Bill C-27

Digital Charter Implementation Act, 2022

An Act to enact the Consumer Privacy Protection Act, the Personal Information and Data Protection Tribunal Act and the Artificial Intelligence and Data Act and to make consequential and related amendments to other Acts

Part 1 enacts the Consumer Privacy Protection Act to govern the protection of personal information of individuals while taking into account the need of organizations to collect, use or disclose personal information in the course of commercial activities. In consequence, it repeals Part 1 of the Personal Information Protection and Electronic Documents Act and changes the short title of that Act to the Electronic Documents Act . It also makes consequential and related amendments to other Acts.
Part 2 enacts the Personal Information and Data Protection Tribunal Act , which establishes an administrative tribunal to hear appeals of certain decisions made by the Privacy Commissioner under the Consumer Privacy Protection Act and to impose penalties for the contravention of certain provisions of that Act. It also makes a related amendment to the Administrative Tribunals Support Service of Canada Act .
Part 3 enacts the Artificial Intelligence and Data Act to regulate international and interprovincial trade and commerce in artificial intelligence systems by requiring that certain persons adopt measures to mitigate risks of harm and biased output related to high-impact artificial intelligence systems. That Act provides for public reporting and authorizes the Minister to order the production of records related to artificial intelligence systems. That Act also establishes prohibitions related to the possession or use of illegally obtained personal information for the purpose of designing, developing, using or making available for use an artificial intelligence system and to the making available for use of an artificial intelligence system if its use causes serious harm to individuals.

[Dr. Patrick Leblond, Associate Professor, Graduate School of Public and International Affairs, Faculty of Social Sciences, University of Ottawa, As an Individual]

Thank you, Mr. Chair.

Good afternoon, members of the committee. Thank you for the invitation to discuss Bill C‑34 with you. I will be giving my presentation in French.

However, please feel free to ask questions in English afterwards.

To begin, I would like to discuss three important aspects of the bill: the nature of an investment that threatens Canada's national security, sanctions for failure to comply with undertakings given by a non-Canadian investor, and transparency.

I will start with the nature of an investment that threatens Canada's national security. Subclause 2(1) of the bill, which amends section 11 of the Act by adding a paragraph (c), refers to “an entity carrying on all or any part of its operations in Canada and that has a place of operations in Canada ... or assets in Canada used in carrying on the entity’s operations.” The bill uses the expressions “material assets” and “material non-public technical information.”

What I wonder about is this: what happens if that non-Canadian investor acquires those material assets or that material technical information directly, without acquiring the entity in question that owns the assets or information? For example, what if the investor buys a bank of personal data about Canadians or the source code of the algorithm for an application associated with critical infrastructure? Is the investor required to give a notice in accordance with the procedure proposed in the bill? Is the acquisition covered by the bill?

If the answer is no, there is a risk that an investor that wishes to use the assets or technical information for legitimate commercial purposes will decide, instead, to acquire them directly from the Canadian entity that owns them, rather than acquire the entity itself and risk having the acquisition blocked by the minister for national security reasons. The same reasoning applies to the owners of a Canadian entity who wish to maximize the value of their assets and technical information: they could put the assets or information up for sale, rather than the entity itself.

In that scenario, the threat to national security is still present. If the Investment Canada Act does not apply to a scenario in which the assets or technical information itself is purchased, and not the entity, such as a business, the acquisition of assets or information needs to be covered by another act or acts. What act or acts would that be? To my knowledge, there are none.

That is the first thing I wonder about regarding the bill, given the intangible nature of some assets, whether they are data or technical information. It is therefore easy to acquire them without necessarily acquiring the business that owns them.

I will now move on to the sanctions for non-compliance with undertakings given by a non-Canadian investor. The bill provides that the minister may approve an investment if the non-Canadian investor gives certain undertakings to limit or reduce the risks of injury to national security. What happens if the investor does not honour their undertakings?

The bill provides a maximum penalty of $500,000. If that penalty applies only once, it seems to me to be very little. We need only think of the millions in profit that material assets or technical information can generate. Is a single penalty of $500,000—because the bill does not provide that it be every day or every year—therefore sufficient to encourage, if not compel, a non-Canadian investor to honour their undertakings? At that point, is it not really just an operating cost?

I wonder why a higher penalty is not being considered, such as the one provided in Bill C‑27? That bill talks about a penalty of the higher of 5% of global revenue and $25 million. Why does Bill C‑34 talk only about a penalty of $500,000? On the one hand, personal information is considered to be so important that the penalty can be millions of dollars and possibly as much as 5% of global revenue. On the other hand, however, when we are talking about national security in connection with what may be the same data, the economic sanction is a mere half million dollars. Does this mean that threats to national security are less important? That is my question to you.

In addition, what is to be done if the investor pays the penalty and continues not honouring their undertakings? Does the minister have the power to stop the investment? Although I am not a lawyer, my reading of the act and the bill suggest to me that the minister does not seem to have that power, unlike in the United States, where it is possible to stop an investment retroactively. Would that be the case here? That is what I wonder when I read the bill.

On the subject of transparency, the bill could increase uncertainty on the part of non-Canadian investors who want to invest in Canada and also Canadians who want to sell all or part of their businesses to non-Canadians or obtain financing from non-Canadians. There is therefore a risk that businesses that have or believe they have material assets or material non-public technical information may decide to move their decision-making centre or headquarters out of the country, to the United States in particular.

The greater the uncertainty regarding the application of the act, the higher the risk of a move happening will be. To reduce the uncertainty, there therefore has to be a degree of transparency in the minister's decisions and the undertakings given by non-Canadian investors, without that necessarily meaning that state secrets or trade secrets would be disclosed. Even if the decisions are made on a case by case basis, there have to be clear guidelines, and those guidelines have to be observed. Simply providing a list of material assets or material technical information does not seem to be adequate.

I will stop there. Thank you.

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

For the Diefenbaker government, I was not there. I never met John Diefenbaker, but I knew his executive assistant. MP Maguire met John Diefenbaker.

He was first elected prime minister in 1957 in a minority, but he had an overwhelming, smashing victory in 1958, winning many seats. He was only to be surpassed in the number of seats by Brian Mulroney's victory in 1984.

Apparently, in 1958, with the election of the Diefenbaker government:

...greater use was made of standing committees; for the first time, a member of the official opposition was chosen to chair the Public Accounts Committee—

Imagine that. The Conservative government of John Diefenbaker expanded the roles of committees and said examining the spending of government accounts by the public accounts committee is not something that should be chaired by a government member. They, in government, said, “We should have an opposition member chair the public accounts committee.”

Is that a dedication to ministerial accountability? That's a belief in our parliamentary system like we don't see these days.

Again, I will read it, “for the first time, a member of the official opposition was chosen to chair the Public Accounts committee and the Committee began to hold regular meetings”. That's a good concept.

In 1968 there were more significant reforms made to House procedures, including the following—and remember, I don't know what time of the year it was in 1968 that it happened. It could have been under Prime Minister Pearson, or it could have been under newly elected Prime Minister Trudeau, who was fresh faced, and there was Trudeaumania. If it was under him, with all the world before him to change the world and use government for good with an unusual respect for Parliament for the Liberals, in 1968 they made a series of significant reforms to House procedures, including the following three key changes.

The estimates were no longer considered by a committee of the whole of the House but were sent to standing committees. That was a good reform. It gave those expert committees the ability to scrutinize the spending of the departments that the minister is responsible for, i.e. the Fisheries minister in the fisheries committee or the Industry minister in the industry committee.

The second significant reform, according to Treasury Board, that was made in 1968 was that the opposition was given a total of 25 days when it could choose a topic of a debate. Those are colloquially called opposition days, when we get to propose a motion for the House to debate and move and, for the general part in this government, for the government to ignore the vote or, in some cases, vote against it, as they did recently on several opposition days. We were thankful that they voted to send China interference, which the government has been aware of for two years, I believe, yesterday, to the procedure and House committee. Thanks to some of these reforms, those things can happen.

The third thing was that most bills were referred to standing committees. I was talking with MP Blaikie the other day about bills going to standing committees, and talking about the time.... Again I'm going to give a story. There is a standing order that is still on the books today, little used, that committees could be freed up from the arduous work of dealing with legislation, which can throw off the important subject studies that standing committees do. For example, we now have three government bills before the industry committee, which has stopped, halted, right in the middle of the important study we were doing on a Bloc motion to have the electronics and recycling ecosystem studied by the industry committee to understand all types of things. That has been stopped because we now have three bills, Bill C-27 on privacy, Bill C-34, changes to the Investment Canada Act, which I'm sure all members here are very interested in, and Bill C-42, a bill to create, finally, a beneficial corporate ownership registry.

There is a standing order that still exists today that says you can refer bills to legislative committees. These are special committees that get set up for each bill. They exist for a bill, then disappear.

During the days when I was a young legislative assistant to a minister, that's where all bills went. They didn't go to standing committees, except for the budget. They didn't go to standing committees; they went to specially constituted legislative committees that would be set up, for example, to deal with Bill C-21, which changed the Firearms Act. It wouldn't go to security, SECU, as we call it. It would go to a special committee of MPs set up from all parties, and it would have its own budgets, its own clerks and its own travel budgets and then, when the bill was reported back to the House with or without amendments, that legislative committee would disappear.

For example, Mr. Chair, look at the biography of a former chair of this committee whom I knew well, Don Blenkarn, an irascible fellow from Mississauga who was elected and chaired this committee, I believe, for six years during the Mulroney government. He wasn't always a person who followed the government rules, I can tell you, much to the chagrin of then finance minister, Michael Wilson. When you look up his bio, you will see legislative committee after legislative committee after legislative committee listed by bill, because when a finance bill came out of second reading in the House, the legislative committee would set up, and Don Blenkarn would always be one who wanted to be on those bills to examine them.

While this reform in 1968 referred it to standing committees, I know personally that there were further reforms to the Standing Orders to allow for more flexibility. It is something we should use a little more today, those legislative committees, but, like I've said before, I've gone a little off topic from this, but I still think it's about how we hold ministers to account in Parliament.

There are different ways to do it under the Standing Orders, and some are effective, but the key part of it, whether it's a standing committee, a legislative committee, public accounts, the finance committee or two of my favourites, industry and fisheries, is that ministers come because it's a courtesy on both sides.

It's a courtesy to ask the minister to come and explain why this is such a great legislative initiative, but it's also generally polite—like when you get a dinner invitation to somebody's house—to go. I won't say to you, Mr. Chair, since I expect I will get an invitation to dinner with you sometime, “Well, I can only go for half an hour.” I know you want to talk to me about the insights I've provided the committee on ministerial accountability for more than that over dinner and maybe a few glasses of wine.

[Jim Balsillie]

I think you need both. The expertise is a needed piece, but I think you need to pair it with the kind of agency that would look at this and feed into any kinds of decisions.

It has to be pulled out and dealt with as its own being, and you need to have expert analysis for all of these crosscutting files. I've mentioned many of them before. The intangibles economy works on legal frameworks, and it's a hands-on economy as opposed to a neo-liberal, hands-off, tangible production economy, so it's a completely different tool kit. I think we have to build the capacity broadly, narrowly and specifically, and we have to create the kind of legislative and agency powers to deal with this.

Yes, if you build this capacity so that wherever this resides in the government, it has to reference it, that's a step forward. If you expand the scope of this to deal with the broader kinds of places that I've mentioned, including having the reverse ability of partnerships, that's great, too, but I've seen so many things like ISED's financing Huawei through granting agencies. People adored Sidewalk Toronto. They let the Tesla battery technology go. Money goes to Invest in Canada to say, “Come take our best stuff,” so this whole system makes me very, very nervous. We have to break with the past.

Whether it's within ISED or outside of ISED, that's an important question, but I've seen the quality of Bill C-27, and it's so foundationally flawed that it doesn't give me confidence.

[Jim Balsillie]

Yes, a hundred per cent the government can keep up. You have to focus on it deliberately.

I've spent the better part of a year working on predecessors—Bill C-11 and Bill C-27. On the Centre for Digital Rights website, we have a 50-page set of proposed amendments to it.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Right. You alluded throughout our testimony today—I'll ask Mr. Ciuriak to comment in a second—to the fact that we're at a tipping point in Canada in dealing with some of these digital challenges in respect to intellectual property, Canadian sovereignty and national security.

Are there any proposed amendments—maybe you can get back to the committee a little later—that in any way can address this in the context of Bill C-27, which touches upon many of these points, too?

You mentioned that there is a capacity and context issue with the Government of Canada in this department. Can government ever really keep up with the technology that's being developed and implemented so quickly today?

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

I ask that question in the context of the points raised about the digital economy and what this committee will be dealing with as well in respect to C-27.

Mr. Balsillie, you caught my attention, and I was texting with my wife during this committee about what we were talking about. The other day I came home, and my son had asked for a Paw Patrol app to be downloaded on our iPad. I don't know the origins of this application or which company owns it, but in my mind it almost seems that a foreign company is operating in Canada. They're investing in Canadian users. They're extracting information from children as young as two years old. They're using that for monetary purposes, but it wouldn't be covered under the Investment Canada Act. As Ms. Walker said, it would also likely not be covered under another law in Canada, even though it is a form of investment to extract information and therefore wealth from Canadians of all ages.

Would you agree with that type of assessment?

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, Mr. Chair.

I think this is an interesting time right now. I know Mr. Balsillie, for one, was just at our science and technology committee. We were talking about IP commercialization, owning more of what we create, and at this point we are also trying to make sure we protect what we create.

I really want to zero in on some recommendations you've given the committee. I can't agree more that economic and security risks should not be analyzed separately. Certainly we need strategic technologies and critical technologies lists like the U.S. has. I think your last recommendation was to create a CFIUS, the committee on foreign investment that the U.S. has. We have an investment review division under ISED right now. I think one of the differences I've seen is that CFIUS is an inner agency, so it seems to work across many different...I guess here it would be ministries, and the U.S. seems to get that. We seem to have it only under ISED.

To the point I wanted to zero in on earlier, we're not talking about intangible assets. We're certainly not talking about data and IP, and protecting that. Again, AI, as we're going to be studying with Bill C-27, is just incredibly powerful right now. We don't know what that's going to do to IP and data.

This is just a question of whether we should be looking at maybe a recommendation to give more power to the investment review division under ISED, and maybe looking at multi-ministry...? Also, how do we handle the AI component, let alone just IP and data itself?

Bill C-47—Time Allocation Motion

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Mr. Speaker, the government is now moving to guillotine debate on its own budget bill, and there is really no reason to do it. The Standing Committee on Finance is already considering the budget bill at committee and has been for many days.

The only reason to do this is to completely shut down debate on a bill that many members, both in the Conservative Party and I am sure other political parties, want to debate to bring forward issues of concern from their ridings. I know people in my riding are extremely concerned about the cost of living crisis that this inflationary budget will only make worse as the government pours more gasoline on to the inflation fire. The Liberals have no plan whatsoever to actually balance a budget in any future budget year that is available in the document right now.

There was no reason to do this; the finance committee is already seized with the matter. It is already considering Bill C-47. The only reason to do this is to slam shut debate in the House of commons once again.

I will remind members that this government passed only one government bill to the next stage last week, Bill C-27. There were more private members' bills passed last week, and I am sure it will happen this week. This government has completely mismanaged the clock. It even has evening sittings and cannot pass government legislation on time.

[Todd Bailey]

Canada is not by itself in the world. It has to deal with other parties out there. Across the pond, you have Europe, which takes a very heavy approach to regulation. They're usually leading the pack, and they have been on AI as well. To the south, we have a country, the United States, the does not do a lot of regulation. As a country, Canada wants to do business in both jurisdictions, so we have to walk a line.

I have not been involved in any of the consultations relating to this. It is just sort of my perspective. We have to walk a line. This is what I see in Bill C-27, part 3, the AI and data act part. It is trying to create a framework that will be helpful for Canadian companies that want to go do business in Europe. It also does not want to discourage our interactions with the United States in terms of AI. We have to accept that the big players in all digital spaces are mostly American companies, and we don't want to cut ourselves off from that.

[Stéphane Lauzon, Liberal, Argenteuil—La Petite-Nation, QC]

Thank you, Mr. Chair.

Mr. Bailey, Professor Yoshua Bengio is an international authority on artificial intelligence based in Montreal. On April 15, he told us clearly that it is very important to act now on Bill C‑27, An Act to enact the Consumer Privacy Protection Act, the Personal Information and Data Protection Tribunal Act and the Artificial Intelligence and Data Act and to make consequential and related amendments to other Acts.

We are establishing international leadership through Bill C‑27. Do you believe this leadership will inspire the United States to address matters the same way we are, since it does not have such legislation?

[Todd Bailey]

It's a great question.

As you may know—and I'm sure you do—a lot of the interesting stuff on Bill C-27 is still to come. It will be in the regulations. The act itself sets out the regulation of so-called high-impact AI. AI is already regulated. We're hearing a lot about AI now because of ChatGPT. It's really cool but it's not new technology; it's old technology. It's just on a massive scale. We've had AI in our hands for 10 years already.

I think the approach being taken is a good one because AI changes quickly. Six months ago we didn't know what ChatGPT was. Now it's here and it's changing a lot of things. If you were to put in your law, it would take a long time to keep current, and you would always be chasing the technology. At least by having the regulations to address the rules and some of those things, the law will be allowed to keep pace. That is quite important.

It's also important to understand that most AI is not high-impact AI. If you look at what Scale AI is doing related to the supply chain, AI is essentially a productivity tool.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you. This is extremely important. We know how much research in French is imperiled on the international scene.

I’ll get back to the subject.

Let me begin with you, Mr. Bailey. You touched on the issue of artificial intelligence. I would be curious to hear from you on Bill C‑27, which I imagine you’ve been following with some interest, and which is now before the committee.

What are your thoughts on Bill C-27? In the context of this study, you could respond by talking about support for commercializing intellectual property, which may be a blind spot in this bill.

[Brian Masse, NDP, Windsor West, ON]

On a separate scheduling note, has there been any thought about what we're doing with Bill C-34 and Bill C-27? How much time do we have left to schedule those? I haven't checked my email, so it could be in my box right now for all I know, but I'm just curious.

[The Chair, Liberal, Joël Lightbound]

Good afternoon, everyone. I call this meeting to order.

Welcome to meeting No. 68 of the House of Commons Standing Committee on Industry and Technology.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, November 28, 2022, the committee is meeting to study the development and support of the electronics, metals and plastics recycling industry.

Today’s meeting is taking place in a hybrid format, pursuant to the House Order of Thursday, June 23, 2022.

I'd like to thank the witnesses who are joining us. I apologize for running late. I note, at the request of Mr. Lemire, that Mr. Masse is to blame for this delay because he requested a division of the motion on Bill C‑27.

Brian, it's your fault if we're late today.

Digital Charter Implementation Act, 2022

[The Speaker, Anthony Rota]

I declare part 3 of the bill carried.

The House has agreed to the entirety of Bill C-27, an act to enact the consumer privacy protection act, the personal information and data protection tribunal act and the artificial intelligence and data act and to make consequential and related amendments to other acts, at the second stage reading.

Accordingly, the bill stands referred to the Standing Committee on Industry and Technology.

(Bill read the second time and referred to a committee)