Protecting National Security under the Investment Canada Act

In March 2024, the Investment Canada Act (ICA) was ammended when Bill C-34 received royal assent. This was the most significant amendment to the Act since the introduction of national security provisions in 2009.

If you've heard of the ICA, it may be in relation to the 2012 effort by CNOOC (a Chinese state-owned enterprise) to acquire Nexen of Calgary. After much debate, the GoC authorized the controversial US$15.1-billion takeover in February 2013. Nexen shareholders were thrilled to be bought out at a 61 per cent premium.

The CNOOC-Nexen affair forced the government to confront a thorny problem. When do you allow foreign takeovers of strategic assets or technology? Two things guide the process, whether there is a "net benefit" to Canada and whether there are reasonable grounds to believe that the investment could be injurious to national security. Of particular concern are investments by foreign state-owened entities. The federal Cabinet and the ISED Minister are the ultimate decision makers with respect to investments considered potentially injurious to national security.

A number of transactions have been blocked on the basis of national security concerns. Among them, the 2008 bid by US-based Alliant Techsystems Inc to acquire MacDonald Dettwiler and Associates Ltd, a Canadian space technology company.

The National Security Guidelines include a list of factors that the GIC may take into account when conducting a national security review, including but not limited to the following:

• the potential effects of the investment on Canada’s defence capabilities and interests;

• the potential effects of the investment on the transfer of sensitive technology or know-how outside Canada, on the supply of critical goods and services to Canadians, on critical minerals and critical mineral supply chains or on the security of Canada’s critical infrastructure;

• involvement in the research, manufacture or sale of certain goods or technology identified in the Defence Production Act;

• the potential of the investment to enable foreign surveillance or espionage, or to hinder current or future Canadian intelligence or law enforcement operations;

• the potential impact of the investment on Canada’s international interests;

• the potential of the investment to involve or facilitate the activities of illicit actors; and

• the potential of the investment to enable access to sensitive personal data that could be leveraged to harm Canadian national security through its exploitation.

For more details: Investment Canada Act governs increasingly controversial foreign investment regime

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