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Revised Investment Canada Act Guidelines Broaden National Security Focus on Foreign Investments

On March 24, 2021, the Canadian government announced the release of revised Guidelines on the National Security Review of Investments (“Revised Guidelines”) under the Investment Canada Act (“ICA”). In summary, the Revised Guidelines: (i) restate the COVID-19 policy of subjecting investments by state-owned enterprises (“SOEs”) to “enhanced scrutiny”, (ii) expand the non-exclusive list of factors that the government will take into account when assessing investments on national security grounds, and (iii) broaden and/or provide more detail on some of the existing national security factors. 


The national security provisions of the ICA apply to any investment by a non-Canadian to establish a new Canadian business, acquire control of an existing Canadian business, or acquire an interest in, or establish, an entity that carries on any part of its operations in Canada so long it has either a place of operations in Canada, an individual(s) in Canada employed or self-employed in connection with its operations, or assets in Canada.  If the responsible Minister under the ICA believes that such an investment may be injurious to Canada’s national security, the Minister can subject the investment to a comprehensive national security review at the end of which the Minister can either permit the investment to proceed or refer it to the federal Cabinet for a final determination.  Cabinet’s enforcement powers include the right to impose terms and conditions on the non-Canadian investor, accept mitigation from the investor, prohibit closing or, where already closed, require the investor to divest itself of control or of the investment in its entirety.  The national security review process applies to all covered investments irrespective of their size.  

Importantly, the term “injurious to national security”, which is basis upon which Cabinet ultimately must assess an investment, is not defined by the ICA.  As such, Cabinet has significant discretion in determining what constitutes “injurious to national security”.

State-Owned Enterprises

SOEs, which includes “private investors assessed as being closely tied to or subject to direction from foreign governments”, have already been a focus of the administration of the ICA. For example, Guidelines — Investment by state-owned enterprises — Net benefit assessment, which were released in 2007 with respect to ‘net benefit’ reviews under the ICA, already made clear “that the governance and commercial orientation of SOEs are considered”.

Interestingly, the prior iteration of the Revised Guidelines did not make specific reference to SOEs, although, practically speaking, SOE status has long been considered relevant to making assessments with respect to national security. In April 2020, a COVID-19 policy, which “will remain in place until the economy recovers from the effects of the pandemic”, flagged that SOEs “may be motivated by non-commercial imperatives that could harm Canada's economic or national security interests”, and stated that “all foreign investments” by SOEs “regardless of their value”, would be subject to “enhanced scrutiny”. The Revised Guidelines have permanently codified this.

New National Security Factors

The Revised Guidelines added “critical minerals and critical mineral supply chains” and “sensitive personal data” to the list of non-exhaustive factors that will be considered by the government in applying the ICA’s national security powers.

More specifically, the Revised Guidelines now clarify that foreign investment in relation to the 31 minerals included in Canada’s recently released critical minerals list may be subject to greater national security scrutiny. The minerals included in this list are considered: (i) essential to Canada’s economic security, (ii) required for Canada’s transition to a low-carbon economy, and (iii) a sustainable source of critical minerals for Canada’s trading partners, including the U.S., the European Union and Japan, which have previously established their own lists of critical minerals.

The publication of Canada’s list follows the Canada - U.S. Joint Action Plan on Critical Minerals Collaboration, a bilateral initiative which aims at developing reliable and integrated North American supply chains for critical minerals. The Canadian critical minerals list is not, however, identical to the U.S.’ list of critical minerals; most notably, copper, nickel and zinc are included in the Canadian list, but are not included in the U.S. list.

With respect to “sensitive personal data”, the illustrative examples of data provided in the Revised Guidelines are: (i) personally identifiable health or genetic; (ii) biometric; (iii) financial; (iv) communications; (v) geolocation; and (vi) personal data concerning government officials. These types of sensitive personal data, largely track those in the definition of “sensitive personal data” contained in rules under the U.S. national security legislation (“CFIUS Rules”). However, the U.S. definition is far more detailed and set outs out other considerations (e.g., regarding the number of people whose data is maintained or collected).

Existing National Security Factors

The Revised Guidelines provide additional information on the following factors that were already set out in the prior version:

  • Defence: Unsurprisingly, examples of “defence capabilities and interests” now include “the defence industrial base and defence establishments”, which makes clear that non-governmental defence businesses are caught.
  • Sensitive Technology: “Sensitive technology” is defined to include technologies that have military, intelligence or dual military/civilian applications. In addition, a new annex to the Revised Guidelines, which may be periodically adjusted, sets out a non-comprehensive list of sensitive technologies, such as advanced manufacturing, advanced surveillance, aerospace, biotechnology, medical, artificial intelligence, next generation computing, energy, robotics and space. The CFIUS Rules in the U.S. are more prescriptive in terms of what constitutes critical technology, but, for example, certain defence products, agents and toxins, as well as emerging and foundational technologies are included.
  • Critical Infrastructure: This factor already made reference to “assets and services essential to the health, safety, security or economic well-being of Canadians”, but now explicitly includes reference to Canada’s National Strategy for Critical Infrastructure and Action Plan for Critical Infrastructure. This document sets out 10 critical sectors: (i) energy and utilities, (ii) finance, (iii) food, (iv) transportation, (v) government, (vi) information and communication technology, (vii) health, (viii) water, (ix) safety, and (x) manufacturing. In the U.S., the CFIUS Rules set out 28 specific types of critical infrastructure that fall within most of the broader Canadian critical sectors.
  • Illicit Actors: The focus on terrorists and organized crime has been expanded to include corrupt foreign officials.

In addition, the COVID-19 policy highlighted investments related to “public health” and “critical good and services”, factors which were already captured in the prior iteration of the Revised Guidelines, but which are now of particular focus due to the pandemic.

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The number of national security reviews has been increasing due to COVID-19 and the geopolitical climate, a trend we expect will continue. In this context, the Revised Guidelines, which do not have the force of law, provide more transparency on the government’s national security assessment criteria in practice and generally align with the approaches taken in other jurisdictions.

For more information on the Revised Guidelines or any other ICA topic, please consult our Competition/Antitrust & Foreign Investment Group.