Thank you, Madam Chair and honourable members of the committee, for inviting me to speak today. My comments are personal and do not necessarily reflect the views of my firm or clients.
I've been advising clients on the Investment Canada Act for over 30 years. During that time, I've seen the structure of the act evolve. In my early years of practice, the review thresholds were extremely low. Too many foreign investments were reviewed. The act didn't address state-owned investors or national security concerns. In contrast, today the act permits review only of significant investments and of all investments that could injure national security.
Because of COVID-19, administration of the act needs some temporary fine-tuning, but no significant changes.
I support careful scrutiny of state-owned investment and the application of national security considerations to all investments, as set out in the ministerial policy statement of April 18. I do not support lower review thresholds or a moratorium on state-owned investments from authoritarian countries, along the lines of the June 1 motion.
Lowering the thresholds runs counter to the trend in Canada's trade agreements for the last 30 years. If we adopt this change, Canada will send a strong signal that it is not open to foreign investment. It would reduce the options for Canadian business owners at a time of great financial distress, and it would call into question Canada's adherence to its international obligations.
Equally concerning is the proposed moratorium on acquisitions by state-owned enterprises, or SOEs, from authoritarian countries. How would “authoritarian” be defined? Not all SOEs are just government proxies. Some SOEs are legitimate investors, with corporate governance and a commercial orientation. Some SOEs are listed on a stock exchange and are accountable to their public shareholders.
The act already contains tools to carefully assess SOE investments on a case-by-case basis. All SOE investments are subject to review at a much lower threshold, based on book value. More of them tend to be captured relative to private sector investments. The definition of SOE captures a wide range of state-owned and state-influenced investors. The minister has the power to determine who is an SOE and whether an acquisition of control by an SOE has occurred. In a reviewable investment, an SOE must satisfy the normal net benefit to Canada criteria. The SOE investor also must satisfy additional criteria concerning good corporate governance and adherence to free market principles.
Problematic SOE investment from authoritarian countries can also be reviewed for national security reasons. Investments of any size can be reviewed on these grounds. The timelines in the act allow for a lengthy, careful review for national security. If enacted, Bill C-17 would enable the minister to extend these timelines further. Security review applies even when the investor does not acquire a complete Canadian business, and there are guidelines that list a full range of factors to be considered in the assessment. Using these powers, the government can block an investment, order a divestiture or allow it to proceed conditionally.
In conclusion, the review thresholds for private sector and SOE investments are set at appropriate levels. The existing review process for SOE investments is sufficiently thorough, and there is a robust national security review process.
Thank you for your time. I would be pleased to answer your questions.