Bill C-34

National Security Review of Investments Modernization Act

An Act to amend the Investment Canada Act

This enactment amends the Investment Canada Act to, among other things,
(a) require notice of certain investments to be given prior to their implementation;
(b) authorize the Minister of Industry, after consultation with the Minister of Public Safety and Emergency Preparedness, to impose interim conditions in respect of investments in order to prevent injury to national security that could arise during the review;
(c) require, in certain cases, the Minister of Industry to make an order for the further review of investments under Part IV.1;
(d) allow written undertakings to be submitted to the Minister of Industry to address risks of injury to national security and allow that Minister, with the concurrence of the Minister of Public Safety and Emergency Preparedness, to complete consideration of an investment because of the undertakings;
(e) introduce rules for the protection of information in the course of judicial review proceedings in relation to decisions and orders under Part IV.1;
(f) authorize the Minister of Industry to disclose information that is otherwise privileged under the Act to foreign states for the purposes of foreign investment reviews;
(g) establish a penalty not exceeding the greater of $500,000 and any prescribed amount, for failure to give notice of, or file applications with respect to, certain investments; and
(h) increase the penalty for other contraventions of the Act or the regulations to the greater of $25,000 and any prescribed amount for each day of the contravention.

National Security Review of Investments Modernization Act

[The Assistant Deputy Speaker, NDP, Carol Hughes]

It is my duty, pursuant to Standing Order 38, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Victoria, Climate Change; the hon. member for Kitchener Centre, Health; and the hon. member for Nunavut, Indigenous Affairs.

[Julie Dzerowicz, Liberal, Davenport, ON]

Madam Speaker, the changes that are being proposed to the Investment Canada Act would provide more flexibility and agility for our minister to make these types of decisions in the future. My understanding is that he is always advised by our national security advisers. We will always take direction from those who provide us advice.

There is a reason we are here: We are constantly modernizing our act to make sure that the national security interests of Canada continue to be protected.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Madam Speaker, I would like to thank the member for her interesting speech. What is unfortunate is that there is a major problem in Bill C‑34. I do not understand why the government has not addressed it.

It had the opportunity to modernize the Investment Canada Act. It addressed national security. That is a good thing. However, there is another aspect, the net benefit review, which has an extremely high threshold. At this time, the threshold for the review of an investment is between $1.3 billion and $9 billion.

Does my colleague not find this threshold to be too high, and that it makes no sense to not examine investments that fall below that very high threshold?

[Julie Dzerowicz, Liberal, Davenport, ON]

Madam Speaker, as I mentioned before, the Investment Canada Act provides for net benefit and national security reviews of foreign investments in Canada. We have proposed a number of changes in this particular act. Assuming the bill passes second reading in the House and goes to committee, there will be many opportunities to consider amendments that might strengthen it.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Madam Speaker, one of the concerns the NDP and I have about this bill is that we should be looking more closely at transactions where a company is being taken over by a state-owned enterprise. The member for South Shore—St. Margarets mentioned Chinese investments. In British Columbia, we had a case where Anbang Insurance bought Retirement Concepts, a local British Columbia company that operates long-term care facilities in B.C. That company was then taken over by the Chinese government, yet there was no automatic trigger for an analysis there. We should have that in this bill for when there is a takeover by a foreign state-owned enterprise.

[Julie Dzerowicz, Liberal, Davenport, ON]

Madam Speaker, I want to thank the hon. member for his important work on this file.

As I mentioned, it is not the first time we have updated the Investment Canada Act. We have taken a number of actions to ensure that we have the right tools and flexibility to protect Canada's national security interests. Assuming the bill passes seconding reading in this House, it will go to committee, and there will be many opportunities there for us to have a debate and talk about what additional elements we might want to see in it.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Madam Speaker, I would like to mention that I will be sharing my time with the member for Rimouski-Neigette—Témiscouata—Les Basques.

We are here today to talk about Bill C‑34. To date, there has been a great deal of discussion about national security, which is the main part of the bill. This bill seeks to reinforce the powers the minister has to take action to protect national security. This is not a bad thing; it is even a very good thing, but decidedly, it does not go far enough.

I also want to talk about one of my concerns relating to another aspect of the Investment Canada Act, which, unfortunately, the bill under consideration does not address.

In fact, there are a number of things in the Investment Canada Act. First, people abroad who want, for example, to purchase a company, invest in a mine, start a research firm or make any significant investment whatsoever have to fill out a form and give notice of their investment indicating their intention.

Then, the federal government must determine whether it wants to review the actual investment. It can review it based on national security criteria, which is what this bill is about. The bill seeks to give the minister more power and to tighten the review criteria.

The other review criterion has to do with the net benefit for Canada. That is something that is a little more vague and that is not very clearly defined. I would even go so far as to say that there is not much on the subject in the current act. That gives the minister a lot of latitude in determining what constitutes a net benefit for Canada. In some unforeseen circumstances, it might be good for the minister to have the latitude to use their judgment. However, it would be good to have a bit more accountability and proactivity on the part of the government with regard to the use of the act.

I would like to talk about where the review threshold was when I was first elected in 2015. I would note that the minister is not obligated to conduct a review. Reviews are mandatory only beyond a certain threshold. When I was elected in 2015, the review threshold was $369 million. What is it now? Better be sitting down for this. It has been indexed, but let us just say it is indexing on steroids. Today, in 2023, the threshold ranges from $1.3 billion to $1.9 billion. That means not all transactions go through a net benefit review if they are below that threshold.

The $1.3-billion threshold is for businesses with which Canada does not have a trade agreement, while the $1.9-billion threshold is for those with which it has agreements, such as the U.K., the U.S., the EU and so on.

This means that some Quebec companies are not protected by the current review threshold. These companies are very important to Quebec's economy, which is very different from Canada's economy. The Canadian economy relies heavily on subsidiaries of U.S. companies, but Quebec's economy is more about small and medium-sized businesses. Slowly but surely, some small businesses grow by dint of hard work and even end up getting listed on the stock exchange.

Some of these major Quebec corporations that are publicly traded and are not protected under the current review threshold include Héroux-Devtek, which has a market value of $560 million, Lassonde Industries, which has a market value of $805 million, Cascades, which has a market value of $909 million, TC Transcontinental, which has a market value of $1.3 billion, and Resolute Forest Products, which has a market value of $1.6 billion.

All of these companies could disappear overnight. Any big shot from the U.S. or any other country on the planet could come in and take them over. The minister would not even look at it. It would be rubber-stamped. Thank you, good night, goodbye to that company. These are major, strategic corporations in terms of Quebec's national interest, and the federal government will not even look at them. It could not be bothered to take the time to analyze the transaction. It is unbelievable.

Worse, in some situations, a review is conducted, but it is not always very rigorous. Let me give an example. My riding was home to a company called Rona. Everyone in Quebec knows Rona. It is a major hardware store that sells all the building materials used in homes. In 2016, the company was sold for $3.2 billion to the American company Lowe's, a company in the same sector.

What happened? A review was supposed to take place because, at that time, the threshold was set at $369 million and it was exceeded. However, immediately after the transaction, some potential wrongdoing came to light. The former board of directors was fired, as was its president, Robert Dutton. Complicit in this was the president of the Caisse de dépôt et placement du Québec, who allegedly planned his exit in order to facilitate the sale of Rona, since it was blocked the first time around, in 2012. This former president of the Caisse de dépôt et placement du Québec is now working for the Liberals. His name is Michael Sabia.

What is interesting is that when we learned about this, we immediately wrote to Minister Bains. We asked him to take a look at what was happening before authorizing the transaction. We just wanted to put it on hold to see if it was a good idea for Quebec or not. What happened? The minister rubber-stamped it. He did not ask any questions. Before we knew it, the company was gone. That is sad. The company was re-sold for $400 million U.S. when it was originally purchased for $3.2 billion. That loss of value signals an abysmal failure. It was sold for a pittance to another U.S. company after Lowe's fell flat on its face in Quebec.

Well, after the minister approved the transaction, we wondered why he made that decision and what his thought process was. There should have been a net benefit to Canada review. We submitted an ATIP request to see what documents and analyses helped the minister make his decision. The answer we got was surreal. Here is what it said: We carried out a comprehensive search and regret to inform you that we found no documents corresponding to your request.

There are no documents. The minister referred to zero documents and zero analyses to make his decision about net benefit to Canada. That is what passes for rigorous analysis by the Liberals for a company worth $3.2 billion, a massive company of strategic value to Quebec. What do people buy at hardware stores? They buy building materials. Building materials are made from raw materials. What do we produce here? We produce wood, nails, shovels and so on. The products that end up on the shelves in those stores are products we make in Quebec.

What happens when a foreign company buys that company? The foreign company has its own suppliers already. For example, an American company will use American suppliers because it already does business with them. Quebec suppliers get kicked to the curb. That is what happened, unfortunately. Many Quebec suppliers lost their orders.

Now Rona will have a second chance with its new owner. We hope things will improve, but it is sad. What happened was the Liberals could not be bothered to review the transaction to see whether it was beneficial or whether it was even over the threshold. That is a big problem. I find that really odd. When a company comes here from overseas and takes a heavy-handed approach, often our first instinct is to assume that they are much better than us, that they are much bigger and therefore unbeatable. We think we have no choice but to sell, so we immediately roll over.

Companies like Target come to mind. When Target came along, the owners of Zellers sold all their stores. It was a fire sale. Run for your lives. Target was going to come in and kill everyone. What happened to Target? It did not last a year before it shut down. Another example is Provigo. Provigo was a Quebec company, a large grocery store chain that created competition. Now we have Loblaws, which exists in the market and is up against Metro, but there used to be other players, too. Unfortunately, when Provigo disappeared, there was less competition, which resulted in higher prices in grocery stores. Today, there are no longer any Loblaws grocery stores in Quebec. Loblaws put the Provigo signs back up. They realized that the Loblaws stores were not working.

Just because a foreign company comes here does not mean that it will succeed. We too have good, solid companies. We should be proud of them. We should ask questions before rubber-stamping any old transaction. Unfortunately, it seems that this government does not understand that. There was an opportunity with Bill C‑34 to do more to defend our companies, and it did not do so. I am really disappointed.

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Madam Speaker, when I look at the legislation, what I see is a modernization that would in essence enable the ministers to continue what I believe is a healthy history. Canada has been perceived as, and has been in real terms, an attraction or magnet for foreign investment. What we are talking about here is ensuring there is more transparency and accountability and the ability to protect and provide security in a better way going forward.

The principles of the legislation are worthy of supporting, no matter what side of the House one comes from. I wonder if the member from the Bloc would concur that, at the very least, this legislation should be going to committee. Hopefully it happens relatively soon.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Madam Speaker, the member opposite is pretty much telling us that they are going to modernize Bill C-34, that it is a good thing and that we should be pleased.

I am pleased that Bill C‑34 will be updated somewhat; what is sad is that that requires rigour. The problem is that there is no rigour.

Is there a way to come up with a more rigorous bill, one that would require rigour? That is what I would find more interesting and make me happier.

Let us look at an example. In 2021-22, there were 1,255 notices of foreign investment. That is a lot. How many were examined? How many were reviewed?

Not even 1% of investments were reviewed. That is absolutely crazy, but that is what the government considers to be rigorous. It approves everything and has lost control.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Madam Speaker, I found the member's speech very interesting, particularly with regard to whether there are any documents to support the minister's decision on the acquisition laws.

In the last Parliament, recommendation number one of the unanimous report by the industry committee was that a state-owned enterprise's financial ceiling for review by the government be lowered from $415 million, from a hostile country like China, to zero. This bill, Bill C-34, does not propose any changes to that limit, which means that state-owned enterprises can buy up anything they like in this country under $415 million.

I would like the member's views on whether he would like to see amendments to this bill in that area.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Madam Speaker, I totally agree with what the Conservative member said.

It does not make any sense for an enterprise owned by foreign interests, not just private interests, but state-owned foreign interests, to be able to buy anything under the threshold he mentioned without any oversight. The government is not even bothering to look at whether it is a good thing or not. A review should be automatic when a state-owned enterprise buys a company here.

That does not mean blocking the transaction. The idea is not to block every purchase that might happen here. The same goes for private interests. The idea is for the government to at least review the purchase and ask questions rather than just letting everything go forward. Right now, the government is sticking its head in the sand and not seeing what is happening. It is blind.

[Laurel Collins, NDP, Victoria, BC]

Madam Speaker, the government allowed a Chinese insurance giant and bank to take over operations of seniors' living facilities. This company was then seized by the Chinese government, which now holds a 98% ownership stake. There are no provisions in the Investment Canada Act that allow for a review of subsequent acquisitions by state-owned companies.

Does the member support closing this loophole?

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Madam Speaker, obviously I agree with my NDP colleague, who raises a really good point.

I would add one thing: out of sight, out of mind. That is true in general. It means that the more distanced the executives are from the company's operations, the less interested they are in the company's well-being and results. It means that the further away the owner of a company is geographically from what is happening here, the less accountability there is and the less likely the company owner is to take our national interests into account in their daily business decisions.

That is something the government needs to keep in mind when deciding whether to authorize transactions.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Madam Speaker, Bill C-34, an act to amend the Investment Canada Act, has good intentions. It seeks to improve controls and give the Minister of Innovation, Science and Industry more authority over foreign investments in Canada. The Bloc Québécois fully supports this commitment to better protecting the economy of Quebec and Canada from foreign interests that may be harmful to us.

The new review process is essentially the same as the one used in the United States. Adopting it increases the chances that the U.S. will continue to see us as a reliable partner. That is a condition for being a preferred supplier that is well integrated into their supply chains. At a time when protectionism is on the rise among our neighbours to the south, a trend that could seriously disrupt our economy, that is an important asset, and the Bloc Québécois applauds it.

Bill C‑34 is in addition to the new critical minerals guidelines that the government adopted in October 2022, and that apply to 31 minerals that are critical for the long-term economic prosperity of Canada and its allies. Bill C‑34 and Canada's new critical minerals strategy should help stop Chinese companies, among others, from taking over our resources.

All these developments are positive, but they are only half-measures. That is why the Bloc Québécois is asking the government to go much further in controlling foreign investments in general. The bill under consideration is limited to investments affecting national security. This category of investment is extremely sensitive, so focusing on it is justified. However, it represents only a small fraction of all foreign investments made in Canada. It is clear that the safety net provided for in the new system created by these proposed amendments to the Investment Canada Act is inadequate.

Here are some figures. Of the 1,255 investment projects filed last year, under the new rules being proposed in Bill C‑34, only 24 would be subject to review. Clearly, this is like a grain of sand on a beach. This bill would affect only 2% of all investment projects filed last year. The other 1,221 projects from last year would remain subject to the new rules. Those rules provide for a review to determine whether a project will truly provide a net economic benefit to Canada.

There are six criteria then used to assess whether a transaction is beneficial. That said, I would draw the attention of my colleagues to the fact that a review is only triggered when a project exceeds a certain monetary threshold, as my colleague from Pierre-Boucher—Les Patriotes—Verchères explained.

That is where the problem lies. Over the years, the threshold at which the government must assess whether an investment is economically beneficial has been significantly increased. It has more than tripled in the last 10 years. At the same time, the number of investment projects is increasing every year, and that must be taken into consideration.

The consequence of this aberration is that virtually all projects are rubber-stamped without additional review. Last year, of the 1,255 projects submitted, only eight were subject to a review under the Investment Canada Act. That is less than 1%.

The member for Winnipeg North says that the law is being amended, so it must be good. The Liberals have created a bill that does not affect even 1% of the projects. That is not very ambitious. It reminds me of yesterday's smoke show on health transfers.

The review rate was 10% as recently as about 10 years ago, in 2009. In reality, this measure has become essentially ineffective over time. It might as well not exist; it would not make much difference. The situation is such that foreign investments are rubber-stamped without analysis, save for exceptional cases. Understandably, less than 1% certainly qualifies as exceptional.

Everyone knows how much I love history, how passionate I am about it, and I believe that building our future depends on having a good understanding of the past so we can learn from our successes and avoid repeating mistakes. I would like to share some snippets of history to illustrate why we need to do more to control foreign investment.

Since the Quiet Revolution, the Government of Quebec has established some important economic and financial levers. These tools enable it to pursue a policy of economic nationalism designed to give Quebeckers more control over their economy. That does not mean Quebec is not open to foreign investment. We are open to it because it can drive growth and development. However, we believe the priority is supporting our own businesses to help them grow so we can protect the significant decision-making power of our own corporate headquarters.

In 1988, former Parti Québécois premier Bernard Landry lobbied for the North American Free Trade Agreement, better known as NAFTA, which was signed with the U.S. and Mexico in the early 1990s. Quebec's strategy worked. Quebec's decision to invest in its businesses paid off, and many flagship companies headquartered on Quebec soil grew.

As the figures show, the presence of head offices is important. There are currently close to 578 head offices in Quebec. This represents approximately 50,000 jobs that pay twice as much as the Quebec average. On top of that, head offices provide nearly 20,000 other jobs for specialized suppliers such as accounting, legal, financial and computer firms, and so on. Structurally, companies headquartered in Quebec also tend to favour procurement from local suppliers, which creates a positive economic circle. Finally, companies tend to concentrate their strategic activities, such as scientific research and technological development, where their head office is located.

As the Bloc Québécois science and innovation critic, I have to emphasize how important this characteristic is, since Canada ranks last in the G7 when it comes to corporate investments in research and development. This statistic can probably be traced to the fact that the Canadian economy has always been recognized as a subsidiary economy. One might think of the automotive sector, with Ford Canada and GM Canada, or the oil sector, with the Shell Canadas and the Imperial Oils of the world.

There is no shortage of examples of the harmful effects that ill-advised foreign investments can have on our economy and even our prosperity. Here are just a few.

First, there is the loss of decision-making powers and head offices, which condemns us to being a subsidiary economy, where foreigners decide for us. Second, there is the weakening of Montreal's financial sector as a global finance hub. Third, there is the total dependence of our businesses on foreign suppliers and supply chains that are more fragile than ever. We saw that during difficult times, such as the COVID‑19 pandemic. Fourth, there is the possible land grab by rich foreigners who do not care about our social and economic priorities. That is a concrete example. Fifth, there is the loss of control over our natural resources, which are our country's greatest asset.

By focusing exclusively on national security, Bill C‑34 does not address Quebeckers' and Canadians' gradual loss of control over their own economy. I want to reiterate that we invite the government to amend its bill to make it much more bold and ambitious and to modernize the entire Investment Canada Act and not just the part on national security.

As always, the Bloc Québécois strives to be a constructive partner, and as such it is recommending three types of amendments. The first is to lower the review threshold to prevent most foreign investments from being approved without review. The second is to pay special attention to strategic sectors of the economy. The third is to develop a tighter process for transactions involving control over intellectual property patents.

I hope the government will listen to our practical proposals and modernize this bill.

[Kevin Lamoureux, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Madam Speaker, I am encouraged that, toward the tail end, the member referred to the idea that there could be room for improving the legislation. This is a reason that I am hopeful the member would share those thoughts with the minister. Let us ultimately see the legislation go to committee.

At the beginning of his speech, the member referred to this whole one per cent factor. We also need to recognize that some industries need more attention than others. Information technology is an example of this, and I think that is another area that the committee could be looking at.

Could the member provide some additional thoughts in regard to those industries he would think offhand, and I do not expect a list, that there should be more attention given to?