As part of the Minister of Innovation, Science and Industry's mandate to modernize the Investment Canada Act, the Honourable François-Philippe Champagne introduced a bill titled "Act to amend the Investment Canada Act" or "The National Security Review of Investments Modernization Act" on December 7, 2022.
This new bill represents the most significant update of the ICA since 2009 and ensures that Canada can continue to address changing threats that can arise from foreign investment.
On March 22, 2024, Bill C-34, An Act to amend the Investment Canada Act, received Royal Assent. This modernization of the Investment Canada Act (ICA) 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.
Provisions not requiring regulations came into force on September 3, 2024:
- 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 to conclude a national security review based on undertakings;
- Improved information sharing with international counterparts;
- New rules for the protection of information during the course of judicial review;
- 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; and
- Improved transparency and accountability through clarifying disclosure requirements and reporting on the use of the Act's authorities.
Certain provisions to the Investment Canada Act will come into force later, as they require either regulatory amendments or an interpretation note before they can be implemented. These provisions are:
- New pre-implementation filing requirement for investments in "sensitive sectors" (prescribed business activities);
- Stronger penalties for non-compliance;
- New ministerial authority to review any state-owned enterprise investment for net benefit;
- Advancement of a national security review to the section 25.2 stage for corruption convictions; and
- Clarification that the ICA's national security review applies to acquisition of assets.
More details about amendments that came into force on September 3, 2024
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 Governor-in-Council (GIC) to the Minister, upon consultation with the Minister of Public Safety.
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 the increasingly complex intelligence analysis.
Authority for the Minister to impose conditions during a national security review
This amendment introduced the authority for the Minister of Innovation, Science and Industry (the Minister), after consultation with the Minister of Public Safety (the Minister of PS), to impose interim conditions on an investment during the 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. 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.
This administrative note provides information to investors and Canadian businesses regarding how this provision will be administered
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.
This administrative note provides information to investors and Canadian businesses regarding how this provision will be administered.
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 or she 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.
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.
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. 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 record underlying the decision making at issue, even where all the information in the record may not be disclosed to a non-government party.
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 intellectual property (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.
Clarification of the transparency provisions
The amendments clarify the existing interpretation of the ICA by expressly noting that the Minister may disclose that a final order authorized an investment, including if it was on the basis of terms and conditions, and the identities of the parties when issuing a final order. These amendments serve to eliminate potential ambiguity and signal the Minister's general intent to increase transparency of the review outcomes under the ICA.
Improved transparency and accountability by requiring reporting 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 this amendment is to increase 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 powers, including the new authorities to impose interim conditions and to conclude a national security review based on undertakings.