Annual report 2023–2024

2023-2024

Message from the Director of Investments to the Minister of Innovation, Science and Industry

Dear Minister:

I am pleased to present you with the 2023-24 Annual Report on the administration of the Investment Canada Act (the Act or the ICA). The Act is a vital part of the Government's broader framework to facilitate beneficial foreign investment that contributes to innovation, economic growth and job creation in Canada. As in previous years, the report contains statistical information on filings made under the Act, as well as decisions made under the net benefit provisions, and actions taken under the national security provisions.      

Given our ongoing commitment to transparency, this year's Annual Report also provides detailed information on how the Act is administered. This includes explanations of how the net benefit and national security review provisions were administered, as well recent policy developments.

Following a busy 2022-23, a year during which the Government introduced several new measures under the Act to ensure that Canada remains well positioned to respond to the rapidly evolving geopolitical security context, the Government implemented further measures with the aim of enhancing transparency and certainty for investors. For example, to address investments that could result in information manipulation that would be injurious to Canada's national security, a new Policy Statement on Foreign Investment Review in the Interactive Digital Media Sector was published in March 2024, which clarifies that foreign investments by entities owned or influenced by foreign states, particularly hostile states, in this sector will be subject to enhanced scrutiny under the Act.

Additionally, after tabling Bill C-34, An Act to Amend the Investment Canada Act in December, 2022, the Government continued to advance the modernization of Canada's foreign investment review regime. Bill C-34 was debated in the House of Commons and the Senate and, following the addition of new amendments, received bipartisan support. The Bill received Royal Assent from the Governor General on March 22, 2024, and certain amendments came into force on September 3, 2024, including new ministerial authorities to extend the national security review of investments, to impose interim conditions during a national security review, and to conclude a national security review where the investment would not be injurious to national security because of undertakings provided by the parties. More information on the amendments and coming into force are included in the Policy Developments section of this report.

In terms of investment activity, there were 1,201 filings in fiscal year 2023-24, which represents the second highest total number of filings ever recorded under the ICA. Of these filings, six applications for review were approved as being of likely net benefit to Canada. The remaining 1,195 ICA filings were certified notifications, of which 293 notifications were in respect of new businesses established in Canada by non-Canadians.

As always, these filings, as well as additional investments not subject to a filing requirement, were reviewed for potential national security injury. Fiscal year 2023-24 saw a continuation of the trend of more, longer and increasingly complex national security reviews. Of the 26 investments subject to extended reviews, two resulted in the Governor in Council (GIC) issuing a final order requiring the investor to divest itself of its investment, nine were withdrawn by the investor and 15 were permitted to proceed following review when no further action was found warranted under the ICA.

We are in an unprecedented period of national security scrutiny of foreign investment, globally, spurred by changing geopolitical realities, remarkable technological evolution, increasing attention to security implications of the renewable energy transition and disruptions to global supply chains for critical goods and services.

Accordingly, we continue to strongly encourage investors to consult Departmental officials, and to submit notifications, prior to implementation, particularly where investment proposals include national security risk factors as set out in the Guidelines of the National Security Review of Investments.

Building on years of demonstrated strength and professionalism, the Department continues to administer one of the most robust and transparent foreign investment review regimes in the world. I look forward to continuing to support you in the administration of the Act.

Yours sincerely,

Francis Bilodeau             
Director of Investments

What's new

Policy Statement on Foreign Investment Review in the Interactive Digital Media Sector

On March 1, 2024, the Minister of Innovation, Science and Industry (the Minister) issued a policy statement that noted the heightened risks of disinformation and information manipulation through state-sponsored or influenced investments in the interactive digital media sector. As a result, the foreign investments by entities owned or influenced by foreign states, particularly hostile states, in the interactive digital media sector will be subject to enhanced scrutiny under the Act.

Enhancing transparency by disclosing s. 25.4 decisions

In an effort to increase the transparency of the ICA national security review process, the Government continued to publicly disclose the names of the parties to transactions subject to orders to block or divest an investment. The Government may also publicly disclose the names of the parties and the outcome of orders authorizing an investment on terms and conditions imposed by the GIC. These new and strengthened efforts increase the transparency of Canada's investment review regime.

Bill C-34, An Act to Amend the Investment Canada Act

Bill C-34, An Act to Amend the Investment Canada Act, was tabled in the House of Commons on December 7, 2022, and following study by the Standing Committee on Industry and Technology in the House of Commons, and by the Standing Senate Committee on Banking, Commerce and the Economy, the Bill received Royal Assent on March 22, 2024. The majority of the amendments included in Bill C-34 came into force on September 3, 2024. These amendments improve and modernize the regime, particularly with respect to national security matters—enhancing transparency, supporting greater investor certainty, and ensuring Canada has strong authorities to take action quickly and where required.

Key amendments that came into force on September 3 include: authority for the Minister to extend the national security review of investments; authority for the Minister to impose interim conditions during a national security review; authority for the Minister to conclude a review where the investment would not be injurious to national security because of undertakings provided by parties; improved information sharing with international counterparts; improved transparency and accountability through the clarification of disclosure requirements and reporting on the use of the Minister's authorities during national security reviews in the Annual Report (which will be published in next year's Annual Report); specifying in legislation that the net benefit factors include consideration of the investment's impact on government-funded intellectual property and personal data; and new rules for the protection of information during the course of judicial review.

The remaining amendments will come into force at a later date, some with public guidance and others following necessary regulatory changes informed by a public consultation process.

Ministerial Statement on Net Benefit Reviews of Canadian Critical Minerals Companies

On July 4, 2024, the Minister issued a statement, which while not within the fiscal period covered by this report will nevertheless affect reviews moving forward. The Minister provided additional clarity regarding foreign investments in Canadian-headquartered critical mineral mining companies. Given the strategic importance of critical minerals and the current geopolitical context, acquisitions of important Canadian mining companies engaged in significant critical minerals operations will only be found of net benefit to Canada in the most exceptional of circumstances.

Fiscal year 2023-24 in numbers ^{Footnote 1}

For fiscal year 2023-24, the level of activity under the Act shows two trends: 1) the volume of filings remained high compared to the historical trend, concurrently setting a record in the total value of investments (see Figure 1); and 2) the number of extended national security reviews* continued to be significantly higher than in the previous decade. (see Figure 2).

Figure 1. Applications and notifications, value and number

Figure 2. Number of extended national security reviews^{Footnote *}

1. Introduction

This report has been prepared in compliance with section 38.1 of the ICA, which requires the Director of Investments to submit a report on the administration of the Act to the Minister for each fiscal year and which requires the Minister to make the report available to the public.   

Foreign investment is central to keeping Canada's economy competitive and globally connected. Beneficial foreign direct investment (FDI) introduces and supports the creation of new technologies and innovations, promotes the creation of well-paying jobs, and grants access to international markets. The Act ensures that the most significant investments into Canada by non-Canadians benefit Canada's economy, and allows the Government to review foreign investments of any size to ensure they are not harmful to Canada's national security.

The ICA therefore plays an important role in positioning Canada as an attractive investment destination with a stable and transparent regulatory climate. The Act has two purposes: to review significant foreign investments for their net economic benefit to Canada, and to review investments that could be injurious to national security. Only significant acquisitions of control of Canadian businesses by foreign investors are reviewed for net benefit, while all investments are subject to national security reviews.

2. Overview of the Act

Filing requirements

When a non-Canadian establishes a new business in Canada or acquires control of an existing Canadian business^{Footnote 2} , a filing must be made to the Foreign Investment Review and Economic Security (FIRES) Branch.^{Footnote 3}. In the event of other investments by non-Canadians (e.g. minority investments), the investor may choose to make a voluntary filing. A voluntary filing provides non-Canadian investors with regulatory certainty as the national security provisions under Part IV.1 of the Act apply to a broad range of foreign investments.

Unless an exemption^{Footnote 4} applies, the following investments by non-Canadians are subject to notification under the Act:

• an investment to establish a new Canadian business;
• an investment to acquire control of a Canadian business where the investment is valued below the relevant net benefit review threshold; or
• their investment would result in the indirect acquisition^{Footnote 5} of control of an existing Canadian business, regardless of its value.

If a non-Canadian directly acquires control of a Canadian business that is valued above the relevant net benefit review threshold, the non-Canadian is required to file an application for net benefit review. In that case, the non-Canadian, with some exceptions, must not implement the investment until the Minister is satisfied or is deemed to be satisfied that the investment is likely to be of net benefit to Canada. For this reason, an application for net benefit review must be filed prior to implementation.

Figure 3 illustrates the applicable thresholds for 2024.

How Investments are Valued

Investments are valued either by Enterprise Value or Asset Value. Enterprise Value is calculated by taking into account the Canadian business' market value, debt, and cash. Enterprise Value is used to value direct investments by private sector investors from a World Trade Organization (WTO) member country.

Asset Value is calculated based on the Canadian business' book value and is used to value investments by state-owned enterprises (SOEs), and investors from non-WTO member countries. The establishment of a new Canadian business and indirect investments (in which a Canadian business is acquired as part of a larger global transaction) are also measured by Asset Value.

For an investment under the net benefit threshold but subject to mandatory filing requirement, the investor may file a notification with the FIRES Branch up to 30 calendar days after the implementation of the investment. Investors are strongly encouraged to file a notification at least 45 days before implementing their investment. Where an application for net benefit review is required, investors are encouraged to file at least 75 days before commercial closing. Application for review and notification forms are available on the ICA website.^{Footnote 6}

Voluntary filings

On August 2, 2022, a new voluntary filing mechanism was introduced under the National Security Review of Investments Regulations (the National Security Regulations). This filing permits non-Canadians who are not otherwise required to file a notification or application for review, to make a filing that triggers the timelines under the National Security Regulations. As a result, they may obtain "safe harbour" after 45 days of the date of certification of the filing rather than the statutory waiting period of five years during which the Government could call-in the investment.

Net Benefit Reviews

The FIRES Branch reviews acquisitions of control of the most valuable Canadian businesses to examine whether the proposed transactions would be of likely net benefit to Canada. The Minister is responsible for administering the Act except with respect to net benefit reviews of cultural businesses, which are consoles or media storage devices. by the Minister of Canadian Heritage (Minister of PCH).      

Section 20 of the Act sets out six factors for consideration during the conduct of net benefit reviews:

• the investment's effect on the level and nature of economic activity in Canada, including employment, resource processing, and the utilization of parts, components and services;
• the degree and significance of participation by Canadians in the Canadian business;
• the investment's effect on productivity, industrial efficiency, technological development, and product innovation and variety;
• the investment's effect on competition in Canada;
• the investment's compatibility with existing industrial, economic and cultural policies; and
• the investment's contribution to Canada's ability to compete in world markets.

These six factors provide predictability for investors while maintaining flexibility for the Minister in the assessment. Depending upon the nature of and the circumstances surrounding the investment, some of the above factors will be given more weight than others.

Amendments to the ICA in Bill C-34 have clarified the scope of two of the factors. Officials will now consider as part of factor 3 in the list above the impact on intellectual property whose development was funded by the Government of Canada. Factor 5 will include an assessment of the effect of the investment on the use and protection of Canadians' personal information.

Net benefit reviews of investments by SOEs take on additional considerations. Since SOEs are more susceptible to state influence, the burden of proof is on a foreign SOE investor to demonstrate to the satisfaction of the Minister that proposed investments are likely to be of net benefit to Canada, and that said SOE sufficiently adheres to Canadian standards of corporate governance (including, for example, commitments to transparency and disclosure, independent members of the board of directors, independent audit committees and equitable treatment of shareholders), and to Canadian laws and practices, including free market principles. For more details, please refer to: Guidelines on Investment by state-owned enterprises — Net benefit assessment.^{Footnote 7}

If the Minister is not satisfied that the investment likely represents a net benefit to Canada, the Act provides an opportunity for the investor to make additional representations and undertakings which would demonstrate the likely net benefit of the investment. The more specific the investor's plans and/or undertakings, the greater the likelihood that approval will be granted.

Ultimately, if the Minister remains unsatisfied, a notice will be sent to the investor advising of the Minister's decision and the investor will be prohibited from implementing the investment.

National Security Reviews

All foreign investments regardless of value are subject to national security review to determine whether there is a risk of national security injury. Part IV.1 of the Act sets out a multi-step process for conducting national security reviews, which are supported by a multi-departmental team including both economic and security/intelligence agencies^{Footnote 8} (Figure 4).

ISED published the Guidelines on the National Security Review of Investments^{Footnote 9} to provide Canadians and foreign investors with transparency on how national security reviews will be conducted. These provided an illustrative, non-exhaustive list of factors that the Government may take into account when assessing the potential national security injury of inbound investments. Examples of factors that may be considered in national security reviews include:

• the potential of the investment to enable access to sensitive personal data;
• the potential effects of the investment on the transfer of sensitive technology or know-how;
• the potential impact of the investment on critical minerals and critical mineral supply chains;
• involvement by state-owned or state-influenced investors;
• potential impact on security of critical infrastructure; and
• potential for injurious transfer of sensitive technology or IP.

New to the national security review process as a result of Bill C-34 is the Minister's authority to conclude a review on the basis that the investment would not be injurious to national security because of undertakings provided by parties. This authority may only be exercised in concurrence with the Minister of Public Safety (Minister of PS). This amendment draws from international best practices, and makes the national security review process more flexible.^{Footnote 10}

The GIC continues to have the authority to, on the referral of an investment by the Minister under s. 25.3(6)(a), take any measures in respect of the investment that they consider advisable to protect national security, including the significant decisions of directing the non-Canadian not to implement the investment, authorizing the non-Canadian to make the investment on certain terms and conditions, or requiring the non-Canadian to divest themselves of control of the Canadian business or of their investment in an entity.

Monitoring and enforcement

The Government regularly monitors the investment environment through open source and other information sources. If required, the Government will reach out to discuss filing obligations with investors or to seek additional information regarding the applicability of the Act to an investment or proposed investment.

The Government also monitors cases where investors are subject to on-going obligations, such as having to comply with undertakings following a net benefit review or a national security review.

The Act specifies enforcement procedures when the Minister believes that an investor has not complied with its obligations under the Act. For example, if non-compliance with an undertaking or condition is suspected, an investigation into compliance may be triggered. Where the Minister believes that a non-Canadian has acted contrary to the Act, the Minister may send a demand letter requiring the non-Canadian to cease the contravention, to remedy the default, to show cause why there is no contravention, or to justify any non-compliance with undertakings.

The Government can also file an application to the courts if the non-Canadian person or entity fails to comply with a ministerial demand. The court can order any measure as the circumstances require, including directing divestiture, compliance with undertakings, imposition of a significant penalty for each day of the contravention, revocation of voting rights, and disposition of voting interests.

3. Policy developments in 2023-24

The Act, which provides for both net benefit and national security reviews of foreign investments into Canada, was established to provide investor certainty while reserving Canada's ability to block individual investments under specific circumstances. As threats to Canadian national and economic security continue to evolve, the Government is working to ensure that Canada's foreign investment review mechanism strikes the right balance between promoting foreign direct investment and protecting national security interests.

The landmark development for 2023-2024, the Royal Assent of Bill C-34, An Act to Amend the Investment Canada Act, represents the most significant modernization of the Act since 2009, and bolsters Canada's visibility on investments, enhances transparency, supports greater investor certainty, and ensures Canada has strong authorities to take action quickly and where required.

Policy statements on foreign investment review in the interactive digital media sector

On March 1, 2024, the Minister and the Minister of PCH released a joint statement^{Footnote 11} clarifying how investments in the interactive digital media (IDM) sector would be scrutinized under the ICA. The Minister of PCH, who is empowered to review investments in Canada's cultural sector, issued a policy clarifying how foreign investments in cultural businesses in the IDM sector will be treated during net benefit reviews. Concurrently, the Minister issued a policy clarifying that investments in the IDM sector by entities owned or influenced by foreign states, particularly hostile states, will be subject to enhanced scrutiny under the national security provisions of the ICA.

For the purpose of this policy, interactive digital media is defined as digital content and environments with which users can actively participate or which facilitate collaborative participation among multiple users for the purposes of entertainment, information or education, and are commonly delivered via the Internet, mobile networks, gaming consoles or media storage devices. Examples of activities that fall under the category of interactive digital media include, but are not limited to, PC gaming, console gaming, online gaming, mobile gaming, and certain immersive technology/augmented reality.

Net benefit reviews in the IDM sector

Foreign investments in cultural businesses in Canada's IDM sector that own or create their own IP and are reviewed for "net benefit" pursuant to Part IV of the Act, will likely be subject to stringent undertakings. Consequently, in addition to the typical undertakings required of most foreign investments, a net benefit review in this regard may require undertakings that deal with:

• Ensuring the creative independence of the Canadian business
• Ensuring robust corporate governance and transparency in decision-making
• Requirements for ongoing reporting, auditing and rights of inspection

National security reviews in the IDM sector

All foreign investments, including greenfield and minority investments – regardless of value – may be subject to the national security review process set out in Part IV.1 of the Act. Given the heightened risks of state-sponsored or influenced information manipulation through transactions, foreign investments by entities owned or influenced by foreign states, particularly hostile states, in the IDM sector will be subject to enhanced scrutiny under national security reviews pursuant to the ICA.

Ministerial Statement on Net Benefit Reviews of Canadian Critical Minerals Companies

While this statement was not issued strictly within the fiscal period covered by this report, it is included in this report to ensure completeness of recent policy developments at the time of publication.

On July 4, 2024, the Minister released a statement^{Footnote 12} providing additional clarity on the Government's views with respect to foreign capital in the mining sector, particularly when it comes to large Canadian-headquartered firms engaged in critical mining operations.

In light of increasing geopolitical competition, and the role critical minerals play at the very core of advanced industrial and defence policies, acquisitions of important Canadian mining companies engaged in significant critical minerals operations will only be found to be of net benefit in the most exceptional of circumstances. Canada continues to welcome foreign investment and recognizes how important it is, particularly for small Canadian firms to advance exploration and site development efforts. This policy statement seeks to balance the protection of Canada's strategic interests while supporting the development of Canada's world-class natural resources.

Coming into force of Bill C-34, An Act to Amend the Investment Canada Act

Bill C‑34, An Act to amend the Investment Canada Act, was introduced in the House of Commons on December 7, 2022 by the Minister, and later received Royal Assent on March 22, 2024. This Bill represents the most significant update of the ICA since the introduction of the Part IV.1 and the National Security Review of Investments Regulations in 2009, and helps bring the provisions and requirements of the Act into the reality of today. While key elements of Bill C-34 fall outside the current reporting period, such as the recent coming into force of certain amendments and the description of amendments that will come into force later, they are included in this report to provide additional information on how the legislation will operate moving forward.

In 2023-2024, Bill C-34 underwent study and review by House of Commons and Senate committees. Further to the original seven targeted amendments introduced as Bill C-34 in 2022, five further amendments to the Bill were introduced during study at the Standing Committee on Industry and Technology (INDU) in the House of Commons. The Senate's Standing Committee on Banking, Commerce and the Economy (BANC) further studied and returned the revised Bill to the House without any further amendment.

Certain amendments to the Act rely on definitions that will need to be established through regulatory changes informed by a public consultation process, or require public guidance and will thus come into force at a later date. Accordingly, the Government proceeded with a two-step coming into force of the amendments included in the Bill:

• Provisions not requiring regulations came into force on September 3, 2024. Most of the key amendments belong to this group, and have been implemented with accompanying guidance material^{Footnote 13} to help investors and Canadian businesses understand how the amendments will affect them.
• Provisions requiring either regulatory amendments or an interpretation note before they can be implemented will come into force at a later date. These include the new pre-implementation filing requirement for investments in "sensitive sectors" (prescribed business activities); the advancement of a national security review where the investor has been convicted of an offence involving an act of corruption; and higher penalty amounts, including for breaching the new pre-implementation filing requirement.

New pre-implementation filing obligation

Bill C-34 introduced a pre-implementation filing obligation for certain investments in prescribed business activities in order to provide the Government earlier visibility on investments where there is risk that the foreign investor would gain access to sensitive assets, sensitive intellectual property or confidential information immediately upon closing. This amendment provides a means to ensure that such irremediable national security harm does not occur, while avoiding the disruption associated with an ordered divesture.

Prescribed business activities will be set in regulations following stakeholder input through consultations. The prescribed sectors will be partly based on other existing public materials such as Annex A of the Guidelines on the National Security Review of Investments.

Authority for the Minister to impose conditions during a national security review

This amendment introduced the authority for the Minister, after consultation with the Minister of PS, to impose interim conditions on an investment during a national security review. Interim conditions may be used to address the risk of national security injury that could arise during the course of the review itself, such as through the possible access to or transfer of assets or intellectual property before the review is complete. An example might be to block access to key intangible assets, such as intellectual property.

At the end of the review period, an interim condition may be adapted as an undertaking or a condition imposed by GIC order or, if appropriate, be removed.

Authority for the Minister to extend the national security review of investments

This amendment transferred the authority to order the further national security review of an investment from the GIC to the Minister, upon consultation with the Minister of PS.

Removing the additional step of getting an order by the GIC improves the efficiency and flexibility of the national security review process, providing more time for security and intelligence partners to complete increasingly complex intelligence analysis.

Authority to conclude a national security review based on undertakings

This amendment allows the Minister to conclude a review on the basis that the investment would not be injurious to national security because of undertakings provided by the parties.

Potential undertakings could include matters such as: requiring prior approval for proposed business locations in order to avoid proximity to sensitive government installations; implementing specific corporate security protocols to safeguard information and access to a site (e.g. cybersecurity, visitor logs); and, granting access to business premises for compliance inspections.

Previously, undertakings related to national security risks could only be given to the GIC. Allowing undertakings at the ministerial level also means these can be amended—or even released—in the proper circumstances.

The Minister will have to be satisfied, with the concurrence of the Minister of PS, that the investment would not be injurious to national security because of the undertakings provided. Investors will be monitored for compliance.

New rules for the protection of information during the course of judicial review

This amendment has been superseded by the introduction of secure administrative review proceedings. When Bill C-70, An Act Respecting Countering Foreign Interference, came into force, this part of Bill C-34 was repealed and replaced by the equivalent measures on secure administrative review proceedings which address confidential information during judicial review for a broad range of federal administrative decision making. The new provisions will allow for the protection of potentially injurious information in the course of judicial review of national security review decisions, that is, allowing the use of sensitive information while protecting it from disclosure.

Improved information-sharing with international counterparts

The amendment facilitates international cooperation and information exchange by creating a new authority for the Minister to disclose information, on terms and conditions that he deems appropriate, to foreign governments in order to support foreign investment reviews. Information about a specific investment is privileged under the ICA and the disclosure of such information is only allowed in limited circumstances. This amendment adds an exception for better coordination with foreign partners.

This change will help defend against a situation where an investor may be active in several jurisdictions seeking the same technology or where there is a common national security interest among allies.

Clarification that the ICA's national security review applies to acquisition of assets

This amendment sets out, for greater certainty, the Government's ongoing interpretation of section 25.1(c) that an investment to acquire, in whole or in part, the assets of an entity referred to in paragraph (c) is reviewable under Part IV.1 of the ICA. This includes sales of intangible assets such as intellectual property, or assets that otherwise constitute a part of a business unit or division – meaning that total or partial acquisitions of Canadian entities would be reviewable under Part IV.1 of the Act.      

Guidance will be issued to provide information on the types of assets captured by this provision.

New ministerial authority to review any state-owned enterprise investment for net benefit

Section 15 of the Act, which permits the GIC, on a recommendation by the Minister of PCH, to order a net benefit review of an investments relating to cultural heritage or national identity regardless of the threshold, was expanded to also permit the GIC to order a net benefit review of any investments by non-trade agreement investor SOEs, on a recommendation by the Minister of ISI. The amendment grants flexibility in how to respond SOE investments that could be contrary to the public interest. This is a limited incremental increase in the Minister's authorities, applying only to a small subset of inbound investment as there are relatively few SOE investments.

Clarification on the net benefit review factors to further protect intellectual property funded by the Government of Canada and the security of Canadians' personal information

This amendment clarifies that net benefit reviews involve consideration of the effect of investments as they relate to government-funded IP, as well as the investments' use and protection of Canadian personal information. While these two factors could already be considered, the amendment explicitly clarifies their importance in net benefit reviews.

This amendment complements the Government's efforts to keep the benefits government-funded IP within Canada and to ensure the proper treatment of Canadians' personal information.

Disclosure requirement to NSIRA and NSICOP on the use of the Act's authorities

This amendment requires that every use of Ministerial authority to conclude a review on the basis of undertakings provided by the parties and GIC final order authority be reported to the National Security and Intelligence Review Agency (NSIRA) and the National Security and Intelligence Committee of Parliamentarians (NSICOP). The purpose of the amendment is to increase the transparency and accountability of ICA actions by notifying these review bodies. Further, the amendments clarify the ICA Annual Report requirement by ensuring that it will include details on the use of the Minister's Part IV.1 duties and authorities, including the new authorities on interim conditions and accepting undertakings to mitigate national security risks.

Stronger penalties for non-compliance

The amendment would update the maximum penalties that may be ordered by a court for contraventions of the Act, including non-compliance with GIC orders and undertakings and provide the authority to update these penalties in the future, as required, in regulations.     

The penalties for non-compliance were established several decades ago and have not been revisited to correspond to current typical deal valuations or inflation. Section 40 of the ICA has been amended to update the possible penalties for non-compliance ($25,000 per day, per infraction) and provide the authority to update these penalties in regulations in the future. In addition, a new discretionary penalty (with a floor of $500,000 and a ceiling to be set out in regulations) for failure to make a mandatory pre-implementation filing has been introduced.   

Penalties for non-compliance are a clear signal and incentive to comply with the ICA, and these changes are not expected to chill legitimate investment. The imposition of ICA penalties will continue to be effected through court orders. The new penalty for a violation of the pre-implementation filing requirement is broadly in line with allied jurisdictions' foreign investment review mechanisms.

Advancement of a national security review to the section 25.2 stage for corruption convictions

The amendment makes convictions for an offence involving an act of corruption in any jurisdiction reasonable grounds to believe an investment could be injurious to national security. This amendment enhances the scrutiny in cases where investors have been convicted of offences involving corruption.

4. Investment activity in 2023-24

This past fiscal year was characterized by two filing trends: 1) the total number of filings was higher than the previous five-year period average of 1,000 filings per year; and 2) the number of net benefit reviews continued to decrease as a share of total filings (trends regarding national security will be discussed in the following section).

Total Investments

In fiscal year 2023-24, 1,195 notifications were certified and six applications for review were approved under the Act, for a combined 1,201 filings. This figure represents an increase of 18.9% compared to fiscal year 2022-23, when there were 1,010 filings and is the second highest total ever recorded. In terms of value of investments, 2023-24 was a record year; investments totalled over $141.9 billion, surpassing the previous record set in 2021-22 ($120.2 billion).

The United Nations Conference on Trade and Development reported that Canadian FDI flows in 2023 increased by 9.0% compared to the previous year.^{Footnote 14} A similar trend was observed with ICA filings this year, where the total number of filings increased compared to the previous year and remained significantly above the average annual totals observed in the previous decade. Figure 5 clearly demonstrates the increased filing activity under the Act observed over the last ten years.

Figure 5. Total number of applications and notifications and trend line

Of the total number of notifiable investments this year, 57.6% (692 filings) were calculated by Enterprise Value and the remaining 42.4% (509 filings) were calculated by Asset Value. These proportions are consistent with previous years. Of the investments measured by Asset Value, 57.6% (293 filings) were for the establishment of new Canadian businesses.

Continuing a trend, investments measured by Enterprise Value ranged more broadly in value than those measured by Asset Value. Within this wider range, 77.2% of investments measured by Enterprise Value fell between $1 million and $100 million. Those investments measured by Asset Value were also predominantly below $100 million in value (91.7%) with more than half – 54.0%– under $1 million, consistent with the fact that many of these are greenfield investments creating new Canadian businesses. See Figure 6.

Figure 6. Number of investments by value

Note: Categories include the highest bound, and exclude the lowest (e.g., investments worth exactly $1M are counted in the "0-$1M" category).

Applications for net benefit review

The 2022-23 fiscal year saw six applications for net benefit review, compared to five in 2022‑23. All six applications for review were measured by Enterprise Value totaling $36.6 billion which is more than double than last year's total of $18.0 billion (see Figure 7). Concurrently, the average value of an application for review measured by Enterprise Value was higher this year ($6.1 billion) compared to last year ($4.5 billion).

The Act provides an initial 45-day period for reviews, which the Minister can extend by up to another 30 days. This statutory timeframe can be further extended, with consent of the investor, for as long a duration as necessary to complete the review.

In 2023-24, the average length of net benefit reviews was 69 days, which is lower than the average of 97 days in the previous year. This change reflects the specific investments that were subject to review in this period rather than signalling a new trend in the timelines for net benefit reviews.

Figure 7. Number of applications for review and related enterprise value and asset value

Note: Due to the very low number of applications measured by Asset Value in 2019-20 and 2022-23 and those measured by Enterprise Value in 2020-21, to preserve commercial confidentiality, the specific amount of the transactions has not been included above.

Notifications

A notification is required for the acquisition of control of a Canadian business valued below the net benefit review threshold, indirect acquisitions of control and for all investments to establish a new Canadian business. This fiscal year, 1,195 notifications were certified, an increase of 18.9% compared to 2022-23. Except for 2020-21, the year marked by the COVID-19 economic downturn, the number of notifications over the past five years has been over one thousand filings every year (see Figure 8). Although the filing volume has been relatively consistent in recent years, as mentioned earlier in this report, the longer-term trend of increased filing activity under the Act continued in 2023-24.

Consistent with past years, investments measured by Asset Value were mostly related to the establishment of a new business or to an indirect acquisition of a Canadian business involved in a larger global transaction; notifications involving SOE investors or asset acquisitions represented only a very small share of such investments. In 2023-24, notified investments measured by Asset Value totalled $53.1 billion, an increase of 158.0% over 2023-24. The average value of investments measured by Asset Value was $104.4 million, a value 123.5% higher than the year prior ($46.7 million). These significant increases were largely accounted by a small number of high value indirect acquisitions. The share of filings involving SOE investors was approximately 0.7% of all investments certified this fiscal year, which represented 0.4% of the total investment value.

For investments measured by Enterprise Value, the total value of notified investments was $52.1 billion, an increase of 26.3% over the year prior. The average Enterprise Value investment also increased to $76.0 million in 2022-23, compared to $73.2 million last year, representing a 3.8% increase.

As in previous years, the number of notifications for acquisitions of control was significantly higher (898, or 75.1% of overall notifications) than the number of notifications associated with the establishment of a new Canadian business (297, or 24.9%).

Figure 8. Number of notifications and related enterprise value and asset value

Voluntary filings

Since the introduction of the voluntary filing mechanism in August 2022 for transactions that do not require a filing, 26 voluntary notifications for various types of investments ­– mostly minority acquisitions – were certified. This number is lower than ISED had anticipated when the voluntary filings mechanism was implemented. Investors are strongly encouraged to file a voluntary notification, particularly where they are state-owned or subject to state-influence, or in cases where the factors listed in the Guidelines on the National Security Review of Investments may be present.

The 26 voluntary notifications were for investments from a wide range of industries although the Resources sector and Business and Services Industries accounted for the majority of voluntary filings^{Footnote 15}. In terms of the country of origin of these investments, the United States and China both accounted for six voluntary filings each, while the European Union (4 filings), Australia (2 filings), South Korea (2 filings) and other countries (6 filings) were responsible for the remaining filings.

Investments by sector

Applications and notifications are classified into five broad sectors based on the North American Industry Classification System (NAICS) codes. Continuing the same trend as in previous years, the number of investments was highest in the Business and Services Industries with a total of 520, or 43.3% of total filings (see Table 1). However, the value of these transactions represented a comparatively lower percentage of total values: only 8.7% of the Asset Value total, and 23.3% of the Enterprise Value total.

Although the Resources sector accounted for a low share of the total number of investments (3.7%), the related Asset and Enterprise Values made up a proportionally higher share of the total investment value at 17.0% and 32.5% respectively, suggesting that the average investment value in this sector was much higher than in other sectors (see Figure 9).

Similarly, while the Manufacturing sector accounted for only 17.8% of the total number of investments, on a value basis, it made up the highest share of total Asset Value (55.0%) and a relatively consistent share (15.3%) of total Enterprise Value. The average investment value was second highest after the Resources sector.

On a year over year basis, the number of applications and notifications increased in all sectors (percent change in brackets):

• Resources (+29.4%): includes businesses in the mining, oil and gas, agriculture, forestry, fishing and hunting industries. The number of investments in the Resources sector rose to 44, a 29.4% increase compared to 2022-23. Total Asset and Enterprise Values also increased to $9.0 billion and $28.9 billion, respectively.
• Manufacturing (+16.3%): includes businesses engaged in the transformation of materials or substances into finished or semi-finished products. The number of investments in the Manufacturing sector was up by 16.3% over 2022-23, to a total of 214, ranking third after Business and Services Industries (520) and Other Services (258). Compared to last year, Asset Value almost quadrupled to $29.2 billion while Enterprise Value decreased by 28.8% to $13.6 billion.
• Wholesale and Retail Trades (+22.2%): includes businesses engaged in wholesaling or retailing merchandise and rendering services incidental to the sale of merchandise. The number of investments in Wholesale and Retail Trades increased to 165, up 22.2% over 2022-23. The total value of investments increased significantly more than the number of investments, with Asset Value almost doubling to $2.5 billion and Enterprise Value almost tripling to $10.9 billion compared to the previous year.
• Business and Services Industries (+20.1%): includes companies in service-oriented industries such as professional, scientific and technical services; education and healthcare services; arts and entertainment; accommodation and food services; and public administration. This sector saw the largest increase in the number of investments (87) or 20.1% more than in 2022-23. Total Asset and Enterprise Values also increased, from to $2.4 billion to $4.6 billion and $17.9 billion to $20.7 billion, respectively.
• Other Services (+15.2%): includes businesses in the utilities, construction, transportation, real estate, finance and insurance, telecommunications and other information industries. This sector saw the second highest number of investments reaching a total of 258 compared to 224 in the year prior, an increase of 15.2%. Asset Value decreased from $13.7 billion to $7.8 billion while Enterprise Value increased from $6.4 billion to $14.7 billion.

Figure 9. Investments by Enterprise Value and Asset Value by sector

Investments by country or region of origin

Pursuant to the Act, investors are required to identify the jurisdiction of their ultimate controller in their filings. The ultimate controller of an investor is the beneficial owner of voting interests that permit control of an entity. Widely-held entities are considered to be controlled by their board of directors or a similar body. For the purposes of the Act, instances in which the ultimate controller is not clearly associated to a unique jurisdiction (such as when a board consists of directors from more than one country), the investor is associated with the jurisdiction with which it is most closely associated. For example, the ultimate controller of a widely held company with a board of directors consisting of three Americans and two French citizens, would generally be considered American.

In 2023-24, as in recent years, the United States, the European Union, and the United Kingdom accounted for the majority of investments on a number of filings basis. Collectively, the United States, European Union and United Kingdom accounted for 944 filings or 75.2% of the total number of filings. On a value basis, investments from these regions represented a comparatively lower share: 43.9% of investments measured by Asset Value, and 56.1% of investments measured by Enterprise Value (see Figure 10).

The United States was Canada's most significant source of investment, accounting for 51.5% of the total number of investments and representing 32.4% of total Asset Value and 43.4% of total Enterprise Value. The next ten countries together accounted for only 31.1% of all filings, but a comparatively lower share of investment value with 25.9% of total Asset Value and 17.1% of total Enterprise Value (See Table 2). Historically, the United States is Canada's largest source of investments. Over the last five years, investments from the United States represented 53.4% of all investment filings. The value of these investments fluctuated from year to year, ranging from $8.2 billion to $36.5 billion for those measured by Asset Value and from $23.7 billion to $69.7 billion for those measured by Enterprise Value.

The European Union remained the second largest regional source of investment with 20.4% of all number of investments, or 7.8% of total Asset Value ($7.9 billion) and 8.1% of total Enterprise Value ($8.2 billion). The share of investments from the European Union has remained relatively consistent over the last five years, ranging between 15.9% and 20.4% of total filings, depending on the year. Investments measured by Asset Value varied between $1.4 billion and $11.8 billion while investments measured by Enterprise Value totalled between $4.9 billion and $20.5 billion.

The United Kingdom was the third largest source of investment this year, with 6.7% of the total number of investments, a similar share than in 2022-23 (7.8%). The share of total Asset Value increased to significantly from 0.7% to 6.9%, the highest level in five years, while the share of investments measured by Enterprise Value almost doubled (+85%) compared to last year. Within the last five years, investments measured by Asset Value ranged between $71 million and $3.6 billion; those measured by Enterprise Value ranged between $2.5 billion and $7.5 billion.

China's share of the total number of investments – which includes investments from Hong Kong – decreased slightly to 3.2% in 2023-24, compared to 4.3% the year prior. Investments measured by Asset Value also decreased to $38 million from $1.3 billion, and those measured by Enterprise Value decreased to $97 million from $381 million. Over the last five years, the share of filings from China has been consistent, ranging between 3.2% and 5.1% of the total number of filings (between 39 and 50). The value of investments has fluctuated to a relatively greater extent. Investments measured by Asset Value varied from $38 million to $1.5 billion while those measured by Enterprise Value ranged from $48 million to $1.3 billion.

Figure 10. Investments by country or region of origin

Sectoral investments by top source countries or regions

This section provides details on sectoral investments by investor's country or region of origin. Similar to the overall sectoral breakdown, the number of investments in the Business and Services Industries sector was the highest for Canada's largest source of investments, with slight variability thereafter among the sources (see Figure 11). Historically, this sector has generally attracted the highest number of investments for Canada's top sources of investments.

• United States: As in recent years, investments from the United States were mostly directed in the Business and Services Industries with 249 investments (40.3%), the Other Services sector with 160 investments (25.9%) and the Manufacturing sector with 119 investments (19.9%). The Wholesale and Retail Trades and Resources sectors each accounted for 82 investments (11.2%) and 21 investments (3.4%) respectively.
• European Union: The Business and Services Industries sector also represented the largest share of investment from EU members, with 101 out of a total 245 investments, or 41.2%. The remaining sectors, by rank, were: Manufacturing with 62 investments (25.3%); Other Services with 43 investments (17.6%); Wholesale and Retail Trades with 32 investments (13.1%). The Resources sector was ranked last, receiving only seven investments (2.9%).
• United Kingdom: Over half of UK investments were also made in the Business and Services Industries, with 47 of 81 total investments (58.0%), while Other Services (19.8%), Wholesale and Retail Trades (14.8%), Manufacturing (3.7%) and Resources (3.7%) received significantly less investments.
• China: China's investments came only from four sectors. Business and Services Industries was the highest-ranking sector with 20 investments out of a total of 39 investments (51.3%). This was followed by the Wholesale and Retail Trades sector with 10 investments (25.6%). Manufacturing and the sector for Other services each accounted for five (12.8%) and four (10.3%) investments respectively.

Figure 11. Investment by top country or region of origin and sector

Investment destination by province and territory

Under the Act, the primary destination of investments is tracked based on province or territory. In 2023-24, Ontario was identified as the primary destination for 612 investments or 51.0%, followed by British Columbia (204 investments or 17.0%) and Quebec (196 investments or 16.3%). In terms of total value, Ontario, British Columbia, Quebec and Alberta all saw total investments valued above $10 billion in combined Asset Value and Enterprise Value (see Figure 12 and 13).

Figure 12. Destination by number of investments

Figure 13. Destination by value of investments

5. National security reviews

This section provides information on the administration of Part IV.1 of the Act, Review of Investments — Injurious to National Security, including characteristics of investments that have required intervention under the ICA. Certain details of investment proposals are not included in this Report, in compliance with the confidentiality and privileged information requirements of the Act and to protect national security.

Amendments to the national security review process

The national security review process has been subject to changes pursuant to amendments made within Bill C-34, an Act to Amend the Investment Canada Act:

• Authority to order an extended review has been granted to the Minister, after consultation with the Minister of PS. Previously, extended reviews required an order from GIC on recommendation from the Minister in consultation with the Minister of PS. Removing the requirement for a GIC order and giving the Minister power to extend reviews under the section 25.3(1) stage of reviews will provide more time for security and intelligence partners to complete the increasingly complex intelligence analysis.
• A new section of the Act authorizes the Minister, in consultation with the Minister of PS, to impose interim conditions necessary for preventing injury to national security that could arise during the review process – such as access to, or transfers of, key intangible assets such as sensitive IP upon transaction completion – and to remove said interim conditions when deemed no longer necessary. Foreign investors are now granted the option to submit written undertakings to address national security concerns in similar fashion to submitting undertakings ahead of net benefit reviews.
• Authority has been granted to the Minister, with the concurrence of the Minister of PS, to conclude national security reviews when the investment would not be injurious to national security because of undertakings provided by the parties. This new Ministerial authority facilitates and expedites possible resolutions to national security concerns in lieu of the GIC ordering divestiture or blocking a proposed investment.

Additionally, several amendments concern the disclosure of sensitive business information obtained during national security reviews. Access to this information forms an essential part of the Government's review of foreign investments and adherence to the strict privilege requirements of the Act has encouraged investors and Canadian businesses to share highly sensitive business information with the Government. Key amendments include:

• Bill C-70, An Act Respecting Countering Foreign Interference, came into force, repealing the closed material proceedings part of Bill C-34 and replacing them with equivalent measures on secure administrative review proceedings which address confidential information during judicial review for a broad range of federal administrative decision making. This will allow for the protection of potentially injurious information in the course of judicial review of national security review decisions, that is, allowing the use of sensitive information while protecting it from disclosure.
• Decisions made under the national security review processes in the ICA can rely heavily on the use of sensitive information that, if publicly disclosed, would be potentially injurious to international relations, national defence or national security or would endanger the safety of any person. To strengthen the Government's ability to defend such decisions in case of judicial review, the Crown may use this process to protect sensitive information that forms part of the evidentiary record that was relied upon in making these decisions. This will ensure that judges in these proceedings can consider a more complete set of factors driving the decision making at issue, even where all the information in the record may not be disclosed to a non-government party.
• Section 36 was amended to facilitate international cooperation and information exchange by allowing the Minister to disclose information about an investor to allies in order to support foreign investment reviews and national security assessments, on terms and conditions that the Minister deems appropriate. Previously, privileged information could only be disclosed to investigative bodies prescribed by ICA regulations.

Summary of the national security review process

The Minister is responsible for administering the national security provisions (covered in Part IV.1 of the Act) and makes a referral to the GIC after consultation with the Minister of PS under s.25.6(a). The national security review process has three main stages. Each stage has its own legal threshold that must be met for a review to continue to the next stage. The timelines for these steps are set out in Figure 14 below.

The initial period of review may begin during the pre-filing period when the Minister becomes aware of the investment. However, the statutory clock starts with a certified filing. Where a filing is not required, the statutory clock starts with implementation of the investment. The time periods for the different stages of review are prescribed in the National Security Review of Investments Regulations and reflect maximum time periods.

Reviews are conducted on a case-by-case basis, involving multiple government partners including ISED, Public Safety, and Canada's security and intelligence agencies and relevant investigative bodies (which are set out in Regulations). Investments are thoroughly assessed based on information and intelligence related to, among other things:

• the Canadian business being established or acquired,
• the terms of the investment, and
• the foreign investor(s) and the potential for third-party influence.

As part of conducting the review, the Government may consult with Canada's allies or require the parties to provide any information necessary, which may include the history of a transaction, the investor's existing presence in Canada, or their full corporate structure.

For more information about the non-exclusive list of factors that may be taken into account in assessing national security risk, please refer to the Guidelines on the National Security Review of Investments, updated in March 2021.

Figure 14. Updated National Security Review Process Timeline Post C-34 Implementation

Notices and orders issued under Part IV.1

The complexities of today's economic and security climate result in longer reviews to thoroughly assess the risk of national security injury. While most investments reviewed are subject to no further action following the initial review period, an extended review is characterized by the issuance of a notice pursuant to s. 25.2(1) of the Act or the issuance of a s. 25.3(1) order where no notice under section 25.2(1) was previously issued.

In fiscal year 2023-24, 26 investments were subjected to extended review compared to 32 investments in 2022-23, an all-time high, representing a 23.1% decrease.

With respect to those 26 investments, two resulted in the GIC issuing a final order requiring the investor to divest itself of its investment, nine were withdrawn and 15 were permitted to proceed following review when no further action was found warranted under the ICA. Decisions of no further action (as noted in Table 3) are made after a thorough review and on the basis of information obtained and the representations provided in the course of the extended review. The average length of an extended review was 163 days (see Table 3 for details of this year's review outcomes, and Table 4 for a historical comparison).

Note: The fiscal year runs April 1 to March 31. Decisions and actions associated with a review are reported according to the fiscal year in which the first action is taken (typically, a review being continued pursuant to s.25.2), even if subsequent actions are taken in the following fiscal year.

6. Conclusion

Fiscal year 2023-24 was marked by significant legislative developments as the Government advanced the modernization of the ICA with the coming into force of Bill C-34. The Bill introduced amendments to the Act to bolster Canada's visibility on investments, enhance transparency, support greater investor certainty, and ensure Canada has strong authorities to take action quickly and where required.

In terms of investment activity, the volume of ICA filings remained higher than in the previous decade. The number and value of transactions from our closest allies and partners in the United States, the United Kingdom and the European Union demonstrate that Canada's open-market economy remains an attractive place to invest.

Continuing recent trends, fiscal year 2023-24 saw a high level of extended national security reviews, the second highest number only behind a record year in 2022-23. While not all extended reviews result in an order to prevent or unwind a foreign investment, increasingly complex transactions, at a time of changing geopolitical realities and remarkable technological evolution, frequently requires lengthier reviews.

Overall, Canada remains open to investments that are beneficial to Canadians and the economy, including investments that drive innovation, wealth creation, and employment growth. The Government is committed to administering the Act in a transparent and predictable manner in order to encourage continued positive investment. Canada will also continue to engage at the international level to ensure that our investment review policies and practices remain world-class.

Canadian businesses and investors are strongly encouraged to account for the ICA process in their investment planning and to engage with the FIRES Branch as early as possible on specific investment proposals.

Appendix

Interpretive notes

• All references to the 2023-24 fiscal year in data, tables, charts and explanations mean from April 1, 2023, to March 31, 2024.
• In the section titled "Investment Activity under the Investment Canada Act", investments are ascribed to the year corresponding to their final action: the certification date for notifications, and the date of the Minister's decision for applications.
• Acquisitions are recorded by the Asset Value or the Enterprise Value of the Canadian business to be acquired, based on its most recent audited financial statements, not by the purchase price. The value of a new business proposal is recorded on the basis of the planned amount of investment over the first two years.
• The actual number and value of acquisitions of control and new business establishments by international investors may not be wholly reflected for reasons which include the following:
  • From time to time, two or more investors may submit applications for review to acquire the same Canadian business. In such cases, each proposal is recorded as a separate transaction.
  • In June 1999, responsibility under the Act for investments related to cultural activities listed in Schedule IV of the Investment Canada Regulations was transferred to Canadian Heritage. Accordingly, our statistics since that time do not include foreign investments in Canadian businesses engaged strictly in activities listed in Schedule IV.
  • A number of filings are submitted to ISED at the proposal stage and processed promptly under the terms of the Act. However, for commercial or other reasons, investors who have submitted a notification or application may subsequently choose not to implement the investment or to implement it at a later time.

Data comparison with other statistical sources

The principal purpose of the Act is the review of investment activity by international investors. For each fiscal year, a report on the administration of the Act is produced and made available to the public.

Data collection is limited to new business proposals and acquisitions of control by foreign investors. Results only represent a portion of the value of international investment in Canada, and therefore cannot be compared with either the FDI flows, or stock figures published by Statistics Canada. For example, the value of major plant expansions by established foreign investors in Canada is not captured under the Act.

Policy statements and guidelines referenced in this report

Ministerial Statement on Net Benefit Reviews of Canadian Critical Minerals Companies (Issued July 2024)      
https://www.canada.ca/en/innovation-science-economic-development/news/2024/07/ministerial-statement-on-net-benefit-reviews-of-canadian-critical-minerals-companies.html

Policy Statement on Foreign Investment Review in the Interactive Digital Media Sector (Issued March 2024)      
https://ised-isde.canada.ca/site/investment-canada-act/en/home/policy-statement-foreign-investment-review-interactive-digital-media-sector

Policy Regarding Foreign Investments from State-Owned Enterprises in Critical Minerals under the Investment Canada Act (Issued October 2022)      
https://ised-isde.canada.ca/site/investment-canada-act/en/policy-regarding-foreign-investments-state-owned-enterprises-critical-minerals-under-investment

Policy Statement on Foreign Investment Review and the Ukraine Crisis (Issued March 2022)      
https://ised-isde.canada.ca/site/investment-canada-act/en/investment-canada-act/policy-statement-foreign-investment-review-and-ukraine-crisis

Guidelines on the National Security Review of Investments (updated March 2021)      
https://ised-isde.canada.ca/site/investment-canada-act/en/investment-canada-act/guidelines/guidelines-national-security-review-investments

A complete list of policies, guidelines and interpretive notes relating to the Investment Canada Act can be found at: https://ised-isde.canada.ca/site/investment-canada-act/en