Industry Committee on May 21st, 2013

[John Carmichael, Conservative, Don Valley West, ON]

Thank you, Chair, and thank you to our witnesses. I think this will be my last go-round.

It's my understanding—and if this is repetitive from earlier questions, I apologize—that in proposed Bill C-60, the SOE definitions of direct or indirect influence remain undefined. Am I correct in that?

[Paul Halucha]

You're correct, sir, only that they already are defined in the existing Investment Canada Act, so there's already a—

[John Carmichael, Conservative, Don Valley West, ON]

From an interpretative perspective—

[Paul Halucha]

Oh, sorry, you said “influence”. I thought you said “control”.

[John Carmichael, Conservative, Don Valley West, ON]

Influence, yes.

[Paul Halucha]

Control, yes, is not defined. Indirect and direct control are defined, though, in the act.

[John Carmichael, Conservative, Don Valley West, ON]

So they are defined.

Would they be characterized similarly? There's an interpretative value here, right?

[Paul Halucha]

Right.

So you're asking if direct and indirect control—

[John Carmichael, Conservative, Don Valley West, ON]

I'm thinking it through as I'm asking you the question. Influence, clearly, could sway a control issue—

[Paul Halucha]

Correct.

[John Carmichael, Conservative, Don Valley West, ON]

—where actual control is defined by numbers, it's numerically controlled.

[Paul Halucha]

That's correct.

[John Carmichael, Conservative, Don Valley West, ON]

With regard to Canadian-to-Canadian business, again from an interpretative perspective, you've got SOEs who step into a market, and they make an investment. I think 30% is the minimum threshold. Is that correct?

[Matthew Dooley]

One-third.

[John Carmichael, Conservative, Don Valley West, ON]

Sorry, one-third.

So as you begin, you then have a Canadian company that's controlled by a foreign SOE. They start making acquisitions internally. I'm wondering about the interpretative value. You've got this extension of influence that obviously is going to cascade through those acquisitions. I'm wondering how far we go with that. Are we talking about sovereign wealth? Are we talking, in terms of the markets, about making acquisitions? Who would be considered the buyers in that, and how far does the SOE actually influence, in terms of those multiple acquisitions, as you step into a Canadian-to-Canadian...?

Have I confused you?

[Matthew Dooley]

I hope not, but let me know if I'm not answering your question.

[John Carmichael, Conservative, Don Valley West, ON]

Somebody said “nebulidity” earlier. I thought that was a great new word.

[Voices]

Oh, oh!

[John Carmichael, Conservative, Don Valley West, ON]

I'm trying not to stray.

[Matthew Dooley]

In the scenario you're discussing, it's a Canadian company purchasing or investing in another Canadian company, but the investing company that's Canadian is potentially influenced by a foreign SOE. In that case, the act, for a definition of SOE, would permit the minister to look at that Canadian company—and I have to use quotes for this—as to whether it actually is Canadian or not, or whether it is an SOE for the purposes of this act because it's being influenced, its business decisions, its management, etc., is being influenced, and therefore directed by the foreign SOE.

It's a difficulty in talking about a Canadian business investing in another Canadian business. If it truly is a Canadian business investing in another Canadian business, this act doesn't apply. We're looking at the scenario where the business folks have arranged their corporate group, or arranged their transactions in such a way as to provide control or direction through influence over a business by another entity, and it's allowing the minister to look back at who is actually pulling the levers on the investor.

This goes as well to the rest of the act. The rest of the act permits the minister to look at control, but that control is not based simply on the initial holder. It allows the minister to look back at who the beneficial holder is. That's why this direct versus indirect control is in the act. If, for example, a foreign state owns company A, and they purchase company B, and company B purchases company C, and company C purchases company D, the act permits the minister to look all the way back up the chain to see who's actually running company D, the final company. It's a similar scenario with influence, where the minister will be permitted to look to see who's actually making the decisions.

[John Carmichael, Conservative, Don Valley West, ON]

Do you not actually have a diminishing value of that influence as it cascades through those acquisitions?

[Matthew Dooley]

In that case, then, it would be a case-by-case analysis by the minister to determine whether it truly is influence or not. If you've got this whole chain and the foreign government is 10 rows back and it can only control or direct the actions of that one company, but then as you go through the chain, the minister sees that, well, there is actually no influence by the time you get down to the company, then it's not influence.

[The Chair, Conservative, David Sweet]

Okay, thank you.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Chair, I would like to request that the next industry committee meeting be televised.

[The Chair, Conservative, David Sweet]

I'll just go to Mr. Regan right now, because of time, and then we'll deal with that.

Go ahead, Mr. Regan.