Industry Committee on June 21st, 2023

[The Chair, Liberal, Joël Lightbound]

I call the meeting back to order.

We're still on the subamendment proposed by Mr. Gaheer. I believe members have had time to compare it with CPC-2, which is what this subamendment is amending.

I see Mr. Perkins.

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

Thank you, Mr. Chair.

I appreciate the flexibility to try to figure this out. We want to make sure that it's right.

As you know—and we've talked about this as one of our key amendments—Mr. Fillmore and government members have been very co-operative on this. My understanding, from talking briefly with Mr. Gaheer, is that this one also requires us to do some other things, if it were to pass, in subsequent sections. Therefore, we would have to do unanimous consent to go back there. If it passes, I don't have any problem with that. I just want to make sure that I understand it.

The primary purpose of CPC-2, as we know, is to deal with this issue of how we approach state-owned enterprises in terms of the thresholds within the act and what the minister has the ability to choose to review and not review. I'll go over the rationale a bit for the amendment, because it's important, in my view, to make sure that I understand the context of the subamendment.

The context of CPC-2 is that in its current form, I believe, neither the ICA nor the bill requires an automatic filing for a net benefit review if the state-owned enterprise.... It's a formula, I understand. I think this year, it's $512 million.

Is that correct?

If the acquisition is below $512 million in asset value.... Is it asset value?

[Mark Schaan]

It's asset value.

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

Right.

As a consequence of that, any state-owned enterprise can acquire anything below that, unless the minister asks for a national security review. That's possible under that threshold, but not for net benefit. Is that correct?

[Mark Schaan]

It's two separate reviews.

Net benefit reviews, as the member has outlined, are subject to thresholds. The SOE threshold is based on asset sales and is currently set at $512 million.

National security reviews are separate. National security reviews happen on all investments and are separate. It's not if the minister so chooses. It is a function of the act.

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

In the question of what we're trying to capture here, which is, I think, the spirit of the subamendment that the government has worked on to try to figure out what the issue was that we were getting at.

Something I'm seeing, for example in my community in Nova Scotia, Mr. Fillmore, is assets well below this ceiling being acquired and not being subject to any review, including a net benefit review. Politics is local, so I often talk about the lobster industry and the processors. The buyers are being acquired at prices of $5 million to $10 million. As they gain control, as has happened to some extent with some of the licences in the B.C. fishing industry or with some of the crab licences, none of that is subject to a net benefit review.

Obviously, it could be subject to that, if the Competition Bureau decided it wanted to investigate it. It does have some authority.

I was trying to capture the issue where we basically have hostile states that can be hostile today but maybe weren't a few years ago, so that those automatically get this kind of review. I think what Mr. Gaheer's amendment does is make it more focused. I assume that is to ensure that we're not in breach of certain types of trade agreements.

[Mark Schaan]

Mr. Chair, that's how we understand the purpose of the subamendment. It is to reduce the overall trade risk by focusing on those that are not in a trade investor country.

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

Could you help define what a “trade agreement investor” is and how that differs with different types of agreements? We have bilaterals. We have the WTO. We have multilaterals....

[Mark Schaan]

The current ICA defines “trade agreement investors”, as referenced in the current legislation, including, as in subsection 14.11(6) of the act, many of Canada's biggest trading partners.

An illustrative non-exhaustive list, just to be helpful, would include the United States, Mexico, the United Kingdom and all of the countries under the comprehensive European trade agreement—sorry, I need to remember my acronyms—including France, Germany, Italy, Spain, Sweden and others; all of the signatories to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership countries, which would include Australia, Singapore, Malaysia, Vietnam, New Zealand, Japan and others; and our trade investor countries of Chile, Peru, Colombia and South Korea.

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

The trans-Pacific partnership I guess would be included as part of that...?

[Mark Schaan]

Yes. The CPTPP is included.

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

All have various levels of open or closed markets, but we're a signatory to that. The United States, I guess, isn't. Regardless of what that not necessarily democratic country that has signed it is, and what their intents and what their state-owned enterprises are, if we narrow the definition based on this subamendment, then they are exempted from any review regardless of what is their economic or political intent.

[Mark Schaan]

To clarify, Mr. Chair, if their investment were below the threshold set out in the act, they would not be subject to a net benefit review. Those investments would still be reviewed under the national security review provisions of the act.

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

“Could” be reviewed, “may” be reviewed but not “shall”...?

[Mark Schaan]

They are reviewed—

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

They are reviewed, no matter what. Okay.

I think Mr. Gaheer may have mentioned it when he introduced this, but could you comment on the need for it to be 45 days? I know that, for a lot of the amendments to the ICA in this bill, the intent is to enable a speedier process and maybe a more thorough process, which is why we put a shorter period of time in here for this provision. We thought that would be something that could be determined fairly quickly.

I take it from what's being proposed here that we might have been too aggressive in understanding how quickly you could make that kind of determination.

[Mark Schaan]

A net benefit review, as I noted, would require us to notify the investor but also to consult with provinces and territories and then to conduct the review on the merits of the investment. Twenty-one days is simply not, in our estimation, possible. Without comments from my colleagues who have a 21-day time lock on their net benefit reviews, I would suggest that their experience has been that 21 days is insufficient.

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

When you say “consult with provinces”, you're not saying that any time we do this, we consult with every province, are you?

[Mark Schaan]

No, but it allows us the chance to consult with the provinces and territories where warranted.

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

It's to notify them that the company that may be located there and is doing business there is now subject to a review, so don't get too excited yet about what may or may not occur with that company.

[Mark Schaan]

Yes.

We seek to ensure that we've lived up our obligations to loop in provinces and territories as required where they potentially also may have commensurate authority.

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

We were talking about Bill C-42 last night in the House, which I know you guys are very familiar with. In doing that determination, do you determine on every one of these cases who is the beneficial owner of the acquiring company?

[Mark Schaan]

We do require the ultimate beneficial owner to be provided to us at the time of application.

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

Are those ever made public?

[Mark Schaan]

The application of the investor is subject to the confidentiality provisions of the Investment Canada Act.