Written by Adam Kalbfleisch and Alysha Pannu
On April 18, the Minister of Innovation, Science and Industry issued a policy statement announcing that the Government of Canada will subject certain foreign investments in Canada to enhanced scrutiny under the Investment Canada Act until the economy recovers from the effects of the pandemic.
The policy states that, in order to ensure that foreign investment into Canada does not introduce new risks to Canada's economy or national security, including the health and safety of Canadians, the government will particularly scrutinize both controlling and non-controlling foreign investments of any value in Canadian businesses related to public health or involved in the supply of critical goods and services to the Canadians or to the government. Under the Act, only controlling investments in Canadian businesses by foreign investors are subject to pre-closing filing and approval and only when a specified monetary threshold is exceeded, unless the investment triggers national security concerns. Since the Act has not been amended, the policy statement implies that investments in critical goods and supplies or in businesses relating to public health may be more likely to lead to a national security review than might previously have been the case. The government's announcement regarding the enhanced scrutiny of foreign investment comes after other countries (e.g., Australia and Spain) have also announced measures to tighten investment rules during the pandemic.
The policy statement does not set out what goods or services are considered "critical goods and services" and what businesses fall under the scope of "public health". The policy is likely to be broadly interpreted by the Minister. The Government of Canada has published a "Guidance on Essential Services and Functions in Canada During the COVID-19 Pandemic", which provides an indication of what the government may consider to be critical services during the pandemic (e.g., services relating to health, the supply of food and water, information and communication technologies, energy and utilities, transportation, manufacturing, finance, safety, and government). The document also notes that food and medicines are considered critical goods. Measures enacted by the provincial Ontario and British Columbia governments in response to COVID-19 provide an indication of the types of goods that are likely to be considered "critical" during the pandemic. The price-gouging measures enacted by Ontario states that "necessary goods" include personal protection equipment (PPE), non-prescription medication used to treat the symptoms of COVID-19, disinfecting agents and personal hygiene products. British Columbia's prohibition against the resale of "essential goods and supplies" states that any goods that are necessary for the health, safety and welfare of people are considered "essential goods and services". This would include food, water and other beverages; fuel and gasoline; health care goods, pharmaceuticals and medical supplies; and personal hygiene, sanitation and cleaning goods.
The policy statement also notes that foreign investments by state-owned enterprises (SOEs) or by private investors with close ties to or directed by foreign governments will also be subject to enhanced scrutiny during this time.
According to the policy statement, the enhanced scrutiny for these types of investments may involve the Minister requesting additional information or extending timelines for review (which are powers that the Minister already had under the Act and regulations).
Notably, the Minister has not announced any new powers to examine investments that it did not previously have. That is, the government has not made any amendments to the Act, the regulations under the Act or to the statutory thresholds for review. The government already had the ability to examine investments in critical goods and services and investments relating to public health, flowing from its jurisdiction to review foreign investments that pose national security concerns or alternatively foreign investments that exceed certain statutory review thresholds. Indeed, the Guidelines on the National Security Review of Investments already cite critical goods and services and investments in health as factors examined by the Minister in reviewing foreign investments for potential national security concerns. While not making significant changes to the existing rules, the policy statement does serve notice to foreign investors that they should expect greater scrutiny for these types of investments (and for SOE investments) in the current environment.