Bill C-34 (Historical)

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

[The Acting Speaker, Gabriel Ste-Marie]

We have time for a short 15‑second question.

The hon. member for Saint‑Hyacinthe—Bagot.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, you picked the wrong member for a short 15‑second question. You know me. The time is already almost up.

We welcome the progress and the improvements that the bill makes to the current act, but why are the rules still so slack, and why is there so little scrutiny?

[Ryan Turnbull, Liberal, Whitby, ON]

Mr. Speaker, you will not be surprised, that, unfortunately, I disagree with the hon. member that this is slack. I do not think that is the case. This is a very strong piece of legislation that was agreed to by committee members.

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

Mr. Speaker, Bill C-34, otherwise known as the national security review of investments modernization act, seeks to update and strengthen the Investment Canada Act with the aim of protecting Canada's national security when it comes to foreign investments in our country.

As tensions rise around the world, Canadians, our businesses, our intellectual property, our private data and our natural resources must be protected from bad actors who seek to undermine our sovereignty and exert influence on our institutions and way of life in Canada. For eight years, the NDP-Liberal government has not taken sensitive transactions seriously and has failed to conduct full reviews of transactions involving Chinese state-owned enterprises, which has seriously jeopardized the security of Canadians and our government.

According to Statistics Canada, China's share of Canadian assets under foreign control doubled from 1.9% to 3.8% between 2015 and 2019. Large shares of key industries are also under foreign control, including 40% of all assets in Canada's oil and gas industry, 48% of wholesale trade, 44% of manufacturing, 30% of mining and quarrying and 25% of professional, scientific and technical services. With so much of Canada's economy controlled by foreign companies and governments, it is crucial that we ensure foreign investments do not pose a threat to our national security and prevent bad actors from weaponizing Canada's economy and our own resources against us.

Let us take a look at some recent examples of investments the government missed.

One example is the Neo Lithium Corp. and Zijin Mining. In March 2021, the minister of industry updated and enhanced guidelines for transactions involving critical minerals and state-owned enterprises. Just 10 months later, the minister ignored those new guidelines, allowing a Canadian mining company, Neo Lithium Corp., to be acquired by Zijin Mining, a Chinese state-owned enterprise, without a security review.

Another example is Sinclair Technologies and Hytera Communications. In December 2022, the RCMP awarded a contract to supply sensitive hardware for its communications systems to Sinclair Technologies, which is directly linked to Hytera Communications, a company partially owned by the Chinese government and a major supplier of China's public security ministry. It was revealed in December 2022 that the CBSA used Hytera's technology and communications equipment in 2017. Hytera has been charged with 21 counts of espionage in the U.S. and banned from doing business in that country. In 2017, when Hytera acquired B.C.-based telecommunications company Norsat International, the parent company of Sinclair Technologies, the minister of industry failed to request a full national security review.

Conservatives have long called on the current government to take swift action to ensure that, any time a foreign state-owned enterprise seeks to invest in a Canadian corporation or asset, the government conducts a thorough review. At second reading of this bill, Conservatives voted to advance the proposed legislation to the industry committee, upon which I sit, with the clear expectation that significant amendments would be made. At industry committee, Conservatives tabled a number of amendments to ensure these reviews would take place and to strengthen this legislation as a whole.

Some of the amendments tabled by my colleagues and me at industry were adopted. However, many more were voted down by the government.

We wanted to modify the definition of “state-owned enterprises” to include any company or entity headquartered in an authoritarian state. We wanted to list specific sectors necessary to preserve Canada's national security rather than the systematic approach applied or recommended by public servants. We wanted to exempt non-Canadian Five Eyes intelligence state-owned enterprises from the national security review process, to prevent an overly broad review process for an ally such as the United States or Australia. We wanted to allow the Government of Canada to maintain ownership of intangible assets that have been developed, in whole or in part, by taxpayer-funded dollars. The committee members rejected those things.

We wanted to allow the minister to go back and review past state-owned acquisitions through the national security review process, allowing for a flexible review process. They rejected that ministerial power.

We know that public servants do take a risk-adverse approach in crafting regulations and providing advice during the legislative process. That is not necessarily a bad thing. That is a good thing. However, politicians must be willing to make the tough decisions, weighing the potential benefits against the repercussions of any decision.

Going back to that first rejected amendment, Conservatives moved to include companies headquartered in an authoritarian state in the definition of state-owned enterprises to ensure that they are automatically subject to security reviews. We just want to protect our sovereignty.

Public servants warned against calling out certain nations like this, as it could conflict with WTO obligations. However, when we look at the 2019 annual report from the national security committee of Parliament, NSICOP, it highlighted activities carried out by the People's Republic of China in Canada, stating, “they are a clear threat to the security of Canada.” The report also stated that “foreign interference represents a significant threat to Canada's society and fundamental institutions.”

The government's own Indo-Pacific strategy reads:

China has benefitted from the rules-based international order to grow and prosper, but it is now actively seeking to reinterpret these rules to gain greater advantage. China’s assertive pursuit of its economic and security interests, advancement of unilateral claims, foreign interference and increasingly coercive treatment of other countries and economies have significant implications in the region, in Canada and around the world.

Despite all that, the Liberals and the Bloc members voted down our amendment. Frankly, it is not surprising, given how long this government has ignored the 2019 NSICOP report, which called for a foreign agent registry, and given the fact that our Prime Minister has said that he admires the basic dictatorship of China.

The question I want the government members to answer is this: Do they really believe that, without the amendments we put forward in good faith, which they rejected, this bill is as strong as it could be to protect Canadian assets, companies and, most importantly, our sovereignty? I do not believe they can answer with a yes.

Thankfully, a few of our common-sense Conservative amendments were passed.

Number one was to reduce the threshold to trigger a national security review from $512 million to zero for any investment by a state-owned enterprise. I think if there is one thing to note from the work the Conservative Party did it would be our standing up for Canadian sovereignty by changing this fundamental aspect of the Investment Canada Act. Moving forward, when this is passed, when China is looking strategically to take an asset in Canada, say mining rights or a small mine that would fall under the threshold, which I believe this year is at $512 million, that strategic move to try to make its way into the Canadian economy would be subject to a security review. That would be thanks to the hard work of the Conservative members.

Number two was to ensure that items reviewable under the national security review process would include acquisitions of any assets by state-owned enterprises. Number three was to work to ensure that an automatic national security review would be conducted whenever a company had previously been convicted of corruption charges. Number four would require the minister to conduct a national security review by changing “may” to “shall” to ensure a review is triggered whenever it is in the review threshold.

That brings us to today. Conservatives have brought forward a common-sense amendment here at report stage that would protect the system of checks and balances in place on the minister's power to undertake, or not undertake, a national security review. Our amendment would remove clause 15 of Bill C-34, which would revert the language back to the existing text in the Investment Canada Act. This would ensure that cabinet continues to play an active role in ensuring regional representation and in making major decisions about foreign investment in our country.

In conclusion, I understand what the Liberals are trying to do here by streamlining decisions through the minister of industry and the minister of public safety, but we must ensure that regional representation plays a role in national security reviews moving forward.

[Chandra Arya, Liberal, Nepean, ON]

Mr. Speaker, I appreciate the amendment to bring the threshold to zero dollars with respect to state-owned enterprises.

I would like to ask my hon. colleague's opinion about the investments done by multinational companies where they come and capture an entire sector, as it is today with the steel and aluminum sector being entirely foreign owned. They just become the branch office of the foreign multinationals, focusing only on the North American markets, and never attempting to export the talent, resources and expertise that is available in Canada to the countries with which we have free trade agreements across the world.

Does that not also fit into the definition of economic security which, in my view, is the same as national security?

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

Mr. Speaker, I missed the first part of that question, but I will note that the member for Nepean actually stood alongside Conservative members in the House during second reading when he called for some of the changes to the national security review.

More broadly to his point, I think when we look at the Investment Canada Act, the Government of Canada needs to be looking very closely at protecting strategic interests, and that is what we were trying to do. That is not just from foreign state-owned actors, but that does include multinational companies as well.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Speaker, my colleague was criticizing the Bloc Québécois for voting against the Conservative amendments. I just want to make it clear that the Conservative amendments were intended to label just about every state-owned enterprise not run by our Five Eyes partners as hostile.

I do not know if he is aware that 40% of European investments made in Canada are made in Quebec. One example is Airbus, which builds Airbus A220s in Mirabel in partnership with the Quebec government. We would have looked pretty silly if the Conservative amendments had been adopted.

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

Mr. Speaker, the question in the House today is whether the Bloc Québécois will protect Quebec sovereignty and support the Conservative amendment, which will keep regional representation in cabinet rather than leaving it all in the hands of a single minister. Imagine if a minister from British Columbia could make a decision for the Quebec nation without cabinet members from Quebec having any say in it.

The Bloc Québécois should vote with the Conservatives in favour of this amendment to protect sovereignty, not just for Quebeckers, but for all of Canada.

[Bonita Zarrillo, NDP, Port Moody—Coquitlam, BC]

Mr. Speaker, earlier, NDP members were talking about the fact that we have no protections in Canada from extra-large corporations that are making billion of dollars in profits and are basically sucking up all the little guys in this country.

Can the member speak to whether they agree that we should have rules, like the United States does, that would allow us to break up these extra-large oligarchies, which are taking over competition in Canada?

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

Mr. Speaker, I appreciate the question regarding the Competition Act, which has been debated very recently in the House of Commons. However, the Investment Canada Act is a bit different than the Competition Act.

What we are focused on here today is ensuring, irrespective of political party, that the Government of Canada has the necessary tools and framework to protect Canadian sovereignty to ensure that our elected officials can make appropriate decisions when foreign investment wants to come into this country and make a decision to ensure that it would be a net benefit gain for Canada when foreign investment dollars come to our wonderful country.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Mr. Speaker, why is it so important that we brought down the threshold from $512 million to zero?

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

Mr. Speaker, it was so important to reduce the threshold to zero to account for intangible assets, for small mines in the natural resource sector and for businesses that could fall below the threshold, but would ensure a strategic asset for a state-owned enterprise or a foreign government that does not necessarily have the best interests of Canada at heart. What we are doing with this amendment is following along the lines of our other like-minded nations to protect strategic assets in Canada or corporations.

[Chandra Arya, Liberal, Nepean, ON]

Mr. Speaker, I rise today to speak on Bill C-34, an act to modernize the national security provisions of the Investment Canada Act. We have been clear that we will always welcome foreign investments and trade that encourages economic growth, innovation and employment opportunities in Canada.

At the same time, we know that economic security is national security. That is why this bill, which will amend the Investment Canada Act, would bring forward improvements so our government can act more quickly when required. This legislation would represent the most significant update of the ICA since 2009 and would ensure that we could address changing threats that can arise from foreign investment. While our government continues to welcome foreign direct investment, we are modernizing the ICA framework to ensure Canada’s continued prosperity while acting decisively when investments threaten our national security.

Let me first appreciate the fundamental importance of foreign investments to our economy. Canada has a long history of welcoming foreign capital, businesses and expertise, and this openness has played a pivotal role in shaping our nation's growth. Foreign investments are a driving force behind economic development in Canada. They fuel innovation, stimulate job creation and enhance our global competitiveness. Foreign direct investment has enabled us to harness the expertise and resources of international partners, thereby propelling our own industries forward.

These investments result in the creation of well-paying jobs for Canadians and help diversify our economic landscape. Moreover, they facilitate the transfer of knowledge and best practices, fostering innovation and productivity enhancements. While the economic benefits of foreign investment are undeniable, we must not overlook the critical dimensions of national security. Protecting our sovereignty, infrastructure and sensitive data is paramount. National security is not a matter of choice. It is an unwavering obligation of the government to safeguard the interests and well-being of its citizens.

Over the years, the interconnectedness of our world has increased exponentially. Technology and the flow of capital have become global, creating unprecedented opportunities but also potential vulnerabilities. We cannot afford to be complacent when it comes to the protection of our national interests. While our commitment to an open and welcoming environment for foreign investors remains steadfast, it must coexist with a thorough evaluation of the national security implications that each investment brings with it.

As I said earlier, we welcome foreign investments and trade that encourages economic growth, innovation and employment opportunities in Canada. At the same time, we know that economic security is national security.

In my speech during second reading, I had mentioned the importance of economic security. I would like to touch on that again. The importance of economic security in the context of foreign direct investments cannot be overstated. In the pursuit of economic growth, it is essential that we safeguard against any potential threats to our long-term economic security.

The economic security part primarily concerns the stability and growth of our economy, while the national security part pertains to safeguarding our sovereignty and protection from external threats. Foreign direct investment is a powerful tool for economic growth, but it must be leveraged in a way that ensures that all sectors of our economy continue to thrive.

The steel and aluminum industries in Canada, which are 100% foreign-owned, serve as a compelling example of how a failure to address economic security can potentially result in stagnation and even decline. These industries, dominated by foreign ownership, have seen little to no growth in production capacity over the past two decades.

While the rest of the world is expanding its aluminum and steel sectors, Canada's lack of growth and diversification in these areas has hindered our ability to tap into new markets and fully leverage our numerous free trade agreements. In fact, there are hardly any exports from the Canadian steel and aluminum industries outside of North America, even though we have signed 15 free trade agreements with 51 different countries that cover 61% of global GDP.

There is a need for a comprehensive approach to foreign investment that addresses not only national security but also the economic well-being of our nation. We must find a balance that encourages investment while ensuring that the growth and diversification of our economic sectors continue to contribute to our long-term economic security.

To strike a balance between these economic requirements and national security requirements, we have adopted a comprehensive and multi-dimensional approach to foreign investments. The approach is rooted in a principled and fact-based assessment of each investment proposal. The key elements of our approach include legislation and regulations, a national security review process, risk assessment, proportionate responses, consultation and transparency.

There are certain principles that guide our approach to foreign investments and national security. The first is sovereignty and security. Canada's sovereignty and national security are not negotiable. The government is committed to safeguarding the country's interests and ensuring that foreign investments do not compromise its security.

The second is openness and partnership. Canada remains open to foreign investments that enhance economic growth and job opportunities. We value international partnerships and the mutual benefits they bring.

The third is transparency and accountability. Our approach is characterized by transparency, accountability and due process. Decisions are made based on facts, expert advice and consultation with relevant parties.

The fourth is proportional response. The response to national security risks is proportionate to the level of risk identified. This ensures that legitimate and beneficial investments are not unfairly restricted.

The fifth is continual adaptation. Our approach is not static. It evolves to address new and emerging challenges. The government remains committed to staying ahead of evolving threats and opportunities.

With this act, we are highlighting that Canada's approach to foreign investments strikes a delicate balance between economic growth and national security. We remain committed to welcoming foreign capital and expertise that contribute to our prosperity, innovation and employment opportunities. However, this commitment is tempered by an unwavering dedication to safeguarding our sovereignty and national security.

The Investment Canada Act, the national security review process and the guiding principles that underlie our approach provide a robust framework to evaluate foreign investments. Through consultation, transparency and a proportional response to identified risks, we ensure that legitimate investments are not discouraged and national security is upheld.

In this era of interconnectedness, Canada's approach is not a mere policy. It is a reflection of our values, our commitment to our citizens and our vision for a prosperous and secure future. We embrace the world while safeguarding our national interests, and in doing so, we strengthen the very foundations of our great nation.

The ICA provides for both the net benefit and national security reviews of foreign investments into Canada. It was established to provide investor certainty while reserving Canada's ability to block individual investments under specific circumstances. The act is designed to encourage investment, economic growth and employment, only interceding when an investment is not of net benefit to Canada or would harm national security.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Mr. Speaker, there has been a long history of the Liberal government making poor decisions by allowing Chinese Communist state-owned operations to take over operations. I will start with one, Anbang. Members will remember that then minister Navdeep Bains bought health care for seniors in B.C. It was a total disaster thereafter, and during the pandemic, the B.C. government had to step in and take over. For that reason, we do not need one individual making a decision on whether there should be a security review.

Does the member agree with the Conservative amendment that it would be better to have the Governor in Council or all cabinet members weigh in on those kinds of decisions?

[Chandra Arya, Liberal, Nepean, ON]

Mr. Speaker, national security issues due to investments made by certain state-owned enterprises were always a concern. In fact, I think we have gone back and re-reviewed some of the decisions made to allow foreign investments by state-owned enterprises.

My view is that this bill is comprehensive enough to take care of the national security review of any investment made by any foreign entity.