Industry Committee on May 15th, 2023

[Subrata Bhattacharjee]

I'll start.

I think the reality is that for those of us who have been involved in these reviews for some time, there is a degree of international communication that already goes on in the review, at least on the national security side. A lot of that is particularly acute when it's an investment that engages the interest of the Five Eyes. What I think the amendments really try to do is formalize that process.

To some degree—to address a question I heard earlier today about what happens if you get an investor who's trying to do different things in different jurisdictions—this sort of information exchange protocol will allow us to communicate to try to manage some of those situations in a more effective way than is currently the case.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Mr. Chair, how much time do I have?

[The Vice-Chair, Conservative, Rick Perkins]

You have one minute.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Thank you.

We know the minister has said that with Canadian businesses and how we attract investment in this country, it's stability and predictability in the rule of law that are very important for investors to know what's going on in the country. In your view, how will the proposed legislation impact the competitiveness of Canadian businesses and, in particular, businesses that are looking to secure additional investors?

[Joshua Krane]

As I've said, I think the rule of law is very important. My comments have really focused on the rule of law.

One of the downsides of the proposed bill is that it allows for secret proceedings to occur in Federal Court regarding national security issues, and investors don't really have an opportunity to test the sufficiency or the reliability of the government evidence. I don't propose that we give national security information to investors directly, but I do believe we have other tools available that we already use to make sure that investors are given due process, that investors believe Canada is a fair place to do business and that, if decisions are made on the basis of national security, they have an ability to understand why.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Thank you.

[The Vice-Chair, Conservative, Rick Perkins]

That concludes the formal rounds.

I will do a sort of a “Joël Lightbound” in case anyone else wants to ask a few questions before we let the witnesses go.

I want to thank the witnesses for their fine testimony on this important bill.

Monsieur Lemire, do you have anything?

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

I still have some questions.

However, if I'm the only one, I'll respect your wishes, Mr. Chair. I won't insist.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you very much.

That being it, thank you very much—

[Matthew Green, NDP, Hamilton Centre, ON]

You're not the only one.

[The Vice-Chair, Conservative, Rick Perkins]

—for your testimony.

Mr. Green, did you have something?

[Matthew Green, NDP, Hamilton Centre, ON]

I did have one quick question.

[The Vice-Chair, Conservative, Rick Perkins]

Go ahead.

[Matthew Green, NDP, Hamilton Centre, ON]

I would concede to my friend from the Bloc if he wanted to put his question first.

[The Vice-Chair, Conservative, Rick Perkins]

Go ahead, Mr. Green.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you.

This question is for Mr. Krane.

National security concerns can be very difficult to fully identify. Certain technologies in the consumer space, and the companies that develop them, are focused on consumer purposes. These same technologies, such as AI and facial recognition, can be redeployed in defence systems or even cyber-weapons development.

How would you address the potential dual use of technologies? For example, ISED established an expert panel. What would be some of your inputs?

[Joshua Krane]

It's an excellent question, Mr. Green, and I thank you for raising it.

It's one of the biggest challenges that advisers have for investors. Investors may believe they are buying a business or investing in a technology for perfectly benign use. However, that technology, as you know, could have military or other applications. That's where the gap often lies in these situations.

My advice to the government is that trying to resolve that gap early is going to be helpful for both sides. Either the investor knows they're not going to do this because there is a risk that this technology could fall into hands they don't want it in, or there's an opportunity for the government to understand the investor's position and possibly put some parameters around where this technology is going. Are there aspects of the technology that could be licensed or sold that are not problematic? Are there ways that investors could shift investment into Canada so that we become a leader in that technology?

I agree with you, Mr. Green. That is the problem.

Finding ways to bridge the gap between the investment community and the government is the fundamental way we can increase investment in that space and can avoid the embarrassment of having to tell investors, “I'm sorry, but you can't invest in Canada.”

[The Vice-Chair, Conservative, Rick Perkins]

Thank you.

I think Monsieur Lemire has one.

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

Thank you, Mr. Chair.

I'll intervene because I just reread the question and find it interesting.

Mr. Hersh, you know Abitibi-Témiscamingue, which is a mining region. You have taken an interest in it. Last week, Osisko Mining sold half of its Lac Windfall project in Lebel-sur-Quévillon in northern Quebec to the South African mining company Gold Fields for $600 million. As a result, two companies will own 50% of the joint venture.

We're seeing more and more joint ventures in the mining business, especially in gold. Do you think that this type of partnership, once established, could raise national security issues if a foreign mining partner decides to sign an agreement with an authoritarian country, like Russia or China? This country was an ally not so long ago and is becoming a bit more of a risk.

What would happen under these circumstances? Could something be triggered? Can it be rolled back? How would the Investment Canada Act apply? Can we defend against that?

[Chris Hersh]

It depends on the interest that the non-Canadian has. Again, the goal is not a critical mineral.

I believe the acquisition of a controlling non-Canadian stake in a Canadian mining operation, in many cases, would be or could be subject to the Investment Canada Act, whether that be the general provisions or the national security provisions. Especially with regard to something like the lithium industry, these provisions assist in that regard by making sure that a joint venture with a trading partner who's viewed as safe from a national security perspective is potentially prohibited from being taken over—that interest being taken over—by somebody we believe raises national security concerns. I think in many cases that would be subject to the Investment Canada Act, under either the new provisions or the existing provisions.

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

Thank you, Mr. Hersh.

Thank you, Mr. Chair.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you.

Go ahead, Mr. Van Bynen.

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

Mr. Chair, thank you for allowing one additional question.

I have a question for all three of you, but I'll start with Mr. Hersh.

A big part of the consideration in evaluation is including intangibles. Is there a discipline that you can use to validate the intangibles in order to determine that they fairly reflect the value being exchanged? Is there a discipline that's accepted in the industry?

[Chris Hersh]

That's a challenging question.

In many cases, it's actually an accountancy question. Different companies book intangibles differently. Sometimes they're booked as an asset. Sometimes they're booked as an asset at a fairly low value. Then there's also the notion of fair market value. If you were asking me which is the correct approach that might better capture intangibles, it's probably a fair market value approach. That's versus, potentially, a book value approach if we want to set thresholds.

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

How is that fair market value determined?