Industry Committee on May 21st, 2013

[Geoff Regan, Liberal, Halifax West, NS]

I will start. I presume the clock stopped, Mr. Chair.

[The Chair, Conservative, David Sweet]

The clock did stop. It is still stopped until you begin to speak.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you. I think Mr. Bezan should have more confidence in the witnesses and their ability to handle these questions.

Was the definition of net benefit test under consideration during the review of the Investment Canada Act that led to the changes in Bill C-60?

[Paul Halucha]

The changes that were announced by the Prime Minister in December and all of the policy work that was undertaken leading up to that was undertaken in the context of cabinet confidence, so I'm not at liberty to talk about what else was or was not on the table for policy changes.

[Geoff Regan, Liberal, Halifax West, NS]

Have you done any analysis to determine if the proposed amendments will restrict global economic interest in investing in Canada, whether through the actual language of the act itself or through the environment it creates?

If you did that kind of assessment or analysis, what was the result of it? If not, why did you fail to assess this impact?

[Paul Halucha]

Are you talking about a specific provision in the act?

[Geoff Regan, Liberal, Halifax West, NS]

The question is whether these provisions changing the ICA will affect global economic interest in investing in Canada.

Have you assessed that, and if you haven't, why haven't you?

[Paul Halucha]

It would be extremely difficult to forecast and interpret what kind of impact these will have. As was noted at the beginning, these are all discretionary authorities.

[Geoff Regan, Liberal, Halifax West, NS]

There's no assessment at all about what the impact will be on investment in Canada?

[Paul Halucha]

You're asking specifically what the impact would be of each of these changes on the global capital availability and—

[Geoff Regan, Liberal, Halifax West, NS]

Are you telling me you've done no analysis of that?

[Paul Halucha]

I'm saying it would be very difficult to answer that question from an economic perspective.

We have looked at it from a policy perspective. We have a track record of similar changes that were undertaken. We believe, for example, that it's consistent with the policy direction that the government announced in December. We looked very carefully at the impacts of the Prime Minister's announcement in December on capital markets. We saw that it was welcomed by most investors. It was welcomed by most of our trading partners. It did not lead to increased ambiguity. We did not measure that there were any negative economic impacts of that announcement, from the time of the announcement until now.

In the sense that what the government is proposing in the budget implementation bill is simply to implement decisions already announced, we do not believe there are any new risks associated with these.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Halucha.

Mr. Regan, Thank you.

Now we go on to round two with five minutes for questions.

[Elizabeth May, Green, Saanich—Gulf Islands, BC]

Mr. Chairman, is it appropriate for me to ask if I might have a chance to ask a question between rounds one and two?

[The Chair, Conservative, David Sweet]

It's my understanding that after round two there would be unanimous consent.

Would that be the case, Madame LeBlanc?

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

We have many questions to ask.

[The Chair, Conservative, David Sweet]

It has to be unanimous. There's no consent.

[Dan Harris, NDP, Scarborough Southwest, ON]

Maybe ask again after the second round.

[The Chair, Conservative, David Sweet]

Maybe we'll ask again.

I'll be glad to ask as many times as you allow me.

Mr. Warawa, you have five minutes.

[Mark Warawa, Conservative, Langley, BC]

Thank you, Chair.

Welcome, Ms. May. I appreciate your being here.

I want to comment on Mr. Regan's cheery disposition and his incredibly colourful shirt.

I want to talk about national security timelines.

You highlighted that there will be some changes. Can you first describe how the national security review process works?

[Paul Halucha]

Absolutely. I'll walk through the review process.

The review process has three distinct stages. There's a 45-day pre-review stage, in which the Minister of Industry, in consultation with the Minister of Public Safety, determines whether an investment could be injurious to national security, and the GIC can order a review of the investment. During this time the minister may send a notice indicating that he has reasonable grounds to believe that the foreign investment could be injurious. The first 45-day period coincides with the first 45-day period of the net benefit test. The two review processes are going on simultaneously at that point.

The second review stage is for the Minister of Industry, in consultation with the Minister of Public Safety, to complete a review and report findings and recommendations to the GIC.

The first period he undertakes a review to determine if there is a national security concern. The operative words are "could be injurious". The Minister of Public Safety provides him with a recommendation. If he's going forward and he's making a recommendation that the transaction could be injurious, the Minister of Industry concurs or doesn't concur. If he concurs, then he makes that similar recommendation to the GIC, an order comes out from the cabinet, and a review process is launched. That's a 45-day review process.

The Minister of Industry, working closely with the Minister of Public Safety, completes a review and reports the findings and recommendations to the GIC. During this period, government officials conduct further analysis, incorporating any additional intelligence and information received from allies, the non-Canadian investor, and the Canadian business. The Minister of Industry refers an investment to the GIC if he is satisfied that an investment would be injurious to national security.

He's out of cabinet, the first period, at the end of the first 45 days. He's answered the question that it could be injurious and a review is ordered. The purpose of the review is to determine if there is an evidence base that moves it from "could be" to "will be injurious". If the minister believes that the transaction would still be injurious—and this is again, the Minister of Public Safety working in concert with the Minister of Industry—then it would return to the GIC for a decision. The GIC would make a ruling in terms of whether or not there are national security considerations.

We're speaking hypothetically here. Typically at that point, there is a possibility that the GIC could approve the transaction subject to conditions. For example, a condition could be that the Canadian business is required to divest itself of certain assets, a certain business line, or certain technologies. Any of that could come out of the cabinet decision as a condition of it returning to the net benefit review for final approval from the Minister of Industry.

Even after the national security process is done, if there are no national security issues or if the national security issues have been addressed, at that point we have the minister complete the net benefit review, as per the act, around the net benefit test.

[Mark Warawa, Conservative, Langley, BC]

There are some changes in that there'll be additional time in part of the process. Additional time will be required. Could you speak to that and when that would be needed?

[Paul Halucha]

Absolutely. There are two provisions in the budget implementation bill dealing with the timelines.

The first one deals with more or less a technical fix. As I noted, the national security provisions are quite new. One of the issues around the original drafting of it is that it said that basically, once the minister completes the national security review, he would only have five days to complete the net benefit evaluation, and if he doesn't complete it within five days, it's deemed to be approved. So it put the minister in a very tight situation.

Effectively, the purpose of this provision is to change that, to move it from 5 to 30 days, so the minister has sufficient time to complete the net benefit review, sufficient time to implement any provisions coming out of the national security review. For example, as I mentioned, if there was a requirement for a divestiture or a sell-off of an asset, it would provide additional time for the minister to feel comfortable that the Canadian business and the foreign investor had a way to implement that condition.

The second one is dealing with the actual national security timelines. As I mentioned, there are three phases. There's the pre-review, the review, and then the GIC review process. Right now, the minister does not have the authority to extend any of those periods, except for the first one. For the first one, he has the power in the act and under regulation to take a 25-day extension when he issues an order, in that first phase only. He can't take additional time in the second one, and he can't take additional time in the third phase. The proposal would provide him with the authority in regulations to prescribe extension periods for the second and the third review periods.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Warawa.

Now on to Mr. Harris. We'll try to keep it to five minutes, as close as we can.

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you for coming here today.

Of course, we have the six net benefit factors listed in section 20 of the Investment Canada Act. When was the last time those were modified?