Thank you very much, Madam Chair and honourable members. I'm grateful to be here to present evidence this morning. I am appearing on behalf of myself and my partner, Brian Facey, who's the chair of the competition, antitrust and foreign investment group at Blakes, but who is unable to be with us this morning.
We regularly provide advice to both foreign investors and Canadian businesses regarding all aspects of the Investment Canada Act. We are also the co-authors of Investment Canada Act: Commentary and Annotation, 2020 Edition, which is published annually by legal publisher LexisNexis. That book is in its eighth year of publication and is widely used by lawyers, Canadian businesses and foreign investors considering the applications of the ICA to investments in Canada.
I am presenting in my personal capacity and the views do not represent those of Blakes or its clients.
I will begin by providing an overview of the issues raised by the committee, followed by three recommendations for your consideration based on our experience. In short, we believe the Investment Canada Act and the review mechanisms do not require amendment, and no blanket policies or amendments should be adopted at this time. The ICA works as framework legislation that provides broad discretion to the minister to approve, reject or amend foreign investments on a case-by-case basis. We do believe that it is a priority area and that it is critical at this time and, in particular, that the investment review branch should be sufficiently staffed and funded to be able to carry out its important mandate.
The challenges arising from the COVID-19 crisis and faced by businesses and government are, indeed, unprecedented, and while we acknowledge the potential risks associated with foreign takeovers of Canadian businesses critical to national security, the ICA already gives extensive powers to the government to conduct in-depth reviews of foreign investments and to block or remedy any investment that raises a national security concern.
Reviews can and frequently do take upwards of 200 days to complete, but based on our experience and observations over the last several months, a blanket prohibition on investments by certain categories of investor or regarding certain industries is not warranted, and a case-by-case approach is appropriate. Imposing additional obligations on investors, especially without conferring additional resources on the IRB and its partner agencies and providing for additional transparency measures, could signal to the investment community that investors are likely to face additional red tape when trying to invest in Canada. Canada needs foreign direct investment to support a strong economic recovery.
It’s also important to keep in mind that Parliament made significant changes in 2009 to implement measures to protect national security, but at the same time it also took steps in 2015 to increase the monetary thresholds and reduce the number of economic or net benefit reviews. These changes achieved an appropriate balance between encouraging investment from our trading partners and making sure that Canadian intellectual property and manufacturing capacity did not fall into the hands of investors whose intentions may not be in the best interests of Canadians. Lowering the review thresholds would be moving backwards in terms of opening Canada up to much-needed foreign direct investment.
I'll now turn quickly to the recommendations that we propose.
Currently, the ICA does not require that investors give notice to the government before closing, unless the investment involves the direct takeover of a Canadian business whose value exceeds the applicable financial threshold. However, it is common practice for investors to notify the government before closing when an investment has potential national security implications.
In our view, this practice works well, but if changes are to be considered, they should be only in connection with investments in industries critical to Canadian national security, and trade agreement investors should also be exempted from a mandatory notification requirement before closing. The list of critical industries should be precise so that investors and Canadian businesses can easily ascertain whether or not a filing is required. Moreover, the government should not add to the already lengthy 200-day timeline for national security reviews. The investment review branch needs to have the resources and directives to triage cases quickly. Let me now turn to that.
We've also observed that when investments are under review, particularly on national security matters, the timelines can be quite long, and this is especially problematic where investors plan to establish new businesses in Canada that create jobs, conduct new research and develop products and services for the benefit of the Canadian economy. A permanent director of investments should be appointed soon, and the government should add more technical staff to the review teams that have the expertise to more quickly assess when investments raise or don't raise national security concerns.
Finally, we also encourage this committee to take steps to improve transparency during the review process. In our experience, investors are often left wondering why their investments get caught up in a national security review, and during that process, investors are told very little about the concerns and the steps that might be needed to address them. A robust national security review framework is in the interest of all Canadians, but that framework must be applied in a principled and transparent way. Investors should have the ability to meaningfully respond to concerns that have been raised, and that process should be built into the law and the regulations.
We thank you for the opportunity to address this committee on this very important topic related to Canada's economic future, and I would be pleased to address any questions that you might have.