Thank you, Mr. Chair.
Members of the committee, thank you for having me participate today.
I am the head of the Norton Rose Fulbright LLP Canada competition and foreign investment group, and I am appearing here in my individual capacity. As with Mr. Bhattacharjee, my views are my own and not those of any clients or the firm.
I want to start off by saying that as a Canadian, I think the national security review provisions of the Investment Canada Act are probably some of the most if not the most important provisions of the ICA, from my perspective. While it's important to ensure we protect national security interests, it's also important to ensure we don't do so in a way that creates an unnecessary or overly onerous burden for the vast majority of investments that are compatible with Canada's foreign investment strategy.
By way of details, ISED's 2021-22 annual report indicated that over the past five years, only 70 investments have been subject to the formal process at all and only 39 of those proceeded to a full review. Of those, 15 were allowed, 14 were withdrawn, seven required divestiture orders, two were blocked and one was ongoing. I think it's important that as we think about the best way to deal with assessing investments from a national security perspective, we also understand that the vast majority of investments are in line with Canada's foreign investment policy. Also, I think it's very important that any regime is as clear as possible, understanding that national security, by definition, involves information and not being able to share all the information that might otherwise be the case. It's important for investors to understand the rules and how to apply them.
Touching on some of the areas that Mr. Bhattacharjee touched on, the notion of “prescribed business activity” and the notion of a mandatory premerger or pre-implementation regime I think acknowledges that there are situations where it's important to be able to assess and potentially stop certain types of investments before they happen—in particular investments relating to sensitive technology, data or intellectual property—and especially where not taking a proactive approach might actually impair the ability to take effective remedial action.
I think there's a real concern with the draft legislation that the term “prescribed business activity” is quite vague. As others have said, I think it's important to appropriately define this.
There are also other terms, such as “material non-public technical information” or “material assets”, that are quite vague. It's very important that people understand how the law will apply to them and understand, as they assess whether to make an investment or not, what regime will apply to them.
While Mr. Bhattacharjee talked about the U.K. approach, I think we have a lot to learn from the U.S. CFIUS approach. In particular, they have adopted an approach, a mandatory regime, to non-controlling investments in what they call “TID U.S.” sectors or “TID U.S. businesses”. Those are businesses that relate to critical technology, critical infrastructure and sensitive personal data. It's important to make it very clear for people whether an investment is subject to the mandatory process.
The other thing is that while it's important to focus on the types of industries where we believe out of the gate that there could be a national security concern, that's only part of the test. There's a two-sided analysis. There are the activities the Canadian business is engaging in and if those activities are potentially raising national security concerns, and there is also the identity of the investor.
I think it's fair to say that there are some investors whose investments are almost generally compatible with Canadian interests, and there are other types of investors who may be viewed as raising potential concerns from a national security perspective. To treat all investors the same way, forcing all investors to go through the same process, seems, quite frankly, to be an overly broad approach, an approach that is going to be wasteful of time and wasteful of resources.
One example, again drawing from the CFIUS experience, is their notion of foreign excepted states and foreign excepted investors, where investors are tied to a state or country that the U.S. has deemed to be a safe state or a trusted trading partner. They've so far designated Canada, Australia, the U.K. and, just recently, New Zealand as those exempt states. Certain investors who meet certain criteria are viewed as exempt foreign investors, and they do not have to go through the mandatory regime. I liken it to a NEXUS-type approach to foreign investment. You have a no-fly list, you have a trusted traveller or trusted investor list, and you have everybody else.