Industry Committee on March 24th, 2011

[Sandy Walker]

Well, I can tell you about my own experience. When there has been non-compliance—and I've dealt with situations in which there's been non-compliance through no fault of the investor—then we've worked out alternative undertakings, and we do that in negotiation with Industry Canada.

Then there is the issue with respect to its not being an undertaking made in good faith. I think that's why there's been public skepticism. People say they haven't met their undertakings, and they ask. There's this notion that there may have been undertakings made in bad faith. If that is the case--and I'm not saying that has been the case in any particular transaction--I think the mechanism is there now. With U.S. Steel, they've taken them to court. That hasn't happened before. That's the first time. That's dragging on and on.

One thing—and I think this is in the last paragraph of my presentation—is that maybe there's another way that's a bit faster. Maybe you have a third party arbitrator, as you have in some commercial contracts. When there's disagreement on an issue between the parties, you can put it to third party arbitration.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

That's where I was going. I was going to ask what you would suggest, but I think that covers it.

I know my colleague Mr. McTeague would like to ask a question, so I'll pass it on.

[The Chair, Conservative, David Sweet]

You have 30 seconds.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

I'll shift gears. Perhaps this question has been considered, but I'd like to leave it out there for you to consider. Perhaps you could get back to the committee, should it exist after tomorrow, in writing.

It's on the subject of swaps and derivatives driving commodities, driving acquisitions, driving international acquisition of assets. The ebb and flow, as we've seen over the past year and a half, in an unregulated market, is in itself very controversial.

[Sandy Walker]

Are you talking about commodity cycles?

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Well, I mean the actions of over-the-counter trades such as we saw in 2007, when we had a frenzy of asset takeovers in Canada, much of it driven by speculation on commodity prices. In our assessment of investments, is this something we have to take into consideration, given that we have very little control over these unregulated markets? Canada, of course, does not want to play a role in this area internationally, but most other nations are involved.

[Sandy Walker]

I think there's scope within the undertakings to look at what the plans are. What are the long-term plans of the company? They can be three-year or five-year undertakings, and those can take into account certain concerns you might have relating to that.

[The Chair, Conservative, David Sweet]

Sorry, Mr. McTeague; your time is actually over.

Monsieur Généreux, you have five minutes.

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

Thank you, Mr. Chair.

Thank you, Ms. Walker, for being here today.

Why is it so important for Canada to attract foreign investors? How is it that this is so important?

[Sandy Walker]

I'm a lawyer, but I have had some training in economics as well. Foreign investment provides critical capital to develop our resources. Canadian shareholders or shareholders of Canadian companies would be pretty unhappy if the only people who could buy their shares were other Canadians. The value of their shareholdings would certainly be discounted substantially.

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

So you think it's a good thing.

[Sandy Walker]

Yes.

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

Do you think that the way Canada analyzes all the acquisitions made by foreign companies could be improved? Should we look at how it's done elsewhere? Mr. Gravelle referred earlier to Brazil and Australia, where there are larger—or potentially larger—reserves than in Canada.

Do you think that there are things that some countries in the world—countries that are partnering with Canada more often than not—do that we could introduce or implement here? Could we adopt some of their ways of operating that would improve our processes?

[Sandy Walker]

I'm not sure specifically what you are referring to when you refer to the other ways in other countries.

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

We have a process that allows us to analyze foreign investments or acquisitions. In recent months, the methods that we use have been called into question. They have been called into question to some extent, or they have at least drawn comments, particularly in the case of potash. One of the reasons we are here today to discuss this issue is to determine how we can improve our processes when it comes to these investments. Our government has shown that it is quite open to studying it.

[Sandy Walker]

I think one way to improve it would be to offer greater clarity through guidelines guidance, in the form of guidance, interpretation notes, or whatever, so that there's greater clarity on what—

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

To foreign companies?

[Sandy Walker]

Yes. Offer guidance with respect to the Investment Canada Act. I'd say this is how we interpret the section 20 factors, because they are so broad that they could be interpreted very, very widely. One of the ways to reduce uncertainty and enhance predictability and make Canada look more welcome is to explain what we mean when we say something in the act. Do we regard certain sectors as strategic, or don't we? What are the considerations?

The editorial in The Globe and Mail today—I think it was today—talked about the reversing of the onus so that the minister can only turn down an investment if it's of net harm to Canada. I don't see that as a radical, revolutionary concept because, really, even if you say they can only turn it down if there's net harm, well, you still have to figure out what's considered of net harm. It's really not a huge shift. There might be a slightly more positive take on that from foreign investors. In reality I haven't thought about that a lot, but I don't think it offers a huge benefit.

If you're going to have foreign investment review, and if that foreign investment review is going to be a broad economic review and not just a national security-based review, then you're going to need to define the elements you're going to look at when you review. I rhymed off a whole bunch of them, but none of those would.... I couldn't tell you why PotashCorp was decided the way it was on the basis of those.

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

What about public consultation? Do you think it would be important to have some, more broadly, about--

[Sandy Walker]

If you mean on each transaction as it comes along, I think that would be very difficult to manage time-wise, and to a certain extent that debate already occurs in papers. You hear it through the media, etc. People are free to make submissions to the government.

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

It's about privacy as well.

[Sandy Walker]

Of course it is, absolutely.

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

Thank you very much.

[The Chair, Conservative, David Sweet]

Merci beaucoup, monsieur Généreux.

Madam Walker, thank you very much.

Thank you for mentioning the recourse that could be taken on companies that don't live up to their undertakings. The riding I represent is part of greater Hamilton, and many constituents are affected by U.S. Steel and the lawsuit that is between the federal government and U.S. Steel right now. I appreciate your testimony and your vast experience and I appreciate your coming here today. I understand you travelled from Toronto, so I appreciate that. Now we'll release you, with our great blessing, so you can return there. Thank you very much.

[Sandy Walker]

Thank you.