Evidence of meeting #24 for Industry, Science and Technology in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was review.
A recording is available from Parliament.
12:45 p.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Thank you, Madam Chair. Since my time is being shared, please warn me halfway through my speaking time and not at the end of it.
Mr. Balsillie, toward the end of your exchange with my colleague Sébastien Lemire, you said that the majority of transactions do not cross the minister's desk.
Could a mechanism be developed so that a larger portion of transactions would end up on the minister's desk?
12:45 p.m.
Chair, Council of Canadian Innovators
Yes, of course. If you had a list of strategic technologies that you reviewed and you had a list of the key actors who were involved in those technologies, and as part of their requirements they notify you on indirect investments or certain licensing technologies that were mentioned, or certain partnerships of research, then absolutely it would come forward.
Our current lens of framework, as I mentioned in my testimony, does not address the overwhelming majority of consequential transactions in the intangibles economy, which is 91% of the value of the S&P 500. This is why we're at risk for sovereignty, and this is why our productivity and prosperity have slid in the innovation economy in the last 20 years.
12:50 p.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
So you would agree with greater transparency in this area.
12:50 p.m.
Chair, Council of Canadian Innovators
I thought the question on transparency was about evaluating and the calculation of the net benefit test. In that respect I can't comment.
However, I do know that the overwhelming majority of relevant transactions never come forward, based on the lens and the framework that's applied to this. That was the nature of my testimony today. You have to change your lens and your framework so that we properly understand and calculate the issues for Canada, economically and non-economically.
12:50 p.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
That still leads to more transparency, tighter criteria and more information at our disposal, so that we can do our work together.
12:50 p.m.
Liberal
The Chair Liberal Sherry Romanado
Thank you very much.
Our next two and a half minutes will go to MP Masse.
12:50 p.m.
NDP
Brian Masse NDP Windsor West, ON
Mr. Wakil, we were talking earlier and I want to go back to that. It's with regard to the evidence that's out there in terms of measuring. I think it's a fair discussion that there isn't enough out there.
How do we go about changing that? I think it is, at some point, logical to do some type of metrics when a company is purchased in Canada, related to what patents or what types of innovation are then brought to our country from somewhere else, versus what exits from the country.
Are you aware of any model out there that another country is doing? I think that's a fair way of evaluating. Otherwise, when we look historically at some of the companies that we've lost, we don't seem to go back to review whether what we're doing makes sense or not. Hence, since we have not had a comprehensive review of the Investment Canada Act, wouldn't it be a logical thing to at least measure the success or failure of the model we have?
12:50 p.m.
Partner, Torys LLP, As an Individual
I think it certainly is something that would be worth exploring to determine whether or not there could be a methodology developed that would give us an accurate assessment of whether or not the Investment Canada Act regime, or at least the net benefit portion of the regime, has worked well over the years.
A problem we would have is one that I began to flag in my earlier comment, which is the “but for” scenario to the extent that...and that's the problem with the assessment of investments now. For example, the government's trying to predict the future. What is the likely one, two, three or four years going to look like for the Canadian business and how does that align with the investor's plans, and is that beneficial or not? Is there a benefit to proceeding with the transaction based on the likely future outcome of the Canadian business? That's a very tricky and complicated assessment to make.
We have a similar problem with respect to the ex post review of an investment that's completed. What would have happened if the investment hadn't happened? Do we have the information available? Conceptually, I think it would be worthwhile to look back and see whether or not it would be possible to construct a test to evaluate the success of the legislation, but I can see that there would be a lot of practical challenges with that.
12:50 p.m.
NDP
Brian Masse NDP Windsor West, ON
Thank you. I know that I'm just about out of time, but it seems really odd that we have just a shot in the dark process that doesn't have any type of empirical evidence afterwards when we know we can get some of those facts.
Thank you, Madam Chair.
12:50 p.m.
Liberal
The Chair Liberal Sherry Romanado
Thank you very much.
Our last round will go to MP Ehsassi.
You have the floor for five minutes.
12:50 p.m.
Liberal
Ali Ehsassi Liberal Willowdale, ON
Thank you, Madam Chair. I'm very grateful for that.
Given that this is the last round of questioning, I think it will be devoted to mopping up and to clarifying anything I've had a hard time understanding.
One of the members of this committee was suggesting that, after reviewing the annual report, they could not determine which one of those acquisitions had an element of intellectual property that had been acquired as well.
Mr. Wakil, if I can go to you, I don't think it's the job of the annual report to clarify which acquisition involved IP and which one didn't. Am I correct in that assumption?
12:50 p.m.
Partner, Torys LLP, As an Individual
You are correct. I would assume that most acquisitions would involve the acquisition of some degree of IP, and that would be a reasonable assumption to make but, no, it's not a requirement to disclose whether IP—
12:55 p.m.
Liberal
Ali Ehsassi Liberal Willowdale, ON
Most of that doesn't mean for a second that our regulators, our framework, do not examine the intellectual property aspects of a company that's about to acquire. Is that correct?
12:55 p.m.
Liberal
Ali Ehsassi Liberal Willowdale, ON
Okay. Finally, I have another quick question. Do you know of any other regime in any OECD country that does list the IP assets that were required?
12:55 p.m.
Liberal
Ali Ehsassi Liberal Willowdale, ON
I will ask Mr. Krane the same question just so I can satisfy myself that I understand this.
First of all, is it unusual that the annual report does not state what the intellectual property assets of each one of those companies were?
12:55 p.m.
Partner, Competition, Antitrust and Foreign Investment Group, Blake, Cassels and Graydon LLP
No, the annual report is meant to provide a summary overview of where investments are originating from and the value of foreign direct investment that's notified to the government each year.
12:55 p.m.
Liberal
Ali Ehsassi Liberal Willowdale, ON
Okay. Again, that doesn't mean that our regulators are not also reviewing intellectual property capital that could also be ensnared in an acquisition.
12:55 p.m.
Partner, Competition, Antitrust and Foreign Investment Group, Blake, Cassels and Graydon LLP
That's correct. In my experience, on all national security files, there's a request for a list of the target company's intellectual property, which is reviewed and assessed.
12:55 p.m.
Liberal
Ali Ehsassi Liberal Willowdale, ON
My last question is the same question as the one I put to Mr. Wakil. Do you know of any regime in any OECD country in which intellectual property assets are actually listed so anyone could go look at it and see if anything needed to be flagged?
12:55 p.m.
Partner, Competition, Antitrust and Foreign Investment Group, Blake, Cassels and Graydon LLP
I'm not aware of any, but Canada does have a public registry of patents, trade and trademarks, which anybody can freely look up on the Internet.
12:55 p.m.
Liberal
Ali Ehsassi Liberal Willowdale, ON
Thank you for that.
Mr. Krane, I very much enjoyed your testimony. At some point, you stated that you think perhaps our regime would benefit from improved notification. Could you actually unpack that for us? Given the safeguards we currently have, if we wanted to make for an even more robust system, what would that notification require and what would that look like?
12:55 p.m.
Partner, Competition, Antitrust and Foreign Investment Group, Blake, Cassels and Graydon LLP
While my position is that the ICA regime is working well and investors are approaching the government preclosing on a voluntary basis, we could look to the model that the Americans piloted in 2018 and adopted in February 2020, which requires that certain types of investments regarding a specified list of critical technologies or critical infrastructure are notified at least 30 days before closing.
While my position is that the system is working well, that's a model that the committee may want to examine to make sure that, first, we are addressing the problems that Mr. Balsillie has identified, and second, we act in a manner that's consistent with our most important trading partner and there is harmonization and alignment between Canada and the U.S on foreign investment reviews.