Industry Committee on Aug. 7th, 2009

[The Chair, Conservative, Michael Chong]

Go ahead, Mr. Braid.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Van Kesteren.

Thank you, Mr. Chair. I'll be brief, only a minute or so.

I'll go to the issue of government funding and support for Nortel. Nortel officials were here earlier, as you know. They confirmed they haven't received any SR and ED funding over the past decade. First, can you confirm that that's the case? Second, what about IRAP funding?

[Richard Dicerni]

I don't think we or anybody in the Department of Finance or Revenue Canada could confirm that. I believe this is confidential information between the company and the tax man. You could ask their accountant and so forth.

In regard to IRAP, I could get back to you, because that is within the confines of the National Research Council, which administers the IRAP program. I can get back to you on that.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

That would be very helpful, thank you.

Do I have any more time?

[The Chair, Conservative, Michael Chong]

We have to move on. Thank you very much, Mr. Braid.

Monsieur Laframboise.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Thank you, Mr. Chairman.

Thanks to the assistant deputy ministers and the deputy minister.

Mr. Dicerni, if I understood correctly, a transaction must meet three criteria: the amount of the transaction, which we discussed earlier, the net benefit and national security.

[Richard Dicerni]

There are two criteria that determine whether we are subject to the act: the amount of the investment and national security considerations. If an investor is subject to the act by reason of the amount of its investment, it must submit commitments that it intends to make in order to enable the minister to conclude that the country will derive a net benefit from the transaction.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Consequently, the investment threshold is the amount that Ms. Thivierge mentioned earlier. We're amending the regulations, but it hasn't been done yet; studies will be coming. Under the current act, the book value is set at $312 million.

Then there's the national security criterion. How does that work? Does each of the bidder businesses inquire with your department? It's fine if Nortel speaks with you, but do Ericsson, Research in Motion or other companies contact you?

[Richard Dicerni]

Most of these large businesses have excellent law firms that are quite familiar with the basics of the act and the criteria. When a foreign investor comes to Canada to invest, usually among the lawyers that it retains, there are some who are very familiar with the act. When it makes an investment, it contacts us to discuss the transaction.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

In a bankruptcy, do the courts contact you, or do they make decisions completely independently? I get the impression that in the case of a bankruptcy, they don't necessarily have any concerns related to the Investment Canada Act.

[Richard Dicerni]

When the bankruptcy court determines how matters will be resolved if an investor from outside the country acquires a business in the bankruptcy process, the act applies. There is a sequential procedure.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

If the minister decided the act applied for one of the two criteria, what would be the time frames? What would happen?

[Richard Dicerni]

The act provides that a decision has to be rendered within 30 and 45 days, unless the investor agrees to extend the review period.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

My colleague asked you a question about the conditions that could be included in an authorization. Once again we're talking about a hypothetical situation. You said that everything was confidential, but the minister could publicly state his requirements before making his decision. Has that ever happened?

[Richard Dicerni]

No.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

He'll never say, for example, that he wants jobs protected and that that's something important for us.

[Richard Dicerni]

Not under this act.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Even the minister doesn't have the power to say so publicly.

[Richard Dicerni]

No. Every time we have the privilege of appearing before a committee such as yours, as officials, we prepare and do a lot of research to ensure that every point we make is based in fact. In that connection, I discovered a statement that Minister Manley made 15 years ago that concerned a matter about which someone was harassing him in the House. He answered that he would have liked to talk about it but that the act prevented him from doing so. So this has been a common practice since the act has been in effect.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

That means that what is made public is the two parties that agree, the business and the investor.

[Richard Dicerni]

It's mainly the investor that is ready.

[The Chair, Conservative, Michael Chong]

Thank you very much. I note that Mr. Manley sits on the board of Nortel Networks today, so things have come full circle.

We now go to Mr. Braid.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you again, Mr. Chair. I'd like to pursue one of the earlier discussion threads with respect to the Investment Canada Act and the threshold.

Madame Thivierge, you have confirmed for us and helped us understand that the net benefit test is automatically triggered, but only if the book value of the transaction is over $312 million Canadian. How did we arrive at that number? What's the origin of that?

[Marie-Josée Thivierge]

Actually, its origin is in international agreements that Canada was party to, where at the outset the first threshold was established. Since then, there has been an annual increment, the formula of which is in legislation and regulations. So annually the threshold increases. Last year it was $295 million. This year it is $312 million, and next year we will see a new threshold, based on the economic factors that need to be factored into the formula to establish thresholds. An annual increment has been provided for.

That being said, with the amendments that were recently introduced to the Investment Canada Act, when the new threshold provisions come into force, that will be set. It will move to $600 million, and then $800 million, and then $1 billion. That's provided for in regulations, but that is not in effect at the moment.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

And in your mind, are those thresholds and the current $312 million an appropriate threshold?