Good afternoon, Mr. Chair and honourable members of the committee.
My name is Kate McNeece, and I'm a partner in the competition, antitrust and foreign investment group at the law firm of McCarthy Tétrault. Thank you very much for inviting me to appear before you today.
Before I begin my statement, I want to note that I am appearing here in my personal capacity. The views expressed today are my own and not those of my law firm or any client of McCarthy Tétrault. However, my submissions today are informed by my experience in assisting both foreign investors—including state-owned enterprises—and Canadian businesses navigate reviews under both the net benefit and the national security provisions of the Investment Canada Act.
I want to keep my remarks today brief, so I'm going to focus on just one aspect of Bill C-34 that I find welcome: the new provision empowering the minister to negotiate binding undertakings with the foreign investor to mitigate national security concerns.
Under the current ICA, the Governor in Council can impose conditions on an investment in the final stage of the review, but in practice this power has not been used since 2017. Empowering the minister to consider and accept binding undertakings during the primary national security review can improve the efficiency of the national security process by resolving matters prior to the final GIC review period. However, I believe the benefit of this provision will be limited if not paired with a greater level of transparency than currently exists.
First, when a national security review is ordered, the investor is customarily provided with very little information about the nature of the national security concern. In my experience, the foreign investor may not be able to discern the precise nature of the national security concern or even which business line or lines of the Canadian business it applies to. This lack of disclosure means that the investor's ability to provide representations to the minister or to propose meaningful and practicable undertakings to address the concern will be limited, undermining the potential benefits of this new process.
Second, the undertakings process will proceed more smoothly if there is sufficient context for the investor to evaluate the minister's requests for mitigation. If the minister cannot provide meaningful feedback to the investor on its proposed undertakings in the national security context, the undertakings negotiation process may move slowly or stall altogether.
Finally, further public disclosure of the undertakings that are agreed to with foreign investors is warranted for reasons of transparency and accountability. There are likely good policy reasons for not disclosing mitigation measures on a case-by-case basis. However, the minister could disclose mitigation measures on an anonymized or summary basis, as CFIUS does in the committee's annual report to Congress.
This disclosure would improve the administration of the Investment Canada Act by providing a remedial road map for investors—not to mention Canadian businesses—trying to assess the national security risk posed by a given investment. It would also demonstrate to potential investors that the undertakings process is not being used as a back door to obtain a net benefit type of undertakings for investments that are not reviewable under part IV of the act, and highlight to the public the steps that the Canadian government is taking to protect national security while ensuring Canada remains a welcome home for appropriate foreign investment.
Of course, there will be information that the government cannot share with the merging parties or with the public due to security reasons. It may be difficult as a practical matter to find the appropriate balance, but by including in Bill C-34 measures to improve transparency—such as an obligation to provide reasons for ordering a national security review, a clear legal standard for national security undertakings and a requirement to include information about mitigation measures in the annual report—Parliament can improve the efficiency of the ICA national security process and highlight its commitment to transparency and the rule of law in its administration.
Thank you very much for the opportunity to present these remarks. I'd be happy to answer any questions.