Industry Committee on June 18th, 2020

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

To your knowledge, has the government acted on your recommendations?

[Tim Hahlweg]

I can't comment specifically on that, because it does impact operational considerations.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

You make our jobs pretty difficult, I have to say.

Mr. Davies, has your department provided any advice to the government to enact either legislative change or regulatory change to provide greater scrutiny on a state-owned enterprise acquisition or state-influenced acquisition from countries that may have been flagged either by CSIS or by Public Safety?

[Mitch Davies]

Madam Chair, the minister's policy statement, which was made in April, was to provide very much that direction on investments by state-owned enterprises. Investments that might encompass investments in health care related to public health or critical goods would be subject to enhanced scrutiny, so I would say that is a direct response—

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

What does that mean? What does “enhanced scrutiny” mean?

[Mitch Davies]

As I said in my opening comments, Madam Chair, it could involve more questions in the area of looking into the impact or potential impact on the health system, critical infrastructure or the supply chains that are so important to Canadians right now. It could lengthen the time of the review process, and obviously, we want to signal to investors that if they're contemplating a sale, they should take that into account.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

Thank you.

With regard to enforcement, an investment might be approved with promises from the company or conditions put in place by the government, but there seems to be little enforcement of those conditions. Has the department provided any advice to the government, Mr. Davies, to propose legislation or a stronger regulatory framework to enforce conditions placed on SOE acquisitions that might be approved by cabinet?

[Mitch Davies]

Madam Chair, it's of course a policy question in terms of direction. Appropriately, you'd ask that question of the minister with regard to any policy changes that might be considered with the act—

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

I asked if your department had provided advice to the minister on that.

[Mitch Davies]

We administer the act and ensure its enforcement and work in that regard, and there's a penalty system under the act, the ability to—

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

This has been a very frustrating line of questions.

Thank you, Madam Chair.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

The next round goes to MP Lambropoulos.

You have the floor for five minutes.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you, Madam Chair.

Thank you to all of our witnesses for being with us today.

My first question is for anybody who can answer it.

Are there currently any measures in place to investigate whether or not foreign investors are influencing the companies that are trying to invest in Canada, the ones that are not as obviously influenced by the state in different countries?

[Dominic Rochon]

Let me jump in. I think anyone can answer the question, but the truth of the matter is, whenever a flag is raised with regard to any potential investment, we're looking at whether there's a vulnerability, and we're looking at whether or not the actor, as the case may be, poses a threat. It's on a case-by-case basis. As we look at areas of concern, vulnerabilities, we will assess them each on their own merits.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you.

Mr. Hahlweg, you mentioned that you only really investigate these when a threat is brought to your attention. How exactly are threats brought to your attention? Are they really brought to you by the ministries, or do you find out in other ways as well?

[Tim Hahlweg]

It's a great question. As part of the ICA process, obviously we're very engaged from a national security community perspective, along with DND, the RCMP and other people. We have a lot of different government departments out of which that threat information may emerge, and then we have those discussions as to whether or not they meet something we need to investigate further. That could be driven by Public Safety. It could be driven by ISED itself or by the service. It comes from a lot of different areas. We can also, given our investigative mandate, come up with some of these on our own as well.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you very much.

I believe my next question is for Mr. Rochon.

You had mentioned earlier that the Investment Canada Act is quite broad in order to give the minister the powers to investigate whatever he sees as a threat. Could you please tell us all of the benefits of keeping it broad and not having some kind of a baseline?

[Dominic Rochon]

Indeed, the truth of the matter is that national security needs to be flexible, because what is a threat today may not have been one last year. The best illustration of that is, as we were talking about with Mr. Masse earlier, personal protective equipment. A year ago a company investing in a manufacturing company that is developing PPE would not have popped up on anyone's radar, but now it would fall into play with regard to supply chains and dealing with pandemics.

National security needs to be flexible. To expand on the comment that Mr. Hahlweg just made, Natural Resources Canada may talk about critical minerals, for example, and Health Canada may talk about supply chains for vaccines. At Public Safety, we're particularly interested in sensitive technologies like artificial intelligence or quantum computing. Different departments have different areas of expertise and they can flag certain things that are of importance to national security. With that flexibility, we're then able to turn our attention to various investments to decide whether or not there needs to be mitigation or action taken with regard to any potential investment.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you.

My final question goes to all of our witnesses.

Have you noticed any gaps in the Investment Canada Act, and do you recommend anything that could strengthen the act? I'm sure that working with it on a daily basis, you could probably think of ways that we could strengthen it. What are those ways?

[Mitch Davies]

Madam Chair, I'll take that question.

I think, and I'm going to refer back, I can't overemphasize the importance of awareness. This act is meant to be used as a reserve instrument when, perhaps, measures haven't been taken by the parties involved that might take into account Canada's interests, particularly in the area of security. The more parties are able to take that into account in their planning, the more they're going to follow investment transactions that they can actually see through. To encounter a review and a notice from us, or to have a review process that disallows an investment, is very disruptive.

In other words, society has to take this on board. We actually need to have an increased general awareness so that the transactions that are going on, which are obviously rewarding and helpful for those businesses, also respect national security interests, which are very important as well.

Awareness is not a minor matter. It may not necessarily be a question of the nature of the law; it's actually what happens before you encounter the law.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

All right. Thank you very much.

[The Chair, Liberal, Sherry Romanado]

Thank you.

I now yield the floor to Mr. Lemire.

Mr. Lemire, you have the floor for two and a half minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Madam Chair. I appreciate your taking the time to complete the second round of questions.

Yesterday, I was at a meeting of the Standing Committee on Finance at which representatives of the Canada Revenue Agency made a presentation. I asked them questions about tax havens. I wanted to know which countries were particularly targeted by their investigations to ensure that there were no tax optimization, tax evasion or tax avoidance schemes. To my surprise, Luxembourg was mentioned. You will understand that I was surprised to see that country ranked third in the table provided to us today by the Library of Parliament. However, this list also includes Switzerland, Hong Kong, China and Bermuda. It seems to me that these are all countries whose national interest may be different from Canada's.

I come back to the question of Luxembourg. Would it not be wise to question the interests of that country further, given that it is the third-largest country in terms of investment and is under investigation by the Canada Revenue Agency?

[Dominic Rochon]

I'll take a stab at answering the question. Thank you for bringing that to our attention.

I will note that CRA is one of the 19 departments and agencies that are at the table when we review items for national security.

The nature of a lot of the questions you're asking us is whether or not something warrants a proactive look at a specific area, for example, a specific country or a specific issue. The way the national security provisions work is that when something raises a flag—and it could be something coming out of Luxembourg, or it could be coming out of another country or a particular area—we bring to bear all of the intelligence from different departments and agencies, and CRA would be one of those, should something of interest pop up from that part of the world.

That's how I would answer the question.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you for this very pertinent information.

Do you think our current law is strong enough to protect us from investments by countries that are tax havens?