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.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Boulerice.

Before we can debate it, I regret to inform you of my decision.

Bill C‑34 amends the Investment Canada Act to, among other things, authorize the Minister of Industry to impose interim conditions on investments to prevent national security breaches that may occur during the review, to make an order to extend the review under part IV.1, and to allow written undertakings to be submitted to the Minister of Industry to address national security risks and to provide that the minister may, with the agreement of the Minister of Public Safety and Emergency Preparedness, terminate the review as a result of the undertakings that have been made.

However, amendment NDP‑4 seeks to add a new obligation for the Governor in Council, that of providing the reasons why an order has not been made, which constitutes a new provision not provided for in the bill as adopted by the House of Commons at second reading. As House of Commons Procedure and Practice, third edition, states on page 770:

An amendment to a bill that was referred to a committee after second reading is out of order if it is beyond the scope and principle of the bill.

In the chair's opinion, for the reasons stated above, the amendment is beyond the scope of the bill. Therefore, Mr. Boulerice, I rule this amendment out of order.

As you know, that decision is not debatable, but it can be overruled if a member of the committee requests a vote on it.

Mr. Perkins, you have the floor.

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

Thank you, Mr. Chair.

I will make a slight alteration to CPC-11, if I can, as I table it. Just to be clear, I believe there's an issue in CPC-11 with what I proposed as new subsection 25.3(6.2). That's at the bottom on the page.

I propose that we put forward this motion without that new subsection. There perhaps is an issue, as I understand it, around whether or not it would be out of order. It imposes, I believe, a new condition or a new requirement on the minister, and it's a minor element of what we're trying to do with this amendment.

This amendment deals primarily with the fact that no clause in Bill C-34 allows the minister to review past acquisitions and mergers under the national security review process. The amendment seeks to give the minister power to review past acquisitions by non-Canadian state-owned enterprises through the national security review process. The geopolitical situation in the world is constantly changing, as we know. Acquisitions conducted by authoritarian states like China 10 years ago did not pose the same sort of national security threat, in my view, at that time, that they perhaps do now, but could pose a threat today.

Several of us have pointed out, and some of the witnesses have pointed out, that the minister needs to have the power to review previously approved ICA acquisitions by non-Canadian companies through that. Indeed, I've actually had a couple of sidebar conversations generally with the minister on this, on some acquisitions in the past. While the minister ordered last year three mine interests to be divested under policy, there were some other ones I brought up, like the Tanco mine, where he said it didn't allow him to go back far enough to deal with that issue. I think, actually, I may have even read about the minister referring to something more recently in the media when he was asked about reviewing an acquisition.

We put this forward because, whether it's this minister or current ministers, we would need the ability to go back when the geopolitical situation changes, as it has with regard to China. We had what I call sort of the “Bill Clinton” policy for many, many years through various governments—that through broader trade and economic engagement in the WTO, we could help China become a more open and a more...maybe not democratic, but a more human rights-based country.

I think that actually did work for a while, but the regime changed. With that regime change, we've seen, in my view, quite a bit of a step back. The regime has very different motivations in terms of how it engages internationally than we hoped for over the last 20 years. In fact, I think we're in a business cold war right now, in some ways, with China in particular. They are very aggressive in acquiring mineral rights around the world and companies under certain levels in our country. They have already acquired some of our strategic assets that we cannot get back.

Mr. Chair, I would urge members to at least give the minister the authority in the act and to give the government the ability to go back and revisit some of these, as I believe many other countries have in some of their acts. I think Britain and certainly the United States have given the minister some ability to go back further than ours does.

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

I just want to comment briefly.

You know, Mr. Perkins has put forward...and I was so, so annoyed. I looked at my package, and I was like, “What the frick? There are a million things on 'may' and 'shall'.”

I want to clarify for Canadians listening today that “shall”, in legal language, is often used to impose a mandatory obligation or requirement. When a law or regulation uses the term “shall”, it means that the action or condition specified is necessary and must be followed. Failure to comply with the “shall” provision can result in legal consequences or penalties. It indicates that the specified action is mandatory and binding.

“May”, on the other hand, is used to confer discretionary power or give permission. When a law or regulation uses the term “may”, it grants an authority or decision-maker the option to exercise their judgment or discretion in a particular matter. It indicates that the specified action is permissive, allowing the authority or individual to choose whether or not to act.

Let's take this example: “The minister may grant an exemption in exceptional circumstances.” In this case, the minister has the discretionary power to grant an exception under exceptional circumstances, but it is not mandatory.

For the purposes of Bill C-34, again, Canadians are looking for a stronger bill that will, in some cases, dictate that the respective minister take certain actions and do certain things to provide confidence in our institutions and, at other times, exercise great discretionary power in the national interest of Canada. That is why we are putting forward these types of amendments.

Thank you, Mr. Chair.

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

I'm just trying to understand, because the principal thing that we're doing in ours is changing “may” to “shall”. We're not really changing a lot of the other section in the act that Bill C-34 amends.

I don't mind. I'm just trying to understand that this is just an addition, not because my proposed amendment is causing a concern. You're just providing a little more clarity.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Thank you, Chair, and thank you to my colleague for the amendment.

I guess the worry is that there could be cases where the act of imposing interim conditions won't actually reduce the risk. It could actually increase the risk by, for example, disclosing the location of sensitive infrastructure.

I'd like to propose a subamendment, and I'm under the impression that it's already been shared. I move that motion CPC-10, proposing in paragraph (c) to amend clause 15 of Bill C-34 by replacing line 26 on page 8, be amended by replacing the word “review” with the following:

review, provided that the imposition of interim conditions does not introduce significant new risks of injury to national security.

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

Thank you, Mr. Chair.

I'd like to move CPC-10.

This is, again, the “shall” and “may” thing. In its current form, Bill C-34 doesn't compel the minister to conduct a national security review, as we've talked about before. Rather than making it optional, we believe it would be helpful to have an automatic trigger that would compel a minister to go a little deeper into the security review.

As I've mentioned before, my poster children for this are Tanco and Hytera, where the minister of the day, on whatever recommendations he chose, did not go into enough detail. I don't know what the recommendations were, but in my view they needed to go further than the first stage of the review.

My concern in this case is that I just don't see how a state-owned enterprise, a Chinese company, being primarily or controlled through the state-owned enterprise—or if not through the state-owned enterprise, at least by the 2017 national security law that was passed in China requiring it to spy and requiring it to steal technology as part of being a good citizen of the Chinese Communist Party—didn't get the in-depth review for these acquisitions.

How could a telecommunications company and its assets in Canada not be considered strategic? They obviously are in the U.S. I know attitudes may have evolved toward Huawei, and with Hytera being charged last year and the only lithium-producing mine in Manitoba being so critical to the issue going forward.

Hopefully, the Ring of Fire and those things will eventually be developed in Canada, and we're not at the point at which our only lithium-producing company is owned by a Chinese state-owned enterprise and everything it mines goes to China.

Given the emphasis on the EV strategy by the government, and by governments of the day, and the move to that, it was probably a little short-sighted to not get a more in-depth strategic look at either the net benefit or, in this case, the national security review. Perhaps today, security might be viewed a little differently from how it was viewed in 2017. I'm not sure, but hindsight's always 20/20. This forces it to go to a deeper dive. It removes some of that ambiguity and gives the minister a little more heft around the table for the minister's ultimate decision.

I won't go over the diligence of various ministers. I went over that last time and got a few smiles. Regardless of government, not all ministers are created equal. Mr. Masse called this the Maxime Bernier clause, and I tend to agree with that. At least he didn't leave any documents.... Well, maybe he did leave documents around on that too, but I'll leave it there for now. This just provides a suspenders and belt approach, as someone said a few meetings ago.

Thank you.

[The Chair, Liberal, Joël Lightbound]

I would ask for a little order, please. Order, please. Let's have a little decorum. I know it's the summer and we're all anxious to get out of here, but we have important work to do.

I want to say to the witnesses that I apologize for the delay.

Pursuant to the order of reference of Monday, April 17, 2023, we are continuing our study of Bill C‑34, An Act to amend the Investment Canada Act and today we are continuing clause-by-clause consideration.

Today's meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Members are attending in person in the room and remotely using the Zoom application.

I would also like to invite members to take a look at the guidelines that have been sent regarding the proper use of microphones and headsets for the benefit of the interpreters' hearing health.

Joining us again today is Mark Schaan, senior assistant deputy minister, strategy and innovation policy sector, Innovation, Science and Economic Development Canada. From the investment review branch, we have James Burns, senior director, and Mehmet Karman, senior policy analyst.

At our last meeting, we left off with clause 14, and CPC‑8 was defeated. We were on CPC‑9, if I'm not mistaken.

We will now resume consideration of amendment CPC‑9. I believe Mr. Perkins had the floor.

Mr. Perkins, you have the floor.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Perkins.

Unfortunately, I must inform you of a decision of the chair.

Bill C‑34 would authorize the Minister of Industry to make an order for the further review of investments under part IV.1. Amendment CPC‑7 would remove the minister's leeway to make such decisions and confer that authority instead on the Governor in Council.

The House of Commons Procedure and Practice, third edition, reads as follows at page 770:

An amendment to a bill that was referred to a committee after second reading is out of order if it is beyond the scope and principle of the bill.

The chair is of the view that, for the aforementioned reasons, the amendment is beyond the principle of the bill. Consequently, the chair finds this amendment inadmissible.

Mr. Perkins, I anticipate that you will challenge.

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

Bear with me while I flip some papers here; two committees in the same two hours is a little challenging.

We have CPC-7. Bill C-34, in its current form, doesn't compel the minister, in my view, to actually conduct a national security review. I know we've had some discussions and questions about this.

Mr. Schaan said there are three stages. What we're looking for is that the minister, in some cases, rather than having the option of asking for the more detailed reviews in the second and third stages, “shall” do it in certain circumstances. My understanding is that the words “may” and “shall” in legal terms have significantly different meanings. The purpose of this amendment, in other words, is to compel the minister to send certain types of investments to a national security review rather than giving him the option.

Part of the reason for that, as I've expressed before, is my concern that several recent acquisitions by companies controlled directly and indirectly by China—the Communist Party of China—were allowed to go through with what I would call, in a non-technical term, a fairly superficial national security review. I am thinking primarily of the acquisition of the telecommunications company in Vancouver called Norsat. It was bought by Hytera, which also owns the Markham-based company Sinclair, which subsequently was contracted by both the RCMP and the Canada Border Services Agency to provide services and equipment to those agencies after the United States and President Biden actually had banned Hytera from doing business in the United States. It has actually been charged in the United States with 21 counts of espionage.

While that's not an acquisition in terms of the procurement, the whole idea that Hytera itself was able to buy important telecommunications equipment, with the minister having the ability to say that he “may” do it, so he'll just do the basic level of security and not the deeper dive into a state-owned enterprise.... We need to have a greater depth of certainty in the national security review in those cases.

The other case, which I mentioned at a previous committee, is the acquisition of the Tanco mine in Manitoba by a state-owned resource company in China, based out of Beijing, I believe. It acquired the only lithium-producing mine at that time in Canada—obviously critical to the EV strategy going forward for our country. The result is that all the lithium being mined at that mine in Manitoba—our only one—is actually going to China to develop the battery technology in China, rather than being used here in Canada. Again, that went through under Minister Bains, with just a cursory first-level review as he was not compelled to go into the more detailed review.

I know there are examples that go further back and that people would probably like to talk about. Mr. Masse and I have talked about Nexen, for example, and the oil sands, and the list goes on.

We feel that in those circumstances it's essential that the government and cabinet have the benefit of that detailed security review and that it shouldn't be an option. It should be required, and it should be a “shall” rather than a “may”.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Généreux.

You hit the nail on the head. The proposed amendment would amend section 23.1 of the Investment Canada Act. However, the House of Commons Procedure and Practice, third edition, reads as follows at page 771, as I just explained with regard to the previous amendment:

…an amendment is inadmissible if it proposes to amend a statute that is not before the committee or a section of the parent Act, unless the latter is specifically amended by a clause of the bill.

Since section 23.1 of the Investment Canada Act would not be amended by Bill C‑34, the chair is of the view that amendment CPC‑4 is inadmissible.

Since the decision of the chair isn't being challenged, that brings us up to clause 10.

Go ahead, Mr. Vis.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I move that Bill C‑34 be amended by adding after line 26 on page 6 the following new clause:

9.1 Section 23.1 of the Act is replaced by the following:

23.1 The Minister shall provide reasons for any decision made under subsection 21(1), 22(2) or 23(3) explaining the factors taken into account by the Minister to conclude that he or she is satisfied or is not satisfied that the investment is likely to be of net benefit to Canada, and shall publish in the Canada Gazette the investment implemented or proposed by a non-Canadian.

Mr. Chair, I don't know whether this amendment will suffer the same fate as the other two that we just considered—that is, whether you will have to make a decision regarding them—but we would like this one to be made to the Investment Canada Act.

Once again, I think that, since a number of our parties, including the New Democratic Party, want to do it, I imagine it's because there's a valid reason for doing it. It would be interesting to see later on how this element could be included differently in the act if, considering the decisions you've just made, this amendment isn't suitable. Perhaps there'd be a way to do that differently.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Williams.

I have a decision to make on amendment CPC‑3.

Bill C‑34 would amend the Investment Canada Act by authorizing 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 under part IV.1 and by allowing 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.

Amendment CPC‑3 would add a new obligation for the minister to provide reasons for decisions made under subsections 21(1), 22(2) or 23(3) explaining the factors taken into account to conclude that he or she is satisfied or is not satisfied that the investment is likely to be of net benefit to Canada. The bill makes no provision for the providing of such reasons.

The House of Commons Procedure and Practice, third edition, reads as follows at page 770:

An amendment to a bill that was referred to a committee after second reading is out of order if it is beyond the scope and principle of the bill.

The chair is of the view that, for the aforementioned reasons, the amendment is beyond the scope of the bill. Consequently, I find the amendment inadmissible.

[Mark Schaan]

Mr. Chair, I'm not in a position to answer the question that was put by the member.

Section 25.3 is fact-based and use case-specific. A case is determined in consultation with the national security community as to whether or not a given investment meets the test of “could be injurious to national security”. Bill C-34 makes important improvements in a number of ways, but the degree of being able to go back and determine whether or not the national security advice would suddenly rise to the threshold of “could” is not something I'm in a position to answer.

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

I was reading a Globe and Mail article by Niall McGee on August 13, 2022, called “China has encroached on Canada's critical minerals industry, with almost no obstruction from Ottawa”.

The article states:

While Canadian politicians claim to want to scrutinize foreign takeovers, over the past five years fewer than 1 per cent have been subject to in-depth security reviews under section 25.3 of the National Security Act, and almost none were blocked. Last year, out of 826 foreign investment filings, Canada conducted only 11 section 25.3 reviews. The government blocked only one of those transactions: Chinese state-owned Shandong Gold Mining Co. Ltd.'s attempted takeover of Canadian gold mining company TMAC Resources Inc.

There was another example that was listed. I believe it was Norsat technologies, where I believe Mr. Masse's amendment comes from. He's nodding in agreement with me. Intellectual property was indeed lost.

The general mood of the Canadian public is that they want this bill strengthened. I'm glad the government brought this forward, but I don't know whether the regulatory approach has done its due diligence. Now, under Australian law, they have the ability to go back.

My question for the official is this: Have any analysts in your department examined Bill C-34 in the context of...? Say Bill C-34 had been in place five years ago. How many more transactions would have been covered under section 25.3 of the National Security Act, in the context of critical takeovers by foreign state-owned enterprises?

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Masse.

I see that Mr. Gaheer wishes to speak, but first I have a decision to render on this amendment.

The proposed amendment would amend section 20 of the Investment Canada Act. The House of Commons Procedure and Practice, third edition, reads as follows at page 771:

…an amendment is inadmissible if it proposes to amend a statute that is not before the committee or a section of the parent Act, unless the latter is specifically amended by a clause of the bill.

Since section 20 of the Investment Canada Act would not be amended by Bill C‑34, the chair is of the view that the amendment is inadmissible.

Before I recognize you, Mr. Lawrence, you understand that the chair's decision can be reversed by a vote but it's otherwise not up for debate.