private investors assessed as being closely tied to or subject to direction from foreign governments, to enhanced scrutiny under the national security provisions of the ICA, regardless of their value. The revisions also emphasize the importance of the identity of the ultimate controller of the non-Canadian investor in assessing investments under the national security provisions of the ICA.

The updated Guidelines serve to provide additional precision on the list of factors that the Canadian government considers in assessing whether a foreign investment poses a risk to national security. Additional factors have been added as well as clarification on existing factors. The changes include:

  • The factor relating to the impact on Canada's defence capabilities and interests were clarified to include the defense industrial base and defense establishments.
  • The following consideration was added to the factor on the transfer of sensitive technology or know-how outside of Canada: whether the investment provides access to information not in the public domain related to the research, design or manufacture of sensitive technologies. Sensitive technologies include those that have military, intelligence or dual military/civilian applications. A specific annex of fields in which sensitive technologies may be developed is included for reference.
  • A new factor was added on 31 designated "critical minerals" and the supply chains thereof, with such critical mineral designations set out in the Government of Canada’s Critical Minerals List.
  • Corrupt foreign officials have been added as an example in the factor relating to activities of illicit actors.
  • A new factor was added regarding access to sensitive personal data. Examples of such data include: personally identifiable health or genetic (e.g., health conditions or genetic test results); biometric (e.g., fingerprints); financial (e.g., confidential account information, including expenditures and debt); communications (e.g., private communications); geolocation; and personal data concerning government officials; including members of the military or intelligence community.

With e-commerce, virtual communication and public health data taking centre stage over the past year, as well as growing interest in certain minerals such as lithium for the storage of renewable energy, these changes reflect that the Government of Canada is alive to shifting threats to national security within our "new normal". Some of the revisions are also reflective of previous areas of concern in national security reviews.

The Minister also stated that the expanded review criteria introduced due to the pandemic would continue to apply until the economy recovers from the effects of the pandemic. For more information on the pandemic-related foreign investment policy updates, see our bulletin here.

The Minister’s statement indicates that the government will continue to take action where necessary to protect national security while remaining open to investment that benefits Canadian jobs and economic prosperity. The stated goal is to strike a balance between making Canada an attractive investment destination and protecting Canadian national security interests:

"As we work with businesses to help them recover from the effects of the COVID-19 pandemic, Canadian companies may look to global capital to help support their growth. Foreign direct investment allows many of Canada’s cutting-edge, intellectual property–intensive firms to scale up and reach global customers. At the same time, as a government, we have a responsibility to ensure such investment does not bring with it national security threats, as some of these Canadian companies possess sensitive personal data or develop and manufacture sensitive technologies that form part of critical supply chains."

For assistance navigating the requirements of the ICA, or for any other inquiries related to competition or foreign investment, contact us here. This bulletin is general information only, not legal advice. Citations can be found in the PDF linked at the top of this article.