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

[Some hon. members]

Oh, oh!

[The Assistant Deputy Speaker, Carol Hughes]

I do not know if there is a cross-debate or if members are having conversations, but I would ask them to take their conversations outside.

The hon. member for Abbotsford.

[Ed Fast, Conservative, Abbotsford, BC]

Madam Speaker, as I was saying, foreign investment, whether it is investments coming into Canada or Canadians investing abroad, can contribute markedly to our national prosperity. I have travelled all around the world promoting Canadian investment, because there was a time when Canada was a great place to invest. Sadly, over the last few years under the Liberal government there has been a decline in foreign investment. Why is foreign investment abandoning Canada? It is because of high taxes and regulatory uncertainty. This should concern all Canadians, because when foreign investment comes to Canada, for the most part it drives job creation if it is done right and contributes to our overall prosperity as a country.

However, as we welcome foreign investment into our country, we also have to be very judicious, making sure that those investments, first, represent a net benefit to Canadians and, second, do not represent a national security threat to our country. That is where the Investment Canada Act comes in. It was created to ensure that as foreigners invest in Canada, we have mechanisms and tools available to review those investments, to welcome those who are going to contribute to the overall good of the country and to reject those who are not good for our country.

The bill before us is seeking to introduce some amendments to the Investment Canada Act that purportedly will really improve the robustness of this regime. Unfortunately, if we dig down into the seven main amendments being proposed, they are mostly tinkering around the edges. Why do I say that? I do not believe they will markedly reduce the influence of foreign corporations and their ability to invest in Canada, especially when they come from increasingly hostile regimes around the world.

When we look around the world, I think all of us can agree that investments coming from a country like Russia require special diligence. Investments that come from places like Iran and China require a special degree of vigilance to make sure they serve our national interest. More and more often, we have seen under the Liberal government that investments have come from abroad from the more hostile regimes around the world, which engage in espionage and make investments that are not necessarily for the good of our country but promote a foreign country's economic interests. My colleague from Calgary Rocky Ridge has already articulated some of the cases where the Minister of Industry has failed to subject investments to the kind of rigorous review that Canadians would expect of its government.

For example, we had a situation where an RCMP contract was awarded for the supply of sensitive hardware for communications to a company that had earlier been purchased by a China-based company beholden to the communist regime in Beijing. How can that be? It is because the minister refused to do a national security review of that foreign investment into Canada. It was also revealed that the Canada Border Services Agency has used communications equipment and technology from the same company.

Canadians need to know that this very same company was charged with 21 counts of espionage in the United States. Would we trust this company not to conduct espionage in our country? Of course not. The reality is that I could go through the same list of foreign transactions my colleague from Calgary Rocky Ridge listed, to which the minister refused to apply the kind of rigour to reviewing these foreign investments that Canadians would expect.

We also have to understand that the geopolitical and security landscape around the world has changed dramatically and the risks Canada faces are that much more acute. We look around the world at countries like China, Russia and Iran that are flexing their muscles economically and militarily in the field of cyber-espionage, and we are incredibly vulnerable, so we have to pay attention to this.

I would also mention that, as we look at investments from abroad, there are some who have said we should be very cautious about welcoming investments of state-owned enterprises from a country like China into our country because of the allegiance of those corporations to the communist regime in Beijing. However, the reality is that, not long ago, China passed a national intelligence law, under which all Chinese corporations and citizens, whether at home or abroad, are required to act as agents of the government and hand over any information the Chinese communist authorities demand.

Therefore, any company from that country, and any citizen from that country, is expected to be an agent of the government, so as we look abroad for investment, it behooves us, as legislators and decision-makers, to make sure we are prudent in whom we welcome to our country to invest.

The largest majority of investments come from countries we would gladly welcome investment from. Obviously, if the United States has a corporation that wants to invest in Canada, we would say we welcome that investment, generally speaking. If it is a huge investment, we may want to put a special spotlight on that investment to make sure there is a net economic benefit to Canada, but by and large, the investments we attract to Canada, we welcome.

As such, the Investment Canada Act is targeted and makes sure that the investments that are problematic are reviewed by our federal government. The legislation before us, unfortunately, had the opportunity to implement the nine recommendations an earlier report from the industry committee had brought forward. Sadly, only two of those recommendations have actually been adopted by the government in its amendments to the Investment Canada Act. What a lost opportunity.

We, as a country, can do so much better, and the reality is that we, as Conservatives, have long had a robust approach to foreign investment. When we were in government, we made major reforms to the Investment Canada Act. We said “no” to investments. We required a number of foreign investments to be qualified and conditional before they could be invested in Canada.

I have just outlined very briefly what it is we are debating here, the Investment Canada Act amendments. Let us make sure we get it right.

[Mark Gerretsen, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons (Senate)]

Madam Speaker, the member started off by talking about how, in the last few years, Canada has performed horribly in terms of investment, and how nobody wants to invest in Canada. We do not have to dig far into the Internet to find a United Nations Conference on Trade and Development from 2021 that specifically says that Canada, in the last five years, has ranked among the top two in the G20 for doing business; is the third-easiest in the G7 to start a business; is the fourth among the G20 for being the least complex to start a business; and had the second-largest foreign and direct investment-to-GDP ratio in the G20 between 2016 and 2020.

Where is the member getting his information that would suggest Canada is not a place that is open for business?

[Ed Fast, Conservative, Abbotsford, BC]

Madam Speaker, the Liberals have yet to learn that they should never ask a former international trade minister a question they do not know the answer to.

Here is the answer. I get my information from the International Monetary Fund. Members will notice that the member did not actually address investment. He talked about GDP, economic performance and regulation, but he did not talk about Canada being a destination for investment.

The IMF said, “According to the latest results...the world’s top ten recipients of foreign direct investment...[are] the United States, the Netherlands, Luxembourg, China, the United Kingdom, Hong Kong SAR, Singapore, Switzerland, Ireland, and Germany.” Canada is not even in the top 10. Shame on us, that we would be so far down the list.

Let me suggest that the member go back to the drawing board, get his statistics right, and then come back to the House and start debating.

[Some hon. members]

Oh, oh!

[The Assistant Deputy Speaker, Carol Hughes]

Order. I want to remind the hon. parliamentary secretary that he had an opportunity to ask a question, and I want to remind the hon. member for South Shore—St. Margarets that it was not his turn to speak either.

We will continue with questions and comments. The hon. member for South Okanagan—West Kootenay has the floor.

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

Madam Speaker, I want to ask my colleague whether the Conservatives would be willing to agree with the NDP that a good amendment to this bill would be to ensure including any investment in a Canadian company made by a foreign investor that goes through, and later that company is bought by a state-owned enterprise.

The example I gave was Anbang Insurance Group in British Columbia and Retirement Concepts. I think we need to make an amendment so we drop the requirements to zero so all those investment proposals would be examined by industry Canada.

[Ed Fast, Conservative, Abbotsford, BC]

Madam Speaker, I do thank the member for that very good question. He has not yet provided us with a copy of the amendment that he would like to propose. We will look at it very carefully.

Quite frankly, it sounds like it makes sense. We, as Conservatives, strongly believe that the Investment Canada Act must be made more robust. I believe the member knows that we will be bringing forward our own amendments at committee to make sure we get that outcome. We do, in principle, support the legislation. It is just that it is a bill that is so lacking in substance when we have an opportunity now to get this right.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Madam Speaker, I wonder if the member would comment on the following.

He has said that foreign investment has plummeted during the time of government, while at the same time acquisitions by state-owned and state-controlled enterprises have gone through without review. That has resulted in something that was best captured in last week's Globe and Mail article titled, “The growing threat of a low-wage future for Canadians”. I just want to quote two lines from that editorial.

The Organization for Economic Co-operation and Development ranks this country last in potential economic growth over the next 40 years.

If that OECD forecast becomes reality, the Canada of 2060 will be a relatively poorer country, falling further and further behind other advanced economies into second-tier status.

Would the member comment on that?

[Ed Fast, Conservative, Abbotsford, BC]

Madam Speaker, I am familiar with that article. I am familiar with those statistics, and they are damning of the Liberal government because we could do so much better as a country. We are so rich in human resources and in natural resources. We are high-tech leaders, yet somehow, we are falling further and further behind when it comes to our economic performance. Part of that is the fact that we are no longer an attractive place to invest in.

We can do better.

[Ruby Sahota, Liberal, Brampton North, ON]

Madam Speaker, I will start off by saying that I will be sharing my time.

I am pleased to appear before us today to speak in favour of Bill C-34, an act to amend the Investment Canada Act, and in particular, the context that led us to undertake these amendments.

Canadians know that our government will always act quickly and decisively to respond to threats to our national security. They also know that a nuanced approach is necessary to ensure that we do not impede the flow of capital that is so important to our continued prosperity.

Indeed, Canada remains a destination of choice for foreign investment. This investment helps businesses prosper and grow, creates well-paying jobs and ensures strong economic growth that benefits all Canadians. Canada has a long-standing reputation for welcoming foreign investment and a strong framework to promote trade while advancing Canadian interests. In fact, Canada has one of the earliest and most robust screening processes for FDI.

The Investment Canada Act was enacted 38 years ago in 1985. The act allowed the government to review foreign investments to ensure that these benefits exist, and it was updated in 2009 to include a framework for a national security review of foreign direct investments.

The world in which Canada now operates is increasingly characterized by the complexity of linkages between economic competition and geostrategic clashes. Globalization has brought new threats to Canada's national and economic security. By exploiting access routes to the Canadian economy through investment, potentially hostile foreign actors can appropriate technologies, data and infrastructure, which are critical to Canada's national security. We also know that some foreign states seek to inhibit Canada's economic growth and to exercise economic coercion against Canada.

Such activities pose a threat not only to Canada's national security but also to its long-term economic prosperity. Canada must have the tools and resources to protect its assets from economic threats to national security. The Investment Canada Act must therefore also continually adapt to these considerations. The complexity of these dynamics can be seen in the increased volume of activity under the act in recent years.

Indeed, there have been more national security reviews since 2020 than in an entire previous decade. The review process is also increasingly complex, as international transactions and ownership structures are also becoming more complicated. The proposed modernization of the Investment Canada Act is designed to make this review process more efficient and more transparent.

Economic-based threats to national security are an area of increasing concern not just for Canada but for our allies as well. Other international jurisdictions are moving in response to shifting geopolitical threats, either by amending or putting in place investment screening regimes. Our action is needed to bring Canada into greater alignment with our international partners and allies.

We will recall that the Investment Canada Act played an important role in Canada's response to the Russian invasion of Ukraine. As early as March 2022, we issued a policy statement that any investment controlled or influenced by the Russian state will also support a determination by the minister that there are reasonable grounds to believe that such an investment could be injurious to Canada's national security, regardless of its value.

This statement sends a clear message about our commitment to protecting Canada's economic security from unwanted investment. Moreover, Canada's Indo-Pacific strategy is clear that this region will play a critical role in Canada's future over the next half century.

The significant opportunities for economic growth in this region are also accompanied by challenges related to the objectives of certain world powers that do not share our democratic and liberal principles. We must respond to this reality in a number of ways, including in the way foreign investment is assessed.

In short, the Investment Canada Act plays a key role in protecting Canada's economic interests from hostile foreign actors. It is broad in scope and allows Canada to respond to changing threats that may arise from foreign investment while protecting Canada's openness to beneficial international investment.

The package of amendments proposed in this bill is designed to assure businesses and investors that Canada has a clear and predictable regulatory regime. Today, we are taking bold steps to modernize key aspects of the Investment Canada Act to ensure that our review regime continues to be effective, rigorous, transparent and flexible to adapt to a changing world.

I thank—

[The Assistant Deputy Speaker, Carol Hughes]

Unfortunately, I do have to stop the hon. member there. She will have four and a half minutes the next time this matter is before the House.

The House resumed from February 8 consideration of the motion that Bill C-34, An Act to amend the Investment Canada Act, be read the second time and referred to a committee.

[Adam Chambers, Conservative, Simcoe North, ON]

Mr. Speaker, it is always a pleasure to rise in this House to talk about a very important issue. Today we are talking about investment, national defence and security. The world is a far different place today than it was even a year ago, and there has been a concerted effort by hostile foreign powers to undermine western democracies, undermine our national security, undermine our economic interests and undermine democracy itself.

Before I continue, I want to mention that I am going to be splitting my time with the wonderful member for Langley—Aldergrove.

The west has basically been sleepwalking into the realignment of global power, and if we do not wake up, our lives and interests will be impaired, or worse, children across the world may not have the same freedoms that our children have in our democracies, like independence and the other freedoms we enjoy.

Not only have we allowed nefarious actions to occur right under our noses, but we have actually helped fund this global realignment. In 2018, Canada gave $250 million to the Asian Infrastructure Investment Bank, which is largely viewed as expanding China’s influence and power in the world. We have been funding it. This is the context that we have to keep in mind when we think about Bill C-34 and this investment act.

These are largely viewed as some of the more significant amendments to this act in well over a decade. The bill provides new ministerial authorities and focuses on special business sectors of interest to the country. I give the government credit for bringing this forward as a stand-alone piece of legislation that will allow for proper scrutiny in this House, but I want to talk about a few issues.

The first is reciprocity. A fundamental principle in all trade or any real commercial relationship is that each party gets something and gives something in return. There is some exchange of equal value. This is not necessarily the case with what has been happening in global trade with Canada. Certainly it is not the case with how companies and entities invest in Canada.

Canadian companies want to invest in other countries or companies housed in other countries, but Canada does not have that opportunity. Canadian companies do not have that opportunity. It is always puzzling to understand why Canada allows companies and entities that have links to foreign governments to invest in and purchase Canadian assets when Canadian companies themselves are not allowed to make the same investments in those other countries.

The fundamental principle of reciprocity does not exist when Canadian firms cannot make the same investments that we allow companies from other countries to make here. Sometimes those companies are either owned or heavily influenced by a foreign power. Whether that foreign power is hostile or not, geopolitics changes. As we have seen in the last year, things have shifted significantly.

I submit that some of these companies and countries, frankly, are laughing at us all the way to the bank. I am beginning to think that they might think we are suckers. What I am worried about is that they are right. We do not have to look hard to find some examples of what I am talking about that make us scratch our heads.

In 2017, the government did not request a security review of Norsat when it was purchased by Hytera Communications, which is partially owned by the People’s Republic of China. Just recently, at the end of 2022, it was exposed that the government awarded a hardware contract for RCMP communications equipment to a Norsat subsidiary. The United States blacklisted Hytera because it “poses an unacceptable risk to the national security of the United States or the security and safety of United States persons”.

Where was Canada's review? Was Canada informed by the United States about its findings? Did Canada do the due diligence we would expect it would normally do before a contract like this is awarded, or maybe even before a transaction is approved?

There are more examples, but I will run out of time. Members can see that our approach can actually weaken our relationships with our partners. We are not holding up our end of the bargain when it comes to national security and defence, and I worry that some countries think we are not taking it very seriously anymore.

I want to talk a bit about the governance we see at some state-owned enterprises and some of the entities that are owned, controlled or heavily influenced by foreign governments. The issue is that the objectives of these entities are not necessarily commercially minded first. They have some other interests potentially at play. They might be interested in locking up the supply of critical minerals. They might be interested in trying to get information, whether that is intellectual property, communications or information about national defence. Proper governance is important for ensuring we have faith in a free market. If these entities are not playing by the same rules and the same principles, we cannot trust all of their motives. We have to be skeptical.

In the last Parliament, a very good proposal was made by the industry committee that when a state-owned enterprise is involved, there is no threshold too low to trigger a review. That is a reasonable approach. When there is a state-owned enterprise involved or an entity that is heavily influenced by a foreign power or could be heavily influenced by a foreign power, the government needs to think about the best interests of Canada.

Who knows what these critical assets will be in the future? I am not sure 20 or 30 years ago people realized that lithium would be as important as it is now, but what about water in the future? Is that something we should be discussing now, or should we have some more flexibility to discuss that?

The other issue is assets versus shares. One can sell a business by selling assets and one can sell a business by selling the shares in the company that owns the assets, but right now we are only looking at issues where shares are purchased. We are exposing ourselves to a loophole that companies and entities can plan around, especially those that have hostile foreign interests.

There are some expanded powers for the minister, and that is okay if we believe and trust the minister. I think the minister in this case is a wonderful individual, and I do trust his judgment. However, we might get a dud in the future. We need to make sure we have proper oversight of the minister, so the Governor in Council and cabinet should have expanded power. Maybe there should even be a third body.

We are required to be stewards of our assets in this country. Defence and security sometimes is more costly. We might not be able to sell to the highest bidder if it undermines our national security. We need to be working to secure Canada's best interests for her future. I hope that the minister and the government are open to amendments.

I appreciate the fact that this has been brought forward as a stand-alone piece of legislation. It will enable the committee to do some good work, I believe, and hear from some important stakeholders. However, I view this legislation as merely a starting point for a conversation and hope to see it enhanced at committee.

I appreciate the opportunity to speak to this important issue this morning. Before I close, I need to say a very happy birthday to Amanda Philp today, who I am sure is watching this and will see it on repeat a number of times.