Industry Committee on June 19th, 2023

[The Chair, Liberal, Joël Lightbound]

We're now back to CPC‑10.

Are there any other comments or questions on CPC‑10?

Mr. Vis, the floor is yours.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

I just want to comment briefly.

You know, Mr. Perkins has put forward...and I was so, so annoyed. I looked at my package, and I was like, “What the frick? There are a million things on 'may' and 'shall'.”

I want to clarify for Canadians listening today that “shall”, in legal language, is often used to impose a mandatory obligation or requirement. When a law or regulation uses the term “shall”, it means that the action or condition specified is necessary and must be followed. Failure to comply with the “shall” provision can result in legal consequences or penalties. It indicates that the specified action is mandatory and binding.

“May”, on the other hand, is used to confer discretionary power or give permission. When a law or regulation uses the term “may”, it grants an authority or decision-maker the option to exercise their judgment or discretion in a particular matter. It indicates that the specified action is permissive, allowing the authority or individual to choose whether or not to act.

Let's take this example: “The minister may grant an exemption in exceptional circumstances.” In this case, the minister has the discretionary power to grant an exception under exceptional circumstances, but it is not mandatory.

For the purposes of Bill C-34, again, Canadians are looking for a stronger bill that will, in some cases, dictate that the respective minister take certain actions and do certain things to provide confidence in our institutions and, at other times, exercise great discretionary power in the national interest of Canada. That is why we are putting forward these types of amendments.

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you.

On that note, shall CPC-10 carry as amended?

(Amendment as amended agreed to [See Minutes of Proceedings])

We're still on clause 15. Are there other amendments?

Mr. Perkins.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you, Mr. Chair.

I will make a slight alteration to CPC-11, if I can, as I table it. Just to be clear, I believe there's an issue in CPC-11 with what I proposed as new subsection 25.3(6.2). That's at the bottom on the page.

I propose that we put forward this motion without that new subsection. There perhaps is an issue, as I understand it, around whether or not it would be out of order. It imposes, I believe, a new condition or a new requirement on the minister, and it's a minor element of what we're trying to do with this amendment.

This amendment deals primarily with the fact that no clause in Bill C-34 allows the minister to review past acquisitions and mergers under the national security review process. The amendment seeks to give the minister power to review past acquisitions by non-Canadian state-owned enterprises through the national security review process. The geopolitical situation in the world is constantly changing, as we know. Acquisitions conducted by authoritarian states like China 10 years ago did not pose the same sort of national security threat, in my view, at that time, that they perhaps do now, but could pose a threat today.

Several of us have pointed out, and some of the witnesses have pointed out, that the minister needs to have the power to review previously approved ICA acquisitions by non-Canadian companies through that. Indeed, I've actually had a couple of sidebar conversations generally with the minister on this, on some acquisitions in the past. While the minister ordered last year three mine interests to be divested under policy, there were some other ones I brought up, like the Tanco mine, where he said it didn't allow him to go back far enough to deal with that issue. I think, actually, I may have even read about the minister referring to something more recently in the media when he was asked about reviewing an acquisition.

We put this forward because, whether it's this minister or current ministers, we would need the ability to go back when the geopolitical situation changes, as it has with regard to China. We had what I call sort of the “Bill Clinton” policy for many, many years through various governments—that through broader trade and economic engagement in the WTO, we could help China become a more open and a more...maybe not democratic, but a more human rights-based country.

I think that actually did work for a while, but the regime changed. With that regime change, we've seen, in my view, quite a bit of a step back. The regime has very different motivations in terms of how it engages internationally than we hoped for over the last 20 years. In fact, I think we're in a business cold war right now, in some ways, with China in particular. They are very aggressive in acquiring mineral rights around the world and companies under certain levels in our country. They have already acquired some of our strategic assets that we cannot get back.

Mr. Chair, I would urge members to at least give the minister the authority in the act and to give the government the ability to go back and revisit some of these, as I believe many other countries have in some of their acts. I think Britain and certainly the United States have given the minister some ability to go back further than ours does.

[The Chair, Liberal, Joël Lightbound]

Mr. Perkins, before anything else, I understand that you are moving a subamendment to your amendment.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Is that what it's called?

[The Chair, Liberal, Joël Lightbound]

Well, I would think so. Or is it...?

No. It's not a subamendment to your amendment. Just to be clear on what your amendment is, everybody has received CPC-11. You are proposing to remove proposed new subsection 25.3(6.2) entirely from CPC-11.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

That's correct. That was after my consultations with the clerks—

[The Chair, Liberal, Joël Lightbound]

Yes, the legislative clerks.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

—about that being the part primarily that made it out of order.

[The Chair, Liberal, Joël Lightbound]

Yes. Hence, without new proposed subsection 6.2, CPC-11 is receivable.

The debate is on the amendment as proposed and not as written or drafted in the package you received.

On that note, we're debating CPC-11.

I recognize Mr. Williams.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you.

To my colleague, the word that we used and we heard in testimony was “unwinding” or “divestment of transactions”.

I want to get some comment from the staff. I know that CFIUS uses this. The National Security and Investment Act uses this. Australia and its Foreign Acquisitions and Takeovers Act.... They all have unwind legislation or unwinding of a completed transaction.

I want to get a comment, perhaps starting with the staff, on what they feel about this amendment.

[Mark Schaan]

As we understand it, the proposal would eliminate ministerial discretion in subsection 25.3(1) to determine whether the threshold for an order to further review certain investments had been met. Also, subsection 25.3(6) allows the minister to recommend a block or a divestment for every SOE transaction involving a previous transaction only if it was already subject to a net benefit review under the ICA.

Essentially, the notion of subsequent takeovers has been discussed. As we noted, those are already subject to national security review. This would essentially prompt the minister to always go to section 25.3 of the act and issue an order in the cases in which that was the case.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Do you see this as beneficial to unwinding? Are you saying we already have unwind pieces in the legislation as it stands?

[Mark Schaan]

Every transaction is reviewed under national security grounds and has the capacity to be blocked or unwound, if it's a new transaction essentially—if it's the first instance of that transaction. That power already exists.

This will essentially force the transaction to go to the order-making stage at section 25.3.

[Ryan Williams, Conservative, Bay of Quinte, ON]

In essence, we already have unwind legislation. If we determine that a state that already made an investment is now seen as threatening to our FDI as a whole, can the minister already go and direct the investment review division to start a new review on a transaction from a decade ago?

[Mark Schaan]

No. A transaction that has not had a first instance hearing under the Investment Canada Act can be reviewed for national security purposes. An investment that has already been considered by the Investment Canada Act cannot be reconsidered by the Investment Canada Act, because the initial decision of the Investment Canada Act is determinative.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Would you see this amendment allowing that?

[Mark Schaan]

As we read it, no, it won't.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Okay. I want to get your opinion, then, on what we are getting and maybe something that you'd want to see. It seems to me that the U.K., the U.S. and Australia have that provision in their legislation. It seems that for the United States, for instance, CFIUS has the authority to review and potentially unwind transactions that have already been completed if national security risks are identified.

[Mark Schaan]

That's the first instance.

[Ryan Williams, Conservative, Bay of Quinte, ON]

They can initiate a review of a completed transaction, if they determine that the transaction threatens national security.

The United Kingdom National Security and Investment Act—this is from 2021—provides powers to unwind completed transactions. That's the same thing. Is that correct?

[Mark Schaan]

The important distinction here is first instance versus.... I think we're potentially confusing two different concepts. One is whether you can unwind a transaction at first instance before your national security or foreign direct investment review. There is that capability under the ICA, under CFIUS and under the U.K. act.

What CFIUS, the U.K. and Canada do not allow is a second hearing under the ICA to come to a different determination. Subsequent transactions, new transactions and transactions that build off previous transactions are all eligible for further national security review.

What is not possible is to go back to a determination of the ICA if it's already been heard at first instance. That's true for both CFIUS and the U.K. regime.

[Ryan Williams, Conservative, Bay of Quinte, ON]

I think they also have specific conditions, processes and safeguards associated with it. Is that correct?

[Mark Schaan]

As do we. In our regime, as noted, if a transaction is closed and completed but it's the first-instance hearing of the transaction, under the Investment Canada Act we have the capacity to unwind that transaction. What we cannot do is have a consideration of an investment under the Investment Canada Act, come to a determination on that investment, then come back to that investment at a later date and make a secondary determination.