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]

I call this meeting to order.

Ladies and gentlemen, colleagues, I am glad to see you again on this Wednesday afternoon.

Welcome to meeting No. 71 of the House of Commons Standing Committee on Industry and Technology. Pursuant to the order of reference of Monday, April 17, 2023, we are studying Bill C-34, An Act to amend the Investment Canada Act. Today’s meeting is taking place in a hybrid format, pursuant to the House Order of Thursday, June 23, 2022.

To assist us in the study of this bill, we have with us today, in person, Patrick Leblond, associate professor at the Graduate School of Public and International Affairs of the University of Ottawa Faculty of Social Sciences.

Mr. Leblond, thank you for accepting our invitation to join us, even though it was at short notice. We appreciate it.

We also have Ian Lee, associate professor at the Carleton University Sprott School of Business, who is joining us virtually.

Hello, Mr. Lee, and welcome to the committee.

And last, from Edmonton Global, we have Malcolm Bruce, chief executive officer, who is also joining us by videoconference.

Thank you very much, Mr. Bruce, for joining us this afternoon.

Without further ado, I'll let Mr. Leblond start with five minutes of remarks.

The floor is yours.

[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.

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

Thank you, Mr. Chair. I'll try to keep this short.

Dr. Burton, Bill C-34 does not propose any change to the definition of “state-owned enterprise” in the Investment Canada Act. Should that be tightened up or expanded or improved?

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

Thank you, Mr. Chair.

Mr. Balsillie, one last time, I'd like to address with you the issue of inadequate intellectual property protection and Canada's longstanding issues with innovation that can drive technology champions to leave the country or to set up shop abroad. Bill C‑34, An Act to amend the Investment Canada Act, doesn't address the threshold issue.

Do you think it's a mistake to not have minimum acquisition thresholds? What impact does that have on marketing in Canada?

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair.

I'd like to direct my first question to either Ms. Walker or Mr. Caldecott.

In the Bar Association's April 2023 brief, you encouraged the government to ensure that the amendments proposed in Bill C-34 and the regulations and guidelines accompanying the new mandatory preclosing regime are clear and do not impose unnecessary requirements or burdens.

How do you suggest the government strike the required balance between the protection of Canada's national security interests and the importance of allowing foreign investment in Canada?

[Sandy Walker, Chair, Competition Law and Foreign Investment Review Section, The Canadian Bar Association]

Merci.

Good afternoon, Mr. Chair and honourable members of the committee.

My name is Sandy Walker. I'm the chair of the competition law and foreign investment review section of the Canadian Bar Association. I'm a partner with the law firm of Dentons Canada.

Thank you for inviting the CBA to discuss the proposed amendments to the Investment Canada Act.

The CBA's main objectives are to improve the law and the administration of justice, and we are here today to that end.

With me today is Michael Caldecott, chair of the foreign investment committee of the section. Michael is a partner at the law firm of McCarthy Tétrault.

At the outset, the CBA recognizes both the importance of foreign investment to the Canadian economy and the importance of national security review of foreign investments in protecting Canada's national security. Today, we offer our views on how the bill can be improved to ensure its effective implementation without imposing unnecessary burdens on foreign investors and the government.

The bill establishes mandatory preclosing notification for acquisitions involving targets in prescribed business activities. Such transactions could not close until clearance has been received. To ensure predictability, it is critical that the new regime not come into effect until crucial terms such as “a prescribed business activity” have been defined. These definitions are essential to determine whether a preclosing filing is required and, as a result, should be defined either in the law itself or, if not, in regulations the bill would require to define those terms.

Second, if these definitions are not in the legislation, the draft regulations should be prepared in parallel with Bill C-34, or the amendment should come into force only after the regulations have been finalized.

Third, the bill will capture acquisitions of non-controlling interest in a foreign entity with a Canadian subsidiary. Even if the target has very limited operations in Canada, in these cases national security concerns are unlikely to arise. We therefore recommend exempting these indirect acquisitions where revenues and/or assets in Canada are under a de minimis level.

Fourth, to address transactions in progress when the amendments come into force, we recommend that the new regime become effective 90 days after the bill receives royal assent.

I will now ask my colleague Mike Caldecott to discuss the other points.

[The Chair, Liberal, Joël Lightbound]

I call this meeting to order.

Ladies and gentleman, hon. friends, welcome to meeting no. 70 of the House of Commons Standing Committee on Industry and Technology.

Pursuant to the order of reference of Monday, April 17, 2023, we are studying Bill C‑34, An Act to amend the Investment Canada Act. Today's meeting is taking place in a hybrid format, pursuant to the House Order of Thursday, June 23, 2022.

This afternoon, we welcome a number of witnesses to study Bill C‑34. As an individual, we welcome Charles Burton, senior fellow at the Centre for Advancing Canada's Interests Abroad of the MacDonald-Laurier Institute.

By videoconference, we also welcome Daniel Schwanen, vice-president, research at the C.D. Howe Institute.

We also have Dan Ciuriak in person, and Robert Mazzolin by videoconference, both senior fellows at the Centre for International Governance Innovation.

In addition, we welcome Jim Balsillie, chair of the board at the Council of Canadian Innovators.

Finally, from the Canadian Bar Association, we welcome Sandy Walker, chair of the Competition Law and Foreign Investment Review Section, and Michael Caldecott, chair of the Foreign Investment Review Committee, Competition Law and Foreign Investment Review Section.

I'd like to thank all of you for joining us in person or virtually for this significant study.

Because we're welcoming a large group of witnesses, we will try to limit testimony to five minutes.

Without further ado, Dr. Burton, the floor is yours.

The floor is yours, Mr. Burton.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you so much for being here at committee.

Just to follow up on that question, we do not have trade agreements with countries that are the most problematic when it comes to hostile regimes. We know which countries those are. That does provide us with some opportunity within the net benefit test to perhaps lower thresholds or incorporate additional tools that are going to give us the ability to place a greater focus of scrutiny on those investments. I'm thinking of investments even like the one that was made by Glencore—or it was going to be made by them. There were two offers from Glencore for Teck, and Teck has resisted both of those. That caused enough consternation with the minister's office that he actually responded to a letter from the Vancouver Board of Trade and signalled that Teck was important—very important.

What in Bill C-34 is actually going to prevent the last champions of industry within Canada from being acquired and potentially being hollowed out by foreign entities, not necessarily on the national security side but on the net benefit side?

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

Thank you, Mr. Chair.

Thanks to the witnesses.

Mr. Vincent, in view of the minister's answers to my questions about Neo Lithium and the other three companies that were asked to pick up their marbles and go home, I would ask that you take various factors into consideration in your replies.

We know that the government of Canada is getting ready to invest in a Volkswagen battery plant. I have in front of me I a map of mines in Canada and a list of the 31 critical minerals considered important for national security. It's acknowledged that Canada's mines cannot supply all of the lithium and rare earth metals needed to produce batteries, either for the Volkswagen plant or any other future plants. It will therefore have to import these if they are to manufacture and install these batteries.

In view of all these contextual factors, don't you think that foreign investments will be needed in all of Canada's mines? There are, after all, many projects on the table that we would like to undertake.

Under the new version of Bill C‑34, which might be adopted, I believe that the time required to get all these mines up and running, and the investments that will be required, are going to demand a lot of work from public servants. They will have to carry out an extremely thorough analysis. We’re still talking about China, but there may well be companies in other countries that would perhaps want to invest in Canada, particularly in this area.

Words are important. If I'm not mistaken, the minister mentioned a new industrial niche for Canada. He even compared it to the introduction of the automobile in the early 19th century.

In view of all these factors, how are we going to attract foreign investors to Canada, when China is currently producing 30% of all the raw materials needed to make batteries?

That's a long question, but I think you understand the context.

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

I would of course hope that we could monitor what happens in our supply chains. I and some of my colleagues also mentioned it, as well as the fact that sanctions for any of violations need to be stronger. These sanctions should be strengthened to deter foreign investors from violating any of the rules in the Investment Canada Act.

Would the new act include any amendments of that kind? Are the sorts of conditions that the department could impose clearly defined in Bill C‑34?

In terms of transparency, could these conditions be published? The minister has stated a strong desire for transparency. Will this be reflected in reality?

The most striking case for us, as Quebeckers, is of course the purchase of Rona by Lowe's. We never learned what conditions were placed on this by the minister. In the end, we get the impression that there is nothing of this company left in Quebec, even the supply chains.

[Viviane LaPointe, Liberal, Sudbury, ON]

On the subject of national security, I understand that, under the act, Canada was only permitted to share limited information regarding certain aspects of current and ongoing cases.

What information will be shared with international allies under the proposed option in Bill C-34?

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. McLean. That's all the time.

Just as a reminder for MPs, we have officials with us taking their time to review Bill C-34, which is what this committee is looking at.

Thank you being here with us to examine Bill C-34, which has been referred to this committee.

Ms. Lapointe, you have the floor for six minutes.

[The Chair, Liberal, Joël Lightbound]

Dear colleagues, we are now reconvening this meeting of the Standing Committee on Industry and Technology.

We are now welcoming two senior government officials, Mr. Vincent and Mr. Burns. Thank you for being with us for the second hour of this meeting, which will be shorter than planned, because we have only 30 or 40 minutes left.

We will now continue our discussion of Bill C‑34.

Mr. McLean, you have the floor for six minutes.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Thank you for the question.

Mr. Chair, obviously you have the final word on everything, so we'll focus on the question that was asked.

Definitely, what I was saying was that Bill C-34 is under national security, which has no threshold. The first thing I was trying to explain to the committee and colleagues was around the fact that, when it comes to national security, there's no threshold, so we review any transaction that would have an impact on national security. That's what Bill C-34 is about. It's to provide more tools in the tool box with respect to that.

The net benefit test has a number of thresholds, whether you're part of the OECD or whether you're a country with which we have a trade agreement, but what I'm saying is that because of what we were looking at—and colleagues have been asking questions—when it comes to national security, there's no threshold. I think it's important for colleagues to know that, because that's really what we're looking at. It's to have more tools in the tool box, because there were questions at the time from colleagues on whether we are looking at all transactions. The response is clearly, when it comes to national security, that every transaction, every investment, is subject to the act.

[Brian Masse, NDP, Windsor West, ON]

Yes, it is. I come from the big three tradition, and it is because it has been something we've been trying to get for a long time.

We're already seeing the effects of the IRA, the Inflation Reduction Act, because even Canadian companies are subcontracting out some work to make eligibility back in the United States. It's going to get highly complex, and that's even for tool and die mould-making and so forth, so I appreciate that you're in front of trying to compete with it, because if we don't, then you're out of business generally. We don't like it in some respects, but that's the way this works.

I want to move on—actually, this does include land close to the Ojibway national urban park and by the Gordie Howe bridge—to a situation and to find out how Bill C-34 can deal with it. Windsor Salt was bought up by a holding firm and has now been bought by another one called “Stone Canyon Industries”. It's a U.S. holding firm.

It's now on strike. Stone Canyon is known for basically being a hedge fund for union-busting. That's what they're trying to do. There hadn't been a strike there in 30-something years. There now is a strike because they're trying to get rid of the union.

I guess the point is how we deal with this in this act where, for example, a Canadian business is bought by a legitimate green-lit buyer at the beginning, but maybe later on a foreign national state government comes in. Is there anything we can do about that? If it's a holding company, some of these private equity forms are also owned by different fiefdoms around the world, and we don't know where some of the money comes from.

Do you have any thoughts about that? Anbang was another one that came up before with the Chinese with regard to that situation. Is it almost like a rope-a-dope, where somebody buys a Canadian company and then later on, within a year or something else, it gets bought by another state-owned entity?