Industry Committee on May 15th, 2023

[Subrata Bhattacharjee]

I think the caution that my colleagues have expressed in their comments is a valid one. It doesn't mean that we shouldn't have the power in there. I think the minister explained some of the circumstances the government is concerned about that would justify exercising that interim power.

If we do choose to proceed with that in the legislation, my recommendation would be that you spell out presumably the limited circumstances within which it would be deployed, to make clear to foreign investors that there is no chilling effect and that there will only be a particular type of investment that may justify the use of that sort of power.

That would be communicated either in guidance or, if not, in the actual text of the legislation itself, although I suspect that one is more likely to find its way into guidance as opposed to something in the legislation.

[Viviane LaPointe, Liberal, Sudbury, ON]

Very quickly, the bill will update penalties to strengthen deterrence. What is your advice about penalties for non-compliance, and how would these be beneficial to ensuring compliance?

[Chris Hersh]

I think we're unusual in the current Investment Canada Act. We don't have significant penalties, and the penalties come only if you continue not to comply. I think penalties that are of the correct magnitude are a very important tool for ensuring compliance with a regime like this, and they need to be calibrated.

For example, it's inappropriate I think to heavily punish somebody for failing to file when it clearly was accidental versus potentially deliberate. I believe it may be appropriate to have a bit of a grace period before you start to impose penalties for failing to make a premerger filing.

I think penalties and making sure they are sufficiently large are an important piece of having a robust regime and having some teeth to it to ensure that people behave in the way we want them to.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you.

Go ahead, Monsieur Lemire.

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

Thank you, Mr. Chair.

Thank you to all of the witnesses, who are extremely knowledgeable.

One of the issues contained in the bill C-34, An Act to amend the Investment Canada Act lies close to my heart. I'll provide some context with the example of a transaction that was very significant for Quebec, namely the acquisition of Rona by Lowe's.

In fact, the minister had set conditions, but in the end, five years later, we realized that there was not much left of the company in Quebec. For example, Garant shovels can't always be found in Rona stores anymore. Before the transaction, the supply chain of Rona's suppliers included a Quebec ecosystem. In addition, the head office was located in Quebec, of course.

I would like each witness to answer my question in turn.

Do you feel that the conditions put forward by the minister, in terms of accountability and transparency, are an improvement? Should we go even further? Of course, we also have to think about national security.

[Joshua Krane]

It's an excellent question. We want to be encouraging investments, particularly in Quebec. Quebec has a burgeoning technology centre. It has a technology industry. It has a fantastic aerospace industry. There's a long history of mining in Quebec.

I agree with you, Mr. Lemire, that we want to make sure that changes to the Investment Canada Act continue to encourage investors from around the world to see what a great place Quebec is to make investments and what a fantastic workforce it has, and to see the contributions that the graduates of Quebec's fantastic universities are making to the economy. Again, sir, it's why we've recommended that we make sure that we're protecting Canada from foreign threats and from issues of national security, but also that this government and decision-makers are held to account so they don't unduly dissuade investments to grow jobs, to create businesses and to strengthen Quebec and other parts of Canada and the sectors they're trying to grow.

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

Mr. Joneja, would you like to add something?

[Navin Joneja]

I agree with Mr. Krane's comments. I would add that for this particular legislation, one thing that stands out is the mandatory pre-closing filing obligation. While I think it's important that the process still focuses on national security elements, one thing that will likely evolve out of it is a greater level of discussion between foreign investors and government officials in a wide range of areas. This is because what happens in practice when the government encourages that early dialogue is that foreign investors, who are very sophisticated and deal with governments all over the world, like to develop the kinds of relationships that encourage that kind of dialogue going forward.

That is one added benefit of the mandatory pre-closing filing obligation. It's also important that it be done properly and with some of the cautions that my colleagues have advised about making sure that we don't have a chilling effect and making sure that there is certainty, predictability and clarity in terms of how that process will unfold.

I think what we'll see, generally speaking, is a greater level of dialogue between foreign investors and government officials generally at the federal level and, quite frankly, at the provincial and community level as well.

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

Mr. Hersh, I'd be curious to hear what you think about the issue of transparency and accountability.

[Chris Hersh]

I think there are issues in your question that are far broader than the Investment Canada Act. I think it's important for the Investment Canada Act to be calibrated, including the national security provision, in such a way that it doesn't deter good foreign investment that's in line with Canadian national security interests.

I think some of your question is on the fate of Canadian manufacturing in some sectors, and that's about creating Canadian champions. For example, I know that the Quebec government is very involved in a strategic initiative to create a lithium value chain in the province. I think making sure we have domestic investment, whether that be with Canadian-based companies or government-supported investment where appropriate, is a key piece of that much larger discussion about how to keep Canadian industry and Canadian jobs strong and maintain control over certain assets.

That's far beyond the Investment Canada Act. I think the Investment Canada Act's role is through the net benefit process to make sure that from a practical perspective and commercial perspective, foreign investments are in line with those goals to make sure we have a national security process that is not an impediment to good investment. I also think there are many broader issues at play to fully address the type of question you've asked or the types of concerns you've flagged in your question.

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

Thank you.

You are very good at expressing yourself in layman's terms.

Mr. Bhattancharjee, I'll ask my question during the next round because my time is up.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you, Monsieur Lemire.

MP Green, you're next.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you.

Thank you very much, gentlemen. I'm going to put a series of questions to you in a rather rapid-fire way. I'd ask that you answer the first round of questioning in a yes-or-no fashion so that I get a better sense of who I'm hearing from today. I'm a guest at this committee, and I'm just trying to familiarize myself with this.

I'll go down the list and start with Mr. Bhattacharjee.

Have you represented foreign companies acquiring Canadian corporations?

[Subrata Bhattacharjee]

Yes.

[Matthew Green, NDP, Hamilton Centre, ON]

Mr. Hersh.

[Chris Hersh]

Yes.

[Matthew Green, NDP, Hamilton Centre, ON]

Mr. Joneja.

[Navin Joneja]

Yes.

[Matthew Green, NDP, Hamilton Centre, ON]

Mr. Krane.

[Joshua Krane]

Yes.

[Matthew Green, NDP, Hamilton Centre, ON]

What was the size and scope? You don't have to name the company, but just in terms of the size of the acquisition, what kind of value did that represent?

Mr. Bhattacharjee, what was the largest one?

[Subrata Bhattacharjee]

I think after 25 years it's hard to give you a fast answer to that. There have been very large public deals that I have been involved in and also smaller ones that have just—

[Matthew Green, NDP, Hamilton Centre, ON]

Just give me a scope of what's a big deal.

[Subrata Bhattacharjee]

They range from $50 billion to smaller.

[Matthew Green, NDP, Hamilton Centre, ON]

Mr. Hersh, go ahead on the same question.