Industry Committee on Feb. 17th, 2011

[The Chair, Conservative, David Sweet]

Thank you, Madame Thivierge.

Now we'll move on to the Liberal Party and Madam Coady for seven minutes.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you very much.

First of all, thank you for your patience at the beginning of the meeting. Also, we certainly appreciate your taking the time today to be with us.

I have several questions. They basically centre around transparency, enforcement, and evaluation, as well as consultation.

But my first question really is around transparency, if I may...? These questions are broad. I can appreciate the need for confidentiality with regard to enterprises, so I'm going to keep these very broad and try to centre them around these three pillars.

About transparency, around the decisions on the potash--and now we have a lot of discussion around the TMX/TSE merger--there's been a call for greater predictability, greater transparency, and timeliness in Canada's investment review process. I noted in The Globe and Mail the other day that somebody was talking about the investment review act and was saying that, really, we need more predictability and transparency in this particular issue.

One of the questions I'd like to ask is, in broad terms, how do we get to a clear rules-based system that takes the political expediency out of the mix?

[Marie-Josée Thivierge]

As I indicated during my presentation, the act is based on the fact that the minister makes a decision. It is the Minister of Industry who makes a decision. His decision is informed by documentation that is provided by an investor and the results of consultations that have been held as provided for under the act.

To your issue around predictability, there are the factors are listed in section 20 of the act. It is provided for under the act that in order for the minister to come to a decision on likely net benefit, he must do so based on the factors that are outlined in the act. There are six factors, which I touched on earlier.

I'd be happy to go through the more specific details of those factors. But essentially, it is based on those factors that ultimately the minister will make a net benefit determination.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Finn Poschmann, vice-president of research at the C.D. Howe Institute, recently said in a Globe and Mail article that a clear, rules-based system takes politics out of the mix and tells the world--and Canadians--why decisions are made. I just want to get to that for a moment.

Are there alternatives to ensure--and I know you've given us the six and all of that--increased transparency and information? I reflect back on the competition review panel. It recommended the increased use of publicly available guidelines and advisory material. Has Industry Canada considered this?

[Marie-Josée Thivierge]

Again, the competition review panel made a number of recommendations, many of which were adopted by the government through changes in legislation. I think that to the extent that the Investment Canada Act provides a fairly detailed articulation of a process from application to decision, the factors that will be considered in the act, and to enforcement, this is the process that has been laid out. Hopefully I'm getting to your question.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

I'll go to the threshold, because some of those things were implemented but the threshold was not. So under the Budget Implementation Act, there was a threshold change from $312 million, I believe, to a book value of $1 billion in the enterprise value. That was a recommendation coming from the competition review panel.

You said that most of the recommendations that were in the Budget Implementation Act were implemented except for that one, and that's because there was a regulatory change required. That was two years ago, so I'm just wondering where we are with changing that threshold as the competition review panel suggested.

[Marie-Josée Thivierge]

Draft regulations were published for purposes of consultations. Extensive comments were received on those draft regulations and they are being considered. I can't predict when these will go forward, but this is a process of engagement, and consultations have been held on draft regulations, describing what is--

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

So for clarity, Parliament voted on increasing the threshold to $1 billion, and you're making the changes based on that, but you're consulting before you make that change...?

[Marie-Josée Thivierge]

One of the things that is involved in the regulations is defining what is enterprise value.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Okay.

[Marie-Josée Thivierge]

What we have found through the consultations is that there are many views out there, so finding a definition that in fact is clear, predictable, and transparent—

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Okay. That's where you are right now.

I want to go to the evaluations. In the Industry Canada slides that you provided us earlier, you noted that the evaluation of the implementation of undertakings is ordinarily performed 18 months after the implementation of an investment.

Is every approved investment consistently evaluated at the 18-month mark? How long does that evaluation take and how frequently is non-compliance an issue?

[Marie-Josée Thivierge]

As suggested in the deck, it is the normal practice because the timeframe for undertakings can vary quite extensively, from a few years to several years, or can go to perpetuity. The duration of undertakings varies from transaction to transaction. Normally, we will look at the 18-month point in time.

That being said, one of the provisions in the act is that we can ask for information at any time. This is very clearly articulated in the act. Therefore, if we are made aware of any change that may have an impact on the plans of the investor or their undertakings, we will immediately consult the investor.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Can you tell me...and again, how frequently is non-compliance an issue? Is it never an issue? Is it sometimes an issue? Is non-compliance often an issue?

[Marie-Josée Thivierge]

I can't answer that question with precision. What I can say is that there are times when in fact non-compliance is on something that is very small in consequence. At other times, it is something that's a bit more significant. Clearly, sections 39 and 40 of the act provide enforcement mechanisms. So to the extent that non-compliance is identified, we will have discussions with the investor. Ultimately, the minister will decide on the appropriate course of action.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

I only have—

[The Chair, Conservative, David Sweet]

I'm sorry. That's all, Madam Coady.

We will move on to the Bloc Québécois now.

Mr. Bouchard, you have seven minutes.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chair.

Good afternoon, Ms. Thivierge.

Ms. Coady asked a question about the threshold for evaluation. At present, it is $312 million, and I think over the next four years it will rise to $1 billion without review by the Minister. Is that correct?

[Marie-Josée Thivierge]

I said a little earlier that there was a provision in the legislation, and under it, over a four-year period, the threshold could rise to $600 million, first, and second, two years later, $1 billion. That provision is not in force at present.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Is the objective to increase foreign investment in Canada? If that provision is brought into force, what repercussions will allowing the threshold to rise from $312 million to $1 billion without the Minister doing an evaluation have?

[Marie-Josée Thivierge]

I wouldn't want to speculate on what the impact of such a change will be, given that the definition of what will be considered in the enterprise value will be an important factor. The definition of enterprise value still has to be established.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Where I am, in the Saguenay-Lac-Saint-Jean region, Rio Tinto, a foreign corporation, bought Alcan. I can tell you that everybody misses Alcan. At present, important decisions are no longer made in Montreal, they're made in London.

Is the place where decisions are made, that is, either in Canada or abroad, considered in the act? Is the fact that decisions are made abroad considered to be a net benefit to Canada?

[Marie-Josée Thivierge]

Mr. Bouchard, you have asked similar questions about specific cases before. Given that I am not free to discuss the effect of a specific transaction, I would invite you to read section 20. I think everyone has received a copy of the act. Section 20 talks about six factors that the minister shall and may consider. They are not necessarily all applicable from one transaction to another. One of those factors deals with participation by Canadians in the business.

Without giving details about the scenario you referred to, I will note that paragraph 20(b) says: the degree and significance of participation by Canadians in the Canadian business or new Canadian business and in any industry or industries in Canada of which the Canadian business or new Canadian business forms or would form a part;

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

I did present you with a specific case, but I expected a hypothetical answer. From what I understand, you consider the fact that a foreign enterprise that purchases a company in Canada has its head office outside Canada to be an evaluation factor.

[Marie-Josée Thivierge]

What is considered is the role of Canadian participation.