SOE investors could fall below the review threshold in the asset value of a private sector trust.
Effectively the de facto power provides the minister with the authority when he has evidence, or reason to believe, that a transaction that has, in appearances, been effectively billed as a minority stake in fact provides control to a foreign entity, a foreign state-owned enterprise. It only applies in the case of state-owned enterprises so there is no authority with this power to look at regular private commercial transactions. It's only for state-owned enterprises.
That, by definition, significantly limits the types of transactions that we're talking about. I would note as well that there are instances where transactions are structured precisely to get around the review process in the act. The act has an anti-avoidance provision in it, but it's quite a blunt measure. It doesn't provide an exploratory power. The de facto power provides the minister with an exploratory power. If he has concerns, if he has reason to believe that a transaction is in fact giving control to a state-owned enterprise, he can undertake a de facto control test with the purposes of giving himself clarity. That's what the power does. Then there's ultimately a review on the other side of that.
If he determines that a company, a state-owned enterprise, in fact has acquired control, not legal control but de facto control, of a Canadian business, then he has the authority to order a review under the act.
It's not as though he says no at that point. It's not as though the determination that it's a state-owned enterprise ends the process. There's still the full review process to go through.
In terms of the question they raised at the end about the lack of limitation around the power, the challenge would be that if you were to delimit the power and, say, arbitrarily pick a period of 180 days, effectively you would be telling foreign state-owned enterprises they had 180 days to structure a deal in a way that the government doesn't notice and so the minister wouldn't do a de facto control test. After that the minister has absolutely no ability to look back. It would be like working around the avoidance provision. The anti-avoidance provision is similarly an arbitrary power within the act, and it similarly is not time delimited. If you avoided the act five years ago and the minister finds out about it today, he's permitted to act.
I'd make another point around the de facto control power in that under the Investment Canada Act, it already applies in the realm of culture and in national security, and it is broadly used in many other acts and legislation. It's not a power that's been developed from the ground up. It does have a precedent and it exists.
Thank you.