Government of Canada to Overhaul National Security Rules of the Investment Canada Act
The Government of Canada has introduced amendments to the Investment Canada Act (ICA) that propose to enhance the government’s ability to review, block or modify foreign investments in Canada on the basis of national security.
New Pre-Notification of Foreign Investments in Sensitive Sectors
The amendments propose a new regime of mandatory pre-notification of foreign investments in Canadians businesses that participate in certain sectors and activities, regardless of their size. Closing of transactions subject to mandatory pre-notification would be prohibited for at least 45 days. The obligation to pre-notify applies to minority non-controlling investments if certain conditions are met. We expect the pre-notification rules to come into force no earlier than mid-2023.
The Canadian government has not yet specified which sectors and activities will be subject to pre-notification, but based on prior guidance, we expect these to include: critical minerals (e.g., lithium), access to personal data of Canadians, and “sensitive technology areas” such as artificial intelligence, quantum sciences, advanced weapons, energy storage and generation technology, and medical technology (including vaccines).
Minority (non-controlling) investments in specified sectors will be subject to mandatory pre-notification if their investment allows them access to sensitive information and assets, and if they have special minority investor rights such as the right to nominate or appoint directors.
The proposed changes are similar to existing rules in the United States relating to “covered transactions” that require pre-notification to the Committee on Foreign Investment in the United States (CFIUS) that were expanded under the US Foreign Investment Risk Review Modernization Act (FIRRMA) in 2018.
Government’s Enforcement Powers Bolstered
The amendments propose further measures that expand the government’s national security enforcement powers, including:
- Sweeping powers to impose interim conditions and extend reviews. The Canadian government will have the unilateral ability to impose interim conditions to both unconsummated transactions and closed transactions if the government believes it is necessary to prevent injury to national security.
- Coordination with foreign allies. The Canadian government will have express discretion to communicate confidential information obtained from an investor with the agencies of foreign governments responsible for national security reviews of investments. This formalizes, and provides greater discretion for, cooperation that the Canadian security services already undertake with agencies in allied jurisdictions (e.g., CFIUS in the United States).
- New and expanded penalties. The amendments permit a court to impose a monetary fine for failing to notify, and increase the limits that can be imposed for other contraventions of the ICA. The new penalty for failing to file is up to CAD $500,000 or another amount that the government can prescribe by regulation.
- New limits on court appeals. Presently, there are few avenues available to bring court challenges to Canadian government decisions in respect of ICA national security orders. The amendments propose to further limit any challenges by allowing the government, with court authorization, to withhold from disclosure in litigation evidence and information that could injure Canada’s international relations, national defence or national security. Under this process, investors and their lawyers would receive only summaries of the withheld information.
Looking Forward
The proposed amendments do not single out any country. However, consistent with policy trends in Canada and among its close foreign partners, we anticipate enforcement will continue to focus on investors from (or with ties to) countries with which Canada is not aligned, and, in particular, Russia and China. For greater context:
- On March 8, 2022, in response to Russia’s invasion of Ukraine, Canada announced a new policy to apply the ICA in a manner that puts greater scrutiny on investors owned or influenced by the Russian state.
- On October 28, 2022, Canada announced a new policy to apply the ICA in manner that restricts the ability of certain state-owned enterprises to invest in Canadian businesses participating in the critical minerals sector. Days later, the Government ordered three Chinese companies to divest their recently acquired interests in Canadian lithium mining businesses (including Canadian public companies whose lithium mining assets are exclusively located outside of Canada).
- On November 27, 2022, Canada released a new Indo-Pacific Strategy that identifies certain national security challenges posed by China, and proposes the use and strengthening of the ICA to defend Canada’s interests.
For further information on these proposed amendments, please contact any member of our Competition and Foreign Investment Group.
Expertise
Authors
Insights
-
Mining
Ontario Proposes Limits on Critical Mineral and Essential Infrastructure Investments by Non-Canadians
In a political environment charged with concerns about foreign control over critical minerals and essential infrastructure, the Ontario government has introduced new legislation to safeguard those… -
Competition and Foreign Investment
Just Watch Me, Canadian Competition Law Review 2025
Kate McNeece co-authored the article "Just Watch Me: Procedural Fairness Under the Investment Canada Act's National Security Regime" for Canadian Competition Law Review 2025. This article investigates… -
Competition and Foreign Investment
The Investment Canada Act in Rapidly Changing Times
The decision of the U.S. government to at least temporarily impose 25% tariffs on most Canadian exports raises novel questions about the treatment of U.S. investments into Canada. This update… -
Competition and Foreign Investment
Competition Bureau Continues Enforcement Against Restrictive Covenants in Grocery Leases
The Competition Bureau announced yesterday that it has entered into an agreement with Empire Company (the parent company of Sobeys, IGA and others grocery chains) to remove a ‘property control’ that… -
Capital Markets
Canada Initiates Consultations and Proposes New Measures to Strengthen Anti-Modern Slavery Efforts
The Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”) came into force on January 1, 2024, implementing enhanced reporting requirements for certain entities to combat… -
Competition and Foreign Investment
The Cineplex Decision – A New Chapter Opens in Canadian Competition Law
The Competition Tribunal released its reasons in Commissioner v. Cineplex on October 3, 2024. It is the first decision under the Competition Act’s “drip pricing” misleading advertising provision…
Featured Work
-
Private Equity and Venture Capital
OMERS sells majority interest in CEDA to Hillcore Group
Goodmans LLP advised OMERS Private Equity Inc., a subsidiary of OMERS, in connection with the sale of its majority interest in CEDA to Hillcore Group… -
REITS and Income Securities
InterRent REIT to be acquired by consortium that includes CLV Group in partnership with GIC in $4 billion all-cash transaction
Goodmans LLP is acting for a consortium that includes CLV Group Inc. in partnership with GIC in connection with the acquisition of InterRent REIT, whereby pursuant to a plan of arrangement a newly… -
Mergers and Acquisitions
Onex to sell WestJet stakes to Delta and Korean Air
Goodmans LLP is advising WestJet Airlines Ltd. and its controlling shareholder, Onex Corporation, in connection with the sale of Onex’s minority stakes in WestJet to Delta Air Lines and Korean Air… -
Restructuring
Endo International plc completes global restructuring
Goodmans LLP acted as Canadian legal counsel to the Endo Group (or the “Company”) in connection with its restructuring initiatives, transaction matters, negotiated resolutions with Canadian… -
Restructuring
Xplore completes CBCA recapitalization and restructures satellite business through RVO
Goodmans LLP acted as Canadian legal counsel to Xplore Inc. in connection with its recapitalization, restructuring, financing, regulatory, governance and business initiatives, including its review of… -
Mining
Paulson and NOVAGOLD RESOURCES INC. to acquire Barrick Gold Corp.’s 50% stake in Donlin Gold LLC for US$1 billion
Goodmans LLP is advising Paulson & Co Inc. in connection with a backstop financing commitment entered into as part of its agreement to jointly acquire with NOVAGOLD RESOURCES INC. a 50% interest…
News & Events
-
Competition and Foreign Investment
Josh Zelikovitz at the CBA Competition Law Spring Conference
Goodmans partner Josh Zelikovitz will be speaking at the CBA Competition Law Spring Conference on Thursday, May 8, 2025.Josh will discuss the role of structural presumptions in Competition Bureau… -
Aging and Health Care
The Canadian Legal Lexpert Directory 2025 Once Again Recognizes Goodmans
We are proud to announce Goodmans LLP continues to be recognized in the 2025 edition of The Canadian Legal Lexpert Directory.Congratulations to the 96 Goodmans lawyers recognized as leaders across… -
Competition and Foreign Investment
Kate McNeece host of CBA’s Counterfactual Podcast: Fair Trade?: North American Competitiveness, Tariffs and Trade with Professor Meredith Lilly
Goodmans Counsel Kate McNeece hosts CBA’s Counterfactual podcast episode 22, Fair Trade?: North American Competitiveness, Tariffs and Trade with Professor Meredith Lilly. Kate McNeece speaks with…