The Government of Canada is today providing additional clarity about how the Investment Canada Act will be applied to investments in Canadian entities and assets in Critical Minerals sectors from foreign state-owned enterprises (SOE). The Critical Minerals List was announced on March 11, 2021, and includes 31 minerals considered critical for the sustainable economic success of Canada and our allies—minerals that can be produced in Canada, are essential to domestic industry and security, and have the potential to support secure and resilient supply chains to meet global demand.
The Government recognizes that Canada’s future prosperity and global leadership in emerging low-carbon and other technology sectors requires reliable market-based access to Critical Minerals across the value chain. Critical Minerals are also strategic assets that contribute to Canada’s national security as vital inputs to defence and high technology. In this context, some investments into Canada by SOEs can be motivated by non-commercial imperatives that are contrary to Canada’s interests. This includes investments from private investors assessed as being closely tied to, subject to influence from, or who could be compelled to comply with extrajudicial direction from foreign governments, particularly non-likeminded governments.
Recognizing these investments carry a greater inherent risk to Canada’s growth, prosperity and security, this policy sets out a framework for the review of such investments under the Investment Canada Act.
Under the Act, the Minister of Innovation, Science and Industry must approve proposed acquisitions of control from foreign investors, including SOEs, where the value of the Canadian business is above the defined threshold.
Given the strategic importance of Critical Minerals and inherent economic risks posed by foreign SOEs or private investors as described above, applications for acquisitions of control of a Canadian business involving Critical Minerals by a foreign SOE will only be approved on an exceptional basis.
For greater clarity, some factors that will be examined to determine whether a proposed investment would be of net benefit include:
- the extent to which a foreign state is likely to exercise direct operational and strategic control over the Canadian business as a result of the transaction;
- the degree of competition that exists in the sector, and the potential for significant concentration of foreign ownership in the sector as a result of the transaction;
- the corporate governance and reporting structure of the foreign SOE, including whether it adheres to Canadian standards of corporate governance and to Canadian laws and practices, including free market principles in its Canadian operations;
- whether the Canadian business to be acquired is likely to continue to operate on a commercial basis. This can include considerations such as where products will be exported or processed, the participation of Canadians in its operations in Canada and elsewhere, the impact of the investment on productivity and industrial efficiency in Canada, support of ongoing innovation, research and development in Canada, and appropriate levels of capital expenditures to maintain the Canadian business in a globally competitive position.
Further detail on the overall administration of the Act in respect to investments by SOEs subject to net benefit review can be found in the Guidelines — Investment by state-owned enterprises — Net benefit assessment.
The Act also provides for the national security review of foreign investments. All investments, including greenfield and minority investments – regardless of value – are subject to the national security review process set out in Part IV.1 of the Act.
Given the inherent risks presented by foreign SOEs or foreign-influenced private investors, the participation of such a party in an investment or proposed investment involving a Canadian business or entity operating in a Critical Minerals sector in Canada will support a finding by the Minister that there are reasonable grounds to believe that the investment could be injurious to Canada’s national security as set out in Part IV.1 of the Investment Canada Act.
This policy applies to such investments regardless of value, whether direct or indirect, whether controlling or non-controlling, and across all stages of the value chain (e.g. exploration, development and production, resource processing and refining, etc.).
This is in addition to the enhanced scrutiny that is already applied under the revised National Security Guidelines under the Act that were announced in March 2021.
Factors that can be considered in assessing whether a particular transaction involving Critical Minerals would be injurious to national security includes:
- the size, scope and location of the Canadian business;
- the nature and strategic value to Canada of the mineral assets or supply chain involved;
- the degree of control or influence an SOE would likely exert on the Canadian business, the supply chain and the industry;
- the effect the transaction may have on the ability of Canadian supply chains to exploit the asset or access alternative sources (including domestic supply); and
- the current geopolitical circumstances and potential impact on allied relations.
In light of this policy, the Government of Canada recommends that all non-Canadian investors and Canadian businesses carefully review their investment plans to identify any potential connections to SOEs or entities linked to or subject to influence by hostile or non-likeminded regimes or states. Investors are strongly encouraged to consult ISED’s Investment Review Division at least 45 days in advance of implementing any investment.
Additionally, a core purpose of the Canadian Critical Minerals Strategy is to support the development of Canada’s industrial capacity and access to vital Critical Minerals, and attract major investments to develop our strategic assets from mines to manufacturing.
The Government of Canada stands ready to assist Canadian businesses in the Critical Mineral sectors. Businesses seeking investment in these sectors are encouraged to contact ISED for more information.