Defence: Doing Business in Canada 2026
This chapter is part of our Doing Business in Canada guide, designed to help global investors navigate the legal, regulatory and strategic considerations that affect investment decisions, execution, and long-term success in Canada.
Defence
Canada’s Defence Policy and Strategic Context
Canada’s defence sector is in a period of policy reprioritization and structural change.
Historically, Canada’s defence policy has been characterized by periodic reinvestment cycles, often driven by external geopolitical shocks or short-term capability gaps. The February 2026 Defence Industrial Strategy (DIS) articulates a long-term vision to strengthen domestic industrial capacity and economic sovereignty through defence spending: an estimated C$180 billion in defence procurement opportunities and approximately C$290 billion in defence-related capital investment over the next decade. The federal government has also committed to, and has already increased, defence spending to approximately 2% of GDP, with a stated commitment to increase defence investment to 5% of GDP by 2035, in line with NATO benchmarks.
Companies seeking to participate in major defence programs will increasingly be expected to demonstrate how their activities contribute to domestic capability, technology transfer, supply-chain resilience, and long-term economic benefits. This applies equally to Canadian companies scaling up their defence presence and to international companies seeking access to the Canadian market.
Defence Procurement in Practice — Bill C-31 Procurement Updates
Canada’s federal government has recently tabled the Defence Investment Agency Act, which will officially establish the Defence Investment Agency (DIA) and propose significant changes to the Defence Production Act, including the renaming of that Act to the Defence and National Security Production and Procurement Act. The DIA will be a standalone agency led by its own Minister, who will have exclusive authority to acquire supplies and services related to national defence and national security.
The proposed Defence and National Security Production and Procurement Act amendments also establish procurement rules in respect of national defence and national security. While the default remains a competitive procurement process (mechanics of a competitive bidding process are described in Government Procurement), there are over a dozen legislated exceptions where the Minister may dispense with conducting a competitive procurement process and issue, for example, sole-source contract awards, including for urgent operational requirements, safeguarding national security, and constructing, maintaining, or operating critical defence projects.
The establishment of the DIA and the proposed streamlining of defence procurement processes are consistent with the objectives of the DIS, which seeks to expedite Canadian defence procurement.
Regulatory Considerations — Controlled Goods and Industrial Technological Benefits
Relevant regulatory considerations focus on safeguarding national security and supporting Canada’s defence industry through investment regulation, including through the Controlled Goods Program (CGP) and the Industrial and Technological Benefits (ITB) Policy.
The CGP is designed to prevent the proliferation of tactical and strategic technology and assets, including missile technology, military equipment, and related intellectual property. It regulates who may examine, possess, or transfer controlled goods in Canada and applies to any Canadian or foreign company that accesses controlled goods during design, manufacturing, modification, testing, repair, or technical discussion. CGP compliance does not replace Canada’s export control requirements. If a controlled good or related technology is listed on the Export Control List, an export permit issued by Global Affairs Canada may be required to transfer it outside Canada or disclose it to foreign persons, including electronically. McCarthy Tétrault LLP is registered to receive controlled goods and technology under the Controlled Goods Program.
Most major defence procurements are subject to Canada’s ITB Policy, administered by Innovation, Science and Economic Development Canada. The ITB Policy applies to all defence procurements over C$100 million that are not covered by trade agreements or exempted for national security purposes, though smaller defence procurements may also be subject to the application of the ITB Policy on a case-by case basis.
The ITB Policy requires successful bidders to make Canadian industrial investments equal to 100% of the contract value, which are contractually binding obligations that may be met through direct Canadian sourcing and manufacturing, research and development activities in Canada, meaningful participation by Canadian companies across the supply chain, technology transfer and skills development, and/or establishing long-term commercial relationships with Canadian firms and First Nations and Indigenous peoples. Certain investments may also be credited using a multiplier (e.g. 5x the spend).
The ITB regime is currently under review as part of the DIS. The anticipated reforms include updating key industrial capabilities to better align with the DIS, further incentivizing strategic investment through enhanced multipliers and other rewards, providing more flexibility to claim exports as ITB credits, and simplifying administrative processes. While ITB implementation details may change, the central expectation remains that foreign companies must meaningfully participate in Canadian industry. Given the various avenues to compliance, sophisticated bidders will approach ITB obligations as a strategic market-entry and industrial positioning exercise, rather than as a post-award compliance task.
For a complete view of investment, regulatory and sector considerations, explore the full Doing Business in Canada guide.
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