Industry Committee on May 15th, 2023

[Joshua Krane]

I don't remember, Mr. Green. I work on a lot of transactions, so it's conceivable that some of the businesses whose clients I've acted for have received some government funding.

[Matthew Green, NDP, Hamilton Centre, ON]

Okay.

In looking at some of the points that have been raised today, there is the issue, obviously, of finding out, when takeovers happen, what's going to trigger a review and what's not going to trigger a review.

I'll reference that from 2006 to 2022, IBM purchased 17 Canadian companies. Google then bought 13. None of these takeovers of Canadian tech companies were reviewed by the Investment Canada Act. All of them were innovative start-ups with significant intellectual property that was developed here in Canada.

Mr. Bhattacharjee, how would you respond to that as a potential concern related to this bill?

[Subrata Bhattacharjee]

I'm not familiar with the pattern of transactions you've identified, but I will tell you that, initially, we only had one test in the Investment Canada Act, which was a net benefit test that ran, at that time, on the basis of asset-based thresholds. You only had a review process that would kick in if you had a deal that exceeded asset thresholds.

[Matthew Green, NDP, Hamilton Centre, ON]

Do you believe this legislation strengthens that or weakens it?

[Subrata Bhattacharjee]

I'm going to finish my answer first. What we did was then put in the national security test to try to allow ourselves a chance to do transactions that were not dealt with under those asset thresholds. That's why we are where we are right now.

I'm sorry. You had a follow-up question, Mr. Green.

[Matthew Green, NDP, Hamilton Centre, ON]

I think my time is up. Thank you.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you, Mr. Green.

Mr. Généreux, you're next.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you to the witnesses.

My colleague asked you questions as if you were in the dock, but don't worry, nobody is in danger here.

Mr. Hersh, you said earlier that the United States used the expression “TID”.

What is the definition of “TID”?

[Chris Hersh]

In the U.S., the definition in the regulations is a U.S. TID business, with TID being short for sensitive technology, infrastructure and data. That is defined under the regulations that are applied through the CFIUS process.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Can this be seen as a way of defining the economic sectors in which a foreign investment should potentially be reviewed?

What is Canada's answer to that? Your colleague was saying earlier that our business sectors were not properly defined.

Are the TID sectors in the United States better defined than in Canada?

[Chris Hersh]

Yes.

I think there are two things. One, it is in a regulation. All we have are guidelines on the application of the national security review provisions. The guidelines are non-binding. They are very high-level, so I think we should, if we are going to provide much-needed clarity and transparency, adopt something similar to what's been done either in the U.S. or, perhaps, in the U.K.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Bhattacharjee, your presentation earlier was excellent.

In today's society, the development of new technologies is extremely rapid. This is particularly the case for artificial intelligence, which is turning the technological world upside down.

How do we define, within such a bill, even if it is in the appendix, a technological sector that is emerging, but that is playing a fundamental role in our society, so that, in 5, 10 or 20 years, we have a relevant definition to review acquisitions or transactions?

Would you suggest that, in a bill like this, we insert the ability to review this definition on a regular basis, annually or tri-annually, whatever, so that we can adjust to how these technologies evolve?

[Subrata Bhattacharjee]

I think it is absolutely the case that we want the ability to revise that list frequently. I think the only counter-argument to it is that if you revise it too frequently, it reduces certainty for investors. I'm sure it's one reason that, for the CFIUS process and the U.K. process, they review on a multi-year basis, as opposed to every year. I agree that there is a balance.

The other part of this is that our process under the Investment Canada Act is only one way for the federal government to be aware of emerging trends and things of concern, so we also have the benefit of that part of it to help tell us that these sectors are emerging and that we may need to protect or watch for developments in them, including in foreign investment.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Is there anything else the other witnesses would like to add? In light of Mr. Bhattacharjee's response, doing so each year...

[Navin Joneja]

I would like to add one point.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Go ahead.

[Navin Joneja]

I think there's an opportunity for a feedback loop in how the list is updated and how often it's updated. I think the idea of having greater transparency through supplements to the annual report regarding how many of the sectors that have been identified are actually leading to extended reviews or national security concerns, and having that disclosed in at least an aggregated way, provides further information that can help to keep the list updated.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

You've probably read a bit about our previous meetings. Mr. Balsillie, formerly of BlackBerry, appeared here and told us very clearly that we are way behind new technologies, particularly because of the way the law is written today.

Do you agree with Mr. Balsillie?

[Navin Joneja]

I think there is always a challenge in government and in oversight in keeping up with the pace of technology. I think that is a fair statement and a fair issue that has to be confronted. I think that at an overall level there is the ability to try to keep the list updated.

I agree with Mr. Bhattacharjee that if you do it too often it reduces certainty, but that's where the additional transparency, the additional disclosure and the feedback loop in terms of that information can be helpful as well.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I'd like to hear from you on artificial intelligence in particular, because I'm very interested in this topic right now. It's evolving extremely rapidly and is going to be an extremely important part of our society tomorrow.

The technologies that are being developed and emerging in Canada will potentially be coveted around the world. Are you concerned that foreign companies will want to acquire intellectual property rights to these technologies or to Canadian companies that own them? Do you see this as a danger? If so, will the current bill be strong enough to prevent these companies from being bought by competing countries?

[Navin Joneja]

If I understand the question, I think the bill is an important step forward. I think it tries to do a good job of balancing the concerns about advanced technology with the need to continue the investments so we have the ability to develop technology in Canada and then protect it. I think the bill does try to do a good job. I think the implementation of it in the details is going to be important as well.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Hersh, you have the floor.

[Chris Hersh]

I think Canada is a bit behind. I don't think we're so far behind that we can't catch up. I think the issue, from a national security perspective, isn't so much the impact of AI on the Canadian economy or individual Canadians, but is rather about making sure that investment in AI is done by people who are compatible from a national security perspective. That's the limited role I see for the Investment Canada Act. There are much broader issues with AI that I think are outside the ambit of the Investment Canada Act.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you. We've gone a little long.

MP Van Bynen, go ahead.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair.

I was interested in the comments made by Mr. Bhattacharjee with respect to the U.K.'s approach to sensitive sectors.

I think you referenced that there were 17 sectors identified that also had a regulation and a guideline. Wouldn't getting more of this defined constrain the reviewing authority? How would we overcome that?