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

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Madam Speaker, I was reminded, during my colleague's speech, of one of my favourite Ronald Reagan quotes, “The nine most [frightening] words in the English language are: I'm from the Government and I'm here to help.” Can the member comment on whether that is as true today of the Liberal government as it was of the Democrats when Mr. Reagan spoke of it?

[Shuv Majumdar, Conservative, Calgary Heritage, AB]

Madam Speaker, when government invents means to interfere in the lives of people, to control what they see and think online, and when government is sitting around wondering about ways in which it can try to solve problems for people, we usually see the expansion of the government doing things which are utterly unhelpful, ultimately. I appreciate the comments by my hon. colleague because I agree with him wholeheartedly. I think the best government is the one that gets out of the way—

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Alexandra Mendes]

We have to resume debate.

The hon. member for Huron—Bruce.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Madam Speaker, it is a pleasure to present here today with respect to Bill C-34.

Before I start, I want to recognize a couple of local baseball teams in my riding that won provincial championships. This summer, it was the Kincardine Cardinals 13U baseball team and the Kincardine Cubs senior team. In our region in western Ontario, there is some of the best baseball in the country and maybe in North America, so it is great that both of those teams won and brought titles back to Huron—Bruce.

I would also like to recognize Mary Hughes and John Westerman from Bayfield, who hosted a tremendous event Saturday night. They invited all the volunteer firefighters from Bayfield to attend. It was a random act of generosity, and it was great to be a part of that. I congratulate them and thank all the volunteer firefighters.

When we look at the purpose of the Investment Canada Act and the depth and breadth of the goals of Industry Canada, it is probably very helpful to go to the beginning of some of the ideas and innovation in Canada, which is at the university and college level across this country. However, as some members here today with whom I am on committee would know, we are studying a number of topics at committee, one of which is state-owned interference at the university level. If Canadians read the headlines from a year ago, they would realize that there are some very concerning activities going on in Canadian universities, mainly through the People's Republic of China and some of the universities that focus on its defence.

My point is that if we think of a young person in university today, studying very hard in engineering or something to do with computers, for example, they would finish their degree, maybe get into some research afterwards and work in a few labs. However, they are really working to come up with the next idea that is going to be a game-changer for Canada, and there are all sorts of federal and provincial dollars. There are hundreds of millions, maybe billions of dollars that are allocated through NSERC, CIHR and SSHRC, all in the hope that this will be great for Canada, for innovation and for the next generation of businesses in this country. It is a multi-year, multi-decade, lifetime's worth of investment, on behalf of the Canadian taxpayer through these organizations, in the young people, professors and researchers in our country. Out of all of those years of effort and partnerships with companies and so forth, there are good ideas and there are businesses that are started in this country. However, what is of concern today and going forward is the high cost of protection that is going to be required at Canadian universities that do the research.

At our committee last week, the SSHRC president, Ted Hewitt, announced that there is $125 million, $25 million a year, being allocated to universities to try to sift through all the applications to determine if there are safety risks to the research and whether the research is going to be brought back to the People's Republic of China and could be used against Canada or whether the idea could just basically be stolen. This is just the beginning of the high cost of protection and security in this country, which leads to looking at the Investment Canada Act and the benefit test, and many other items within the act. I will give one example, a little outside what we are looking at with Bill C-34, but in parallel: the recent purchase, within the last year, of Magnet Forensics located in Waterloo. If we look at the education and experience that those individuals have, and likely the grants they applied for with their business, whether through SR&ED, IRAP or any of the other taxpayer-led initiatives that provide ideas and support for these businesses, there is a lot of money that goes into this.

There is a lot of value being given to the Canadian taxpayer, including by the individuals who own the company and the workers who work there. However, the company was sold for $1.8 billion to a private equity company in the States. The threshold for the transaction to be reviewed is $1.9 billion.

Now, I am not saying this is a coincidence. I know there is a different threshold being proposed through this bill for different transactions. However, this one was an American company; obviously, we have a trade deal with the United States, and that was the threshold if purchased by a private equity company.

After all those years of support, all those years at university and everything else that goes into it, including SR&ED and IRAP, it is sold for $1.8 billion. I am happy for the founders. That is a great payday. However, if we think about it, eventually the majority of those jobs are going to head to the United States, and all those years are gone.

We have to ask ourselves this: Is that a net benefit for the Canadian taxpayer, the workers or the country that has provided all those dollars of support? We really have to question it.

I will give another example, and it is a company that I used to work for: Wescast Industries in Wingham, Ontario. At one time, it was the largest exhaust manifold supplier in the world, producing over 10 million manifolds a year. It was bought 11 years ago by Bohong Group, which is financed by the China Development Bank. The founders of the company, the LeVan family, were ready to move on. They needed a buyer. This one came forward.

However, I believe, if we look at it, that this acquisition should have been reviewed. It was much lower than the threshold, but if we look at the knowledge and the value that those jobs provided this country and my region, there is no way that the transaction should have been approved. Everybody in our area, of course, all the guys and gals I used to work with, knew what they were going to do. They were going to take all the ideas, skill and know-how back to their headquarters. Basically, when the bones were picked, they would shut it down and operate solely in China.

That is in fact what has happened over 11 years. That is a shame. It was a great place to work. There were so many people to get to know. There were thousands of employees across southwestern Ontario.

These are examples of where the Investment Canada Act and the net benefit test could do more. Specific to this bill, one great amendment that was accepted by the government was our amendment that set the level to zero for a review, when a company has connections or ties to being state owned. Therefore, everything would be reviewed, and we could look at it. This also lends itself to my belief that it should be more than just the minister. I realize that, in the beginning, it is not. However, at the end, the final decision should be from a cabinet that consists of members from all provinces and, hopefully, some of the territories, to really drill down and decide if it is a net benefit to the country. I think we will find that a lot of these acquisitions are not.

Another great example is one I made a note of. If members remember, a number of years ago, there was Retirement Concepts, which sold 20 or 21 retirement communities to Anbang Insurance. This should never have been approved. It was to nobody's net benefit in British Columbia. There is no way that a Chinese state-run insurance company should have been operating health care in this country.

I think we are coming to a close. I look forward to questions.

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

Madam Speaker, the member is talking about decreasing the threshold. This was brought forward to committee, and it ultimately passed.

The government has said in the past that, if there are ways it could improve upon legislation, it is always open to good ideas. This can be compared with the former government, which never allowed amendments unless they were government amendments.

I see this as a positive thing. The question I have for the member is as follows: Given the very nature of Canada as being what most would say is a safe place to invest, because of the environment we are in, whether it is trading agreements or the dependency Canada has, in terms of wanting to expand where it can, could the member provide his thoughts in regard to why it is so important that we update the act?

[Ben Lobb, Conservative, Huron—Bruce, ON]

Madam Speaker, it is important. Obviously, it has been over a decade since the act was reviewed, so that is great. However, the member sometimes gets mixed up on the trade deals. If we look back at the trade deals that have been approved in the last few years, they were all done by the Conservative Party. We took it right to the one-yard line. With the European trade deal, I know that the finance minister, who was the trade minister at the time, fumbled about 10 times before she got it into the end zone.

The member for Abbotsford, Gerry Ritz and Stephen Harper are really the people who did 99% of the work. Yes, the Liberals bobbled the football into the end zone, and they get the touchdown, but the heavy lifting was done by our government in previous years.

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

Madam Speaker, I thank my colleague for his speech. It sounds like he really studied the bill. When we give speeches in the House, I think it is important that we truly pay attention to the bill's content in order to elevate the debate and have meaningful discussions.

My colleague spoke at length about what he would like us to do to dive deeper into this matter. I would like to know what he would like the government to do when analyzing transactions. I have a specific case in mind. A few years ago, in my riding, Rona was sold. Because the purchase price was so large it exceeded the minimum threshold, the sale was reviewable under the Investment Canada Act. I wanted to know on what basis the Liberal minister at the time authorized the sale. I filed an access to information request, but the answer I got was that no records relevant to my request could be found. We wanted to know which analyses and studies the minister based his decision on. Apparently, he did not base his decision on any documents at all.

I want to ask my colleague whether he believes that due diligence is important when analyzing transactions.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Madam Speaker, that is from my neighbour, who sits right behind me. He is a decent fellow; he has not hit me in the back of the head yet, so I appreciate that.

The fines and penalties are increasing. It is so important for businesses to know that Canada is open for business, but if someone is going to do an acquisition, they have to go into the office and disclose what their intentions are with the Canadian business and how they would like to conduct themselves. To answer the member's question, today there is not enough of that done in the beginning. Then we get into these 11th-hour scenarios where it is not good for the business or the government of the day, and the wrong decision is usually made.

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

Madam Speaker, I am glad my colleague mentioned Anbang. Retirement Concepts is a company operating a retirement centre in my backyard, basically, in Summerland. It was in trouble before Anbang, a Chinese-owned insurance company, got involved; that was approved, as the member said, probably mistakenly. Then, Anbang was taken over by the Chinese government. The NDP put forward an amendment to the bill before us that would trigger a review, with a previously okayed deal, if there was a subsequent takeover by a state-owned enterprise.

Could the member comment on that and why the amendment did not pass through at committee?

[Ben Lobb, Conservative, Huron—Bruce, ON]

Madam Speaker, the member is not wrong. That deal should never have been approved. There is no way. I remember reading about the deal, and I thought it was bad. This is why it is so important that they come, in the beginning, to the office and disclose. That would give the government and the officials plenty of time, and it should be reviewed at committee, as well. We should give the committees more power.

[Kelly McCauley, Conservative, Edmonton West, AB]

Madam Speaker, I am pleased to rise to talk on the update to Bill C-34, an act to amend the Investment Canada Act.

When it comes to business investment, it is clear that, after eight years under the Prime Minister and the Liberals, the government is not worth the cost. Since coming into power, business investment per employee in Canada has actually dropped 20%. At the same time, business investment per employee in the U.S. has actually increased 14%. It puts things into perspective in terms of Canada's dropping productivity and, as we go forward, the fear of declining prosperity in our country. What is more shocking is that, in the very final year of the Harper government, Canada's business investment, as a percentage of GDP, was actually higher than that of the U.S. After eight years of the government, we are at about 15% lower.

According to the National Bank of Canada, for the first time ever, business investment is now lower in this country than housing investment is. We can think about all the manufacturing, oil production and everything else. The investment is actually lower than it is in housing.

Manufacturing capital stock is the lowest that we have had since 1988. Two-thirds of our 15 main industries experienced declines in business investments under the government, including wholesale trade, accommodation and food services, utilities, professional services and manufacturing. All these numbers fell prepandemic; this is not because of the pandemic.

The Business Council of B.C. has issued a report on investment in Canada, calling it “Stuck in the slow lane”. What better title is there for what is going on right now with investment in our country than being stuck in the slow lane? The report noted that, out of 38 members in the OECD, Canada is going to have the slowest economic growth over the next decades. We will have the lowest real GDP per capita growth in the OECD going forward. That has been brought up, I think, in previous speeches about Bill C-34 in this House. The report lists several reasons for this, among them, inefficient regulatory approvals. Does anyone remember Bill C-69? Of course, we have seen Bill C-69 ruled against by the Supreme Court. Hopefully, the government will recognize what the Supreme Court has said and eliminate Bill C-69; however, Bill C-69 was only one of many regulatory burdens added by the government that has chased away business investment in this country.

The Business Council of B.C. also noted punitive tax rates as companies grow; lack of relief for energy-intensive, trade-exposed industries under the carbon tax regime; and high internal trade restrictions. Something also noted in this report is that our anemic business investment would be all the worse if it backed Alberta out. Alberta has the highest per capita investment in the entire country. If we back out Alberta, our numbers are even worse. What do we get with the government? Every possible regulatory move, every possible attempt to strangle the growth in Alberta. Therefore, we have one province driving most of the business investment in this country, and the government is trying to destroy it.

There will be some members across the way, such as, perhaps, the member for Winnipeg North, who will get up to ask this: Are there not some things the government has done? Would we not agree that it is good? There are some things the government has done to spur business investment in Canada, such as green-lighting the purchase of ITF Technologies by a China-based company. This was a deal that the Harper Conservatives had kiboshed. The Liberals reversed it and allowed a China-based company to buy out ITF Technologies. ITF has done national security work with National Defence, and the government overrode the ban on a purchase by a China-based company. We should remember that China's national intelligence law of 2017 requires companies to “support, assist and cooperate with state intelligence work”.

I will read that part again. It says Chinese companies “shall support, assist and co-operate with state intelligence work”, and we have the government approving the sale of a technology company that has done work for National Defence. It waived the security review of the Chinese takeover of Vancouver's Norsat, despite Norsat being involved in communication tech for Public Safety Canada, the defence department and the Coast Guard. Norsat had also done work for the Pentagon. The U.S. and our Five Eyes allies asked us not to allow the sale to go through, but it did.

When not allowing the sale of sensitive tech companies, the Liberals are going out of their way to bring Chinese regime companies into our security systems, such as Nuctech, which my colleague from Barrie—Innisfil talked about. Nuctech is called the Huawei of scanners. It is a Chinese-based company partially owned by the Chinese state. It has been fined, charged and convicted around the world over various fraud, regulatory and spying issues, and the government went out of its way to give it a contract to bring its technology into every embassy we have around the country.

The CBSA, which is meant to protect us, for some reason basically jury-rigged the RFP to ensure that only Nuctech, ahead of two Canadian companies, one in Quebec and one in Calgary, got the contract. It wrote in the requirements the exact specifications of a type of scanner, down to exactly how many inches across and how many inches high, and guess what. Only one company in all of the world happened to have a scanner that was 33 inches across and 21 inches high: Nuctech. Oddly enough, PSPC warned the government not to buy it, and the CBSA went ahead anyway.

When this was exposed, the government said it would hire an outside consulting company to do a review. Apparently, McKinsey was not available at the time, so it hired Deloitte, and for a quarter of a million dollars, Deloitte did what had been done at the mighty OGGO. Of course, I cannot make a speech without mentioning the operations and estimates committee. Deloitte exposed the fallacy of buying equipment from Chinese security companies. For a quarter of a million dollars, it came out with a four-page report that basically said Canada should not buy sensitive IT technology from despotic regimes.

I went to the West Edmonton Mall that week with the report and randomly asked kids and adults, strangers, about this, and they all laughed. Not one person said we should buy sensitive technology from despotic regimes.

I appreciate that the government is finally getting around to updating the issue with Bill C-34, but one major change the Conservatives would like to see is taking away the ability of a minister to make the final decision. We would like to see a minister bring it to cabinet so that cabinet is consulted. For an issue as important as our state security, too much power is left with the minister. The minister should be required to bring the purchase of a sensitive company elsewhere. Whether it is a mining company or a tech company, it should not be the role of the minister to decide. We have seen the government repeatedly bring bills to the House that would give ministerial power over such a thing, and we would like to see that change.

There were a couple of other amendments we brought up that were shut down, and I would like the government to reconsider them. One of them would modify the definition of a state-owned enterprise to include any company or entity headquartered in an authoritarian state. This goes back to my previous comment about the Chinese intelligence law that forces those companies to act and assist in concert with that regime.

I will just briefly bring up a couple of other amendments that we would like to see. One is listing specific sectors necessary to preserve our national security rather than a systematic approach. Another is exempting non-Canadian Five Eyes intelligence state-owned enterprises from the security review.

The House resumed from October 30 consideration of Bill C-34, An Act to amend the Investment Canada Act, as reported (with amendments) from the committee, and of the motions in Group No. 1.

Report Stage

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

Mr. Speaker, I am happy to rise today to speak to Bill C-34, which would update the Investment Canada Act. This act is designed to do two main things. The first is to ensure that foreign investments in Canada have a net benefit to Canadians. The second is to ensure that foreign investments are not detrimental to our national security.

Many Canadians, especially Canadians of my age, might know this act better by its former name, The Foreign Investment Review Act. In its early days in the 1970s, it was brought in to deal with a rash of foreign buyouts, mainly American, of Canadian companies.

The Foreign Investment Review Agency approved about 90% of the transactions it dealt with, but was criticized by both Liberals and Conservatives for actually doing its job by blocking some proposals that did not show a benefit to Canadians.

Therefore, Brian Mulroney brought in the Investment Canada Act in 1984. He replaced the Foreign Investment Review Agency with Investment Canada, saying that he wanted to welcome foreign investment. True to his word, under his government, Investment Canada did not block a single foreign investment transaction, not one. The Liberal governments that followed Mulroney, under Jean Chrétien and Paul Martin, had the same record, not one application blocked.

The Harper government was a different story. Harper blocked the sale of British Columbia-based Macdonald, Dettwiler to the American company Alliant based on both financial and critical technology arguments.

On the other hand, in 2012, the Harper government allowed the $15-billion sale of Canada oil company Nexen to the China National Offshore Oil Company, owned by the Chinese government, and the $6-billion sale of Progress Energy to Malaysia-based Petronas. However, the same day, Harper changed the Investment Canada Act to block state-owned foreign investment in Canadian oil and gas companies, essentially closing the barn door after the horses had left.

Therefore, legislation regarding regulating foreign takeovers of Canadian companies has changed from time to time over the past decades. Foreign investment trends have changed as well. The share of U.S. investment in Canada has declined over the past few decades, but it still leads the pack followed by the Netherlands, the United Kingdom, Luxembourg, Switzerland, Japan, China, Germany, Brazil, France and Bermuda, although, I suspect the high placement of Luxembourg and Bermuda reflects more where Canadian companies are hiding their profits than real sources of investment.

However, it is clear that we need to keep up with the times in regulating foreign investment, and Bill C-34 is another example of that.

Information and data are the new oil, and earlier versions of the Investment Canada Act were essentially blind to that. The bill before us introduces a pre-implementation filing requirement for certain investments to give earlier visibility to situations where there is a risk that a foreign investor would gain access to sensitive assets or information immediately on closing.

I have talked to numerous tech companies over the past few years. One story I hear repeatedly is that small Canadian tech companies work hard to develop a new technology, say in hydrogen energy development or AI advances. However, when it comes to expand their companies to really get their product to market, they need investment. Too often in the Canadian tech ecosystem, these companies simply get bought out by bigger companies from the United States, Europe or China. With those sales go the intellectual property that represents the core of their company's value.

The present version of the Investment Canada Act allows companies to report takeovers after the fact. However, if critical intellectual property is involved, it is usually too late to stop the transfer of that information, if we find out about the transaction 30 days later, for instance. It is not like the old days when the main value of a company was in the factories it owned. This new pre-implementation filing could help put a stop to that where necessary.

There are several other improvements that provide more flexibility for the minister to act and better manage the entire process.

What would make the act even better? First, the act should mandate the review of an acquisition by a state-owned enterprise of a company previously reviewed by the ICA, and I would like to spend some time on a story that illustrates why this is needed.

There is a company called Retirement Concepts that owns and operates a number of seniors residences in British Columbia, long-term care homes. One of them is the Summerland Seniors Village just outside the federal riding I represent but within the provincial riding I live in. When I first sought to enter politics 10 years ago, I was involved in a provincial election in that riding.

The Summerlands Seniors Village was involved in a tragic story of a local family that lost both its mother and its father in 2012 to poor care and accidents. I met with members of the family and heard the heart-wrenching story of neglect that had taken the lives of their parents.

After that incident, the provincial government demanded that Retirement Concepts hire more staff, but managers claimed that no one was applying. I am guessing that a combination of low wages and overworked conditions had a lot to do with that.

In 2016, Chinese insurance giant Anbang, then a privately held company, bought Retirement Concepts, a transaction that was reviewed and okayed by the federal government's investment review process. Less than a year after that purchase was okayed, the Chinese government seized the Anbang company and jailed its chairman for fraud. Perhaps it knew something that the Canadian government missed when that review was carried out.

Suddenly, we have the Chinese government owning a company that is one of the largest providers of long-term care in Canada and certainly the largest in B.C.. Not only is it one of the largest providers of long-term care, but it is known to provide very poor care at times for our seniors.

In fact, in 2020, the provincial government in British Columbia had to seize management control of four care homes run by Retirement Concepts because of the continuing problems with poor care. It returned that control just over a year later, but it is an indication of the general lack of priority Retirement Concepts had placed on the care of seniors.

At present, there are no provisions in the Investment Canada Act that would allow Investment Canada or the minister to be able to review the subsequent acquisition by a state-owned enterprise of an ICA-approved takeover or merger by a foreign private company. We have to change this.

The NDP put forward an amendment that would allow for the review of a takeover by a state-owned enterprise. This can be done by establishing the power to require a mandatory divestment of all Canadian assets by entities in these specific circumstances.

As an aside, in the case of long-term care homes, the NDP is very much in favour of a move to a future where seniors' care is given the same respect that all health care gets, a future where no long-term care homes are owned by private companies that put profit ahead of the well-being of our seniors.

This is an example of where we could and should take a big step in that direction.

Another factor to consider in investment review is to prevent the loss of publicly funded research and development from leaving the country, resulting in the loss of jobs and, basically, the theft of taxpayer dollars.

A company called Nemak received $3 million dollars from the government's automotive supplier innovation program. However, in 2020, Nemak closed its plant in Windsor, where those funds had been used to create new products for General Motors, and transferred that technology and those jobs to its operations in Mexico.

An NDP amendment, passed in committee, would allow for the review of a foreign takeover to consider the intellectual property whose development was funded by the federal government and to issue remedies to retain the benefits in Canada. Therefore, a situation like that of Nemak would not happen again.

I do not have time today to go over all the improvements this bill would bring to the foreign investment space in Canada or to go over all the improvements that we had hoped it would bring but fell short.

In this new world, where ideas and data are often more valuable than the natural resources we have so long relied on for our wealth, we need a new regulatory framework to protect our industries, our workers and our companies. Bill C-34 is a step in that direction.

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

Mr. Speaker, could the member provide his thoughts in regard to the idea that this is a modernization? It has been a number of years since the legislation has been changed to the degree that is being proposed today. Because of technological changes over the past decade, changes to the legislation are badly needed. That is one reason why we hope to see Bill C-34 pass as quickly as possible.

Could he comment on the importance of getting this passed before Christmas?

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

Mr. Speaker, as I mentioned in my speech, things have really changed since this was last updated in, I think, 2009 or 2012. Before that, when I was young, this whole regulatory system was brought in because manufacturing plants were largely going south of the border.

Things have changed. Canada is a leader in several aspects of real high-tech research and development. I mentioned hydrogen. There is fusion and AI that we hear a lot about. These are things that move very rapidly, and almost all the value in the company is not in the offices it has or its labs but in ideas and intellectual property. This is something that has really changed. One thing we need to do is change the regulations to protect that from leaving Canada.