A Macro Perspective of Canada’s National Security Review of Foreign Investment: Considering Sustainable Economic Security

This paper will examine the legal, political, and economic implications of the Canadian government’s use of the foreign investment national security review powers provided to the Governor in Council (federal cabinet), and the Minister of Innovation, Science and Economic Development (ISED), in consultation with the Minister of Public Safety.

Beginning with a quick overview of the paired foreign investment review tests, an examination of domestic financial policies, as well as international trade and economics are followed to offer deeper perspective on the development of Canadian policies. A breakdown of the national security review powers is read in the light of Canada’s position in the global economy, to reveal flaws in the embodiment of the Investment Canada Act[1] (ICA) which could be putting Canada’s national economic security and sovereignty at risk.

Recommendations are made to include a more weighted consideration of sovereignty and economic independence, and formalize review behaviour, under the ICA’s national security review powers. The goal of this paper is to broadly examine perspectives related to integrating elements of economic security into Canada’s definition of ‘national security’.


The “Net Benefit” Test

Prior to 2009, the net benefit test embedded a national security review under general calculations of whether a proposed foreign investment would constitute a net benefit to Canada.[2] Once a financial threshold is triggered, the Minister could consider: the effects on employment, resource processing, the use of parts and services produced in Canada, and exports from Canada; the degree and significance of participation by Canadians in the affected Canadian business/industry; the effect of the investment on productivity, industrial efficiency, technological development, and product innovation/variety in Canada; the effect of the investment on competition within any industry in Canada; the compatibility of the investment with national industrial, economic and cultural policies; and the contribution to Canada’s ability to compete in world markets.[3]


National Security Review Procedure Overview

The national security review process is highly consultative in nature, and invites input from the federal cabinet, departments of the federal government, as well as provinces affected by the transaction. All of these bodies are heavily influenced by public concern over high-profile transactions, especially those subjected to extensive media coverage. Foreign investors are advised by the government to recognize this, and to tailor government and public relations strategies to be consistent with the approach taken under the ICA.[4]

Canada’s formalized national security review test in 2009 was described as a fleshing out of and compliment to the “net-benefit” test[5], but applies to a broader range of investments due to the lack of a financial threshold; the target does not need to be a “Canadian business”; and the investment may be proposed or already implemented.[6]


Dimensions of Canadian National Security

Three important dimensions (or levels) of ‘national security’ to consider include: (1) Economic welfare (protection of domestic industries); (2) National security (strategically sensitive for defence reasons); and (3) Super-national security (protect the homeland from investment by countries viewed as a security risk).[7]

Canada’s current legal frameworks address each level in a fragmented way. With the most recent amendments strengthening protections against unwanted foreign government influence – the national security review process provides the most efficient means to ultimately ensure each dimension is covered. However, to find success in any of these dimensions, there must be no limitation on the potential for supply of information, as exists in the current framework.

Domestic Anti-Money Laundering & Counter-Terrorism Financing

Much of the legwork of Canada’s domestic, operational oversight of national financial security is carried on by the Office of the Superintendent of Financial Institutions (OSFI), in conjunction with the Financial Action Task Force (FATF) established by G7 countries in 1989. Together, they serve to contribute to the safety and soundness of the Canadian financial system. Their responsibility is mainly inward-looking, towards banking-type institutions, providing support in anti-money-laundering and anti-terrorist-financing initiatives.

The FINTRAC agency, born from the Proceeds of Crime (Money Laundering) and Terrorist Financing Act[8], collects, analyses, assesses and discloses information in order to assist in the detection, prevention and deterrence of money laundering and of the financing of terrorist activities, and in order to assist the Minister of Finance and Minister of Public Safety in their duties.

A 2016 report conducted under the responsibility of the International Monetary Fund highlighted a number of key deficiencies in Canada’s legal framework.[9] FINTRAC’s notable issues included: a lack of power to request further information from certain entities; the limited or incomplete access to some administrative information (e.g. fiscal information); and also that FINTRAC is not able to disseminate upon request information to some authorities (e.g. Environment Canada, Competition Bureau). Furthermore, law enforcement and investigative authorities are unable to compel a witness to give statement in money laundering investigations; and only law enforcement agencies can ask for designated information from FINTRAC. Notable issues with (corporate) legal persons included: insufficient risk mitigating measures in place to address money laundering or terrorist financing risk posed by bearer shares and nominee shareholder arrangements; in some provinces, there is no legal obligation to update registered information within a designated timeframe; and a lack of information required for, or collected on beneficial ownership.[10] Many threats stemming from these deficiencies are echoed by a 2017 Transparency International report entitled “Doors Wide Open”.[11] A Public Safety report from this year also reiterates a concern for additional oversight and operational capacities for FINTRAC to carry out and co-operate in its duties.[12]

The exercise of the federal government’s existing powers over financial or economic security can be characterized as currently being limited to ‘anti-crime’ domestically, and defence-focused internationally. Legal gaps still exist and can be quickly filled within the current framework by altering behaviours to address a wider scope of economic security considerations before parliament might consider a new legislative scheme in the future.


Canadian Trade & Investment

“Trade is about money and money is a powerful instrument to foster political relations. Trade can be used as a ‘carrot’ or a ‘stick’.”[13] Trade is a necessity in the capitalist economic framework to attain efficiency and equilibrium between supply and demand, with scarce resources, to keep prices at an affordable level to consumers. In many international trade theories, trade (export) specialization is necessary: (1) to achieve what is described as “comparative advantage” through high productivity or low wages;[14] (2) to take advantage of specific factors of an economy;[15] (3) to take advantage of relatively abundant factors of production;[16] (4) to achieve monopolistic competition to lower prices;[17]; or (5) as a result of historical accident which earned the country a ‘head-start’ advantage which is much easier to maintain.[18]

Canada’s trade history is described by historical economists as a solidified, staples-export ‘hinterland’ economy throughout its development.[19] Legally, Canada was hindered by the UK though intentionally contrived jurisdictional issues in the Canadian constitution’s division of powers, coupled with the doctrine of repugnancy and UK control over the Privy Council. Canada’s independence and immediate adoption of protectionist trade policies in the late 1800s helped decrease UK control, but did not afford it enough development to hold-off the domestic effects from the Great Depression or the boom of US industrialization.[20] Post-WWII saw a massive increase of multinationals being used to bypass tariff restrictions, especially from the US who would dominate the estimated one-third share of foreign ownership or control over enterprise in Canada.[21] A 1957 report of Canada’s Economic Prospects (‘Gordon Commission’) observed that the growth of the country would have been slower without FDI from the US and UK; however they also noted issues with the massive levels of non-resident ownership and control over certain industries in Canada, as well as the fear of US economic dominance and integration to the point of a loss of political independence.[22] The ‘Watkins Report’ in 1968 urged for mandatory Canadian participation in multinationals (to be enforced by an administrative body), and recommended adding an ‘upper-limit’ to foreign investment, as well as obligations pertaining to subsidiaries of multinationals to engage in activities seen as beneficial to Canadians (such as research and development).[23] In the early 1970’s, the ‘Wahn Report’ offered recommendations for an investment screening process; and the ‘Gray Report’ urged that national objectives should include sovereignty and independence, warning of the overexposure of the Canadian economy to decisions outside Canada and that FDI weakens Canadian economic control.[24]

Then spawned the era of the Foreign Investment Review Act[25] when Canada had a chance to shape what benefits it could expect from any given investment proposal.[26] In 1984, a new government commissioned the ‘Macdonald Report’ which evaluated Canada as having a high level of foreign control over capital by international standards. The report advocated for a more open and positive attitude towards foreign investment, yet warned that smaller firms are more vulnerable to takeovers resulting in the loss of Canadian jobs. The ‘Macdonald report’ also featured many suggestions eventually used in the creation of the ICA which were more favourable to foreign investors.[27]


International Economics, Business and Investment

The CED chapter on International Economic Law explains that “economic independence is an essential part of sovereignty” [28] and that any threat to economic independence is tantamount to a threat to sovereignty as such; and in the face of such a threat, a state is entitled to take proactive measures of an economic character by way of legitimate measures in self-defence. [29]

This understanding stems partially from the 1974 General Assembly on the Charter of Economic Rights and Duties of States which intended to give effect to the Declaration on the Establishment of a New International Economic Order – creating some economic security for developing nations. This confirmed: (1) permanent sovereignty over the possession, use, and disposal of a state’s wealth, natural resources, and economic activities; (2) the right to regulate foreign investment and multilateral corporations; (3) the right to nationalize industries; (4) disputes to be settled over local law (unless otherwise fairly agreed upon); (5) obligations to promote the development of international trade; (6) a responsibility to co-operate for promotion of economic and social progress throughout the world; (7) preferential treatment to developing countries; and (8) that prosperity as a whole is achieved through the accumulation of individual prosperity.[30]

The agreement appears to subscribe to known internal conflicts within international economic trade theories by identifying the necessity of international trade for economic growth, as well as the potential for corporations to be highly intrusive to a nation’s sovereignty. Hirsch explains that “one of the most challenging questions in contemporary international investment law relates to the balance between the competing needs of allowing a reasonable policy space for host states and enabling foreign investors to plan their operations in advance”[31]; and that “calculability” in law breeds capitalism.[32]

Bildfell explains in his chapter Maximizing Shareholder Value that “conventionalist ethics posits that private actors should not have to adhere to any principles unless that principle is binding in law”; [33] and that corporations are self-interested, profit-maximizing entities, even when that exercise negatively and substantially affects the interests of others, unless one has a legal right that limits the exercise of that freedom.[34] (emphasis added)


Canadian Policy Perspectives on Foreign Direct Investment (FDI)

In Changing Face of Canadian Foreign Direct Investment Policy, foreign investors are described as having been perceived as speculators and exploiters of national wealth and resources – an affront to national sovereignty and economic independence. This comes partially due to foreign investors’ ignorance of local market conditions, as well as a tendency to repatriate profits or channel them through tax havens.[35]

This was the guiding belief which birthed the Foreign Investment Review Act (FIRA) in the 70’s. FIRA was inspired by public concern over the high level of foreign ownership in Canadian industry. It encouraged Canadian persons’ control over the economy and ensured foreign owned business would benefit Canada, and most significantly – reserved ‘key sectors’ and introduced the screening process for individual investments. The standard used under this act was whether an investment was of “substantial-benefit” to Canada. During this era, Canada is described as “not as hostile as developing countries” as the act was simply a legislative / administrative barrier, and there were no decisions of expropriation of property or nationalization of industry.[36]

FIRA’s intended purpose was to “guard against future governments becoming so captive to the corporate agenda.”[37] Yet in 1985, it was replaced with the ICA and the standard of review lowered to whether an investment was of “net-benefit” to Canada. Shortly following the relaxation of Canadian safeguards against foreign corporate influence, Canada entered into two major trade agreements, the US-Canada Free-Trade Agreement in 1988, and the North American Free-Trade Agreement (NAFTA) in 1992. During this period Canada expectedly took a less interventionist approach[38] in its investment reviews, until the first rejection issued in 2008.

It is important to note that regional trade agreements have one main purpose: tackling non-tariff barriers, while seeking to prohibit purely protectionist measures by imposing requirements to base measures on scientific principles.[39] Interestingly, another trade concept (adopted by the European Union) is the ‘Precautionary principle’ which states that “action should be taken to prevent harm… even if scientific evidence is inconclusive or incomplete.”[40]

Interestingly, “the United States and Canada figure among the main opponents to the precautionary principle status”[41] even though the necessary legal framework for implementation of the principle exists in Canada – a discretion that allows for cautiousness and reflexivity in decision-making.[42] This provides context behind the Canadian government’s decision to use their national security review powers over foreign investment on an ad-hoc basis. Dobson is noted for finding that “perceptions about political rather than commercial decision-making underlie national security concerns.”[43] This can be inferred in Canada from the conflicting considerations under the guidelines issued by the federal government in 2009, as well as the disclosure regulations added more recently.

The Canadian government’s aim of targeting foreign market demand to determine our terms of trade does not make good sense, unless the government’s goal is to maintain its position in the global economy as a resource-extraction ‘hinterland’. However, this is not a sustainable position for Canada – a growing expectation for stakeholders in international investment.[44] Neither can it be called ‘security’ since Canadian sovereignty has been constantly called into question by numerous government-commissioned reports.

The ‘Massey Report’[45] highlighted the threats from US control over mass-media production and concerns over the degradation of Canadian culture. Several economic-focused reports already mentioned followed, highlighting fears over foreign control over the Canadian economy. The rise of such perceived ‘economic nationalism’ during the age of FIRA is long gone since its replacement with the ICA; concurrently the share of foreign ownership or control within the Canadian economy has since risen (albeit at a lesser rate) under the ICA, compared to the period before FIRA. Furthermore, Canada has experienced stagnation in its economy due to a reliance on natural resource exports – and their inherent volatility in commodity prices determined by global influences.

Everything in Canada, from where we live to our diverse culture, is attributable to global trade in some form. The way that trade has affected our society has developed through foreign direct investment and ownership to relieve some Canadians of their decision-making capabilities over many things, from their homes, to the corporate symbols that represent their nation globally.[46] Canada’s biggest revenue earning industries (oil and gas) are being targeted by foreign investors, which is understandable from their purely economic perspective, however the energy sector is Canada’s main reliance for export value and therefore the success of its economic growth.

A 2017 government report states that the clear target for foreign investors is focused in primary and secondary economic sectors: “The [overall] stock of foreign investment in Canada rose… to $825.7 billion; notably, the proportion of that stock originating in the United States remained below 50 percent this year. The manufacturing sector and the mining and oil and gas extraction sector remained the largest targets for foreign investors.”[47] This may (unlikely) be the beginning of a new trend; moving away from a majority-US FDI influence may have positive results on Canada’s growth – to reflect the diverse and multicultural society Canada has grown into. However, a (less-favourable) correlation exists between society’s historic ability to point to an overarching foreign (American) influence while it encroaches on our sovereignty as a single behemoth. A more likely result of a dilution in foreign ownership, with concealed ultimate beneficiaries, will be a reduction in citizens’ abilities to recognize a more fractured infringement on Canada’s economic independence.

It is, however daunting, a necessary task for the federal government to step-up and use the legislative tools they’ve been given to at least share prosperity amongst Canadians when approving foreign direct investment. Corporations are duty-bound to honour the bottom line, and therefore to reduce the resulting social deficiencies evident from accepting FDI within the current framework – the government must ensure and secure fair terms for income-distribution within investment agreements. The only way that this seems possible at the moment is in the discretionary review process conceived under the national security review process within the ICA, where necessary disclosure may be obtained to ensure Canadian economic security.


The National Security Review Process

The most recent national security review of investments’ guidelines issued in 2016, which serve to inform investors of their expectations under the review procedures, are partially reproduced below.[48] A review is triggered by the security services after they identify a national security concern arising out of Canadian investments by foreign parties.[49] Within the wide scope of a review is: the establishment of a new Canadian business or an entity carrying on operations in Canada; acquisitions of control of a Canadian business of any dollar value; and acquisitions of all or part of an entity carrying on operations in Canada.

An investment that could be injurious to national security must then be referred by the Minister of ISED (in consultation with the Minister of Public Safety) to the federal cabinet, who may order a review. The Investment Review Division of ISED is the interface with investors (and other parties to the investment) before a national security review is ordered, and throughout the entire review process. However, it is claimed that the Prime Minister is the ultimate decision maker in the FDI sphere.[50] The national security review process is supported by investigative bodies determined by the regulations, including: the Departments of Industry; Canadian Heritage; Public Safety and Emergency Preparedness; National Defence; Foreign Affairs and International Trade; Natural Resources; Transport; Public Works and Government Services; Health; Citizenship and Immigration; Finance; Department of Justice; Canadian Security Intelligence Service; Royal Canadian Mounted Police; Canada Border Services Agency; Communications Security Establishment; Canada Revenue Agency; Privy Council Office; Public Health Agency of Canada; and all provincial, regional and municipal police forces. Information obtained in administering the ICA is shared with these bodies throughout this process with commercial information being protected by strict confidentiality provisions, and sensitive information protected under the Canada Evidence Act and other applicable laws. National security considerations may restrict the degree to which the government can share information with the investor and others in this context, which may explain why administrative decisions are able to be given without detail or reasons.

Following the Minister’s review, and another consultation with the Minister of Public Safety, the investment report and recommendations will either be referred to the federal cabinet, or if satisfied the investment would not be injurious to national security, the Minister will notify the investor that no further action will be taken. Upon referral, the federal cabinet may take any measures they choose in order to protect national security with respect to the investment.

The assessment should consider the nature of the asset or business activities and the parties, including the potential for third party influence; as well as the following factors:

  • The potential effects of the investment on Canada’s defence capabilities and interests; and on the transfer of sensitive technology or know-how outside of Canada;
  • Involvement in the research, manufacture or sale of goods/technology identified in Section 35 of the Defence Production Act[51];
  • The potential impact of the investment on the security of Canada’s critical infrastructure, including: processes, systems, facilities, technologies, networks, assets and services essential to the health, safety, security or economic well-being of Canadians and the effective functioning of government;
  • The potential impact of the investment on the supply of critical goods and services to Canadians, or the supply of goods and services to the Government of Canada;
  • The potential of the investment to enable foreign surveillance or espionage;
  • The potential of the investment to hinder current or future intelligence or law enforcement operations; or to involve or facilitate the activities of illicit actors, such as terrorists, terrorist organizations or organized crime; and
  • The potential impact of the investment on Canada’s international interests, including foreign relationships.

Sroka is concerned that Canadian assets are less attractive, partially due to the ad-hoc nature of the decision-making process, and therefore are precluded from attaining maximum valuation – but, notes that the potential for State-Owned Enterprises (SOE) to adversely impact commercial outcomes provides justification for the intensive review processes.[52] To add more concern, there is a new consensus on foreign investment moving away from industrial policy towards neoliberalism.[53] Fostering control over the economy in the hands of fewer, commercially-focused, private decision makers, especially those whose impacts are either tied to governments (as SOE’s) or completely removed from Canada, threatens both political and economic independence. “The suspicion that foreigners would be acting in ways that harm Canadians should be dealt with under the national security provisions.”[54]


Notable Decisions Under the ICA

It is observed that parliamentarians concerns from 2004 about the investment proposals for Noranda (a large Canadian mining company), by a Chinese SOE were the first, modern signs of unease towards foreign control over Canadian “strategic assets”.[55]

Australia’s BHP Billiton proposed an acquisition of Potash Corp. which triggered Provincial concern over foreign control over “Canada’s national strategic interests”[56] which may have exercised considerable influence over the federal government’s decision to reject the multi-billion dollar hostile takeover. This controversy was apparently due to BHP’s focus of its lobbying efforts on the federal level rather than sway the provincial government as well.[57]

The SINOPEC (China) acquisition approval of Daylight Energy was applauded by PM Harper outlining that Canada “welcomed investment by China and other countries, so long as the acquisitions were economic in nature and don’t have strategic and political connections.”.[58]

In 2012 the government rejected a proposed takeover of Progress Energy by Petronas (Malaysia). The Minister outlined that he was “not satisfied that the proposed investment is likely to be of net-benefit to Canada” [59] after Petronas tried to take advantage of the regulatory deadlines during negotiations.

Sroka notes that it is troubling that the “procedural reality means that lobbying efforts can have a measurable impact in the assessment of a supposedly objective test early on.”[60] Though lobbying normally attempts to influence a subjective policymaking process, here we see an influence in the standard of review creating an imbalanced perspective on investment.[61]

The 2013 CNOOC’s (China) government-approved acquisition of Nexen included several promises in order to secure public support and government approval. A September 2017 article reviews CNOOC’s substantial failure to meet the Canadian government’s expectations and notes the charges laid against Nexen for a bitumen spill, and an ongoing investigation into the Long Lake explosion in 2016.[62]

The bidding war for Canada’s Norsat, between Chinese and US firms, was ultimately won by the Chinese firm, Hytera. The federal government was reported as having come under fire “for greenlighting the sale of Norsat International Inc. to Hytera, a Chinese telecom giant, without conducting a formal, comprehensive, national security review of the deal.” [63] While PM Trudeau noted that allied national security agencies had consulted together and advised him, they had not recommended a formal, comprehensive security review. [64]

An analysis of the decisions within the framework somewhat resemble those described as ‘Regional / Emergency Safeguard Measures’; which have been noted to be seen as helpful to Regional Trade Agreement parties who are planning on “embarking on a process of a creation of a customs union involving elimination of all trade defence instruments’ measures… and may relieve any difficulties that the elimination of [anti-dumping], [countervailing duties/measures], and [safeguard measures] may cause to the more sensitive domestic industries.”[65] These decisions are also noted to “rarely have recourse” available due to their politically sensitive nature; and that increased use (as paralleled in Canada) would risk exposing the absence of sufficient economic preparedness for regional liberalization. Within this paradigm of understanding, the Canadian government’s behaviour and effects thereof are indicative of the economy being influenced towards deregulation without being primed for such a change.


Are Canadians Ensured Economic Security?

Throughout its development Canada has experienced a long history of economic growth fueled by foreign direct investment; dominated first from the United Kingdom during the period leading up to the Great Depression, followed by the United States of America.

A Statistics Canada study examined 2014 levels of inward foreign direct investment data for both immediate and ultimate investor countries and found that the US share of investment dominated overall for both an immediate ($352B) and ultimate ($368B) basis; alongside notable increases of ultimate investor countries including the UK, Brazil, China and Japan. Part of the reason behind a differentiation between immediate and ultimate investor countries is due to “round-tripping” as Canadian-based corporations channel funds abroad and then return to the same country in the form of direct investment – usually through tax-havens or tax-friendly countries.[66]

Keeping in mind that an impact on a nation’s economic control is tantamount to an impact on state sovereignty; Foreign direct investments in the forms of mergers and acquisitions, as well as the creation of a Canadian corporate personality, have direct impacts on society. These foreign owned or controlled businesses pay wages to directors and employees, and taxes to provincial and federal governments; they make decisions over purchases of capital, and business consolidations which have a direct impact on jobs, as well as individual citizen and government incomes.

The Canadian government aims to promote foreign investment in order to cater towards foreign market demands which in effect will create further foreign control over the impacted industry – foreign control then theoretically extends to both global commodity-pricing (which can be highly influenced by speculation and cartels), as well as commercial (and potentially political) decisions within the affected Canadian industry.

Leal-Arcas argues that “the attitude of the BRIC’s [Brazil, Russia, India, China] towards multilateralism is unclear. Moreover, the BRIC’s assume little responsibility to maintain international order in global economic governance.”[67] One example of the impacts these policies have in reality is exemplified in the decline in prices of potash (good for consumers) in 2013 following the breakup “of a Russian-Belarusian marketing cartel that previously helped limit supply.”[68]

Global Affairs Canada stated in their 2017 Trade and Investment Update, that “Although the declines in commodity prices moderated during 2016, they continued to exert substantial influence on Canada’s trade. Overall export prices fell 13.8 percent in the energy sector and 1.1 percent overall; meanwhile, the price index of Canada’s imports rose 1.2 percent. As a result, Canada’s terms of trade deteriorated further in 2016, dropping two percentage points.” [69]

These numbers fall contrary to the benefits which should be offered under the Ricardian model of international trade which says that trade based on comparative advantage should benefit all countries due to the relative price of the exported good rising (i.e. income for export producers rises, and imported goods become less expensive). Unfortunately, the majority of international trade theories also require those who benefit to actively distribute income to those who lose.


Security: Expecting the Unexpected

One aspect to consider adding to the list of national security concerns could include an environmental focus such as climate change. This may be another necessary to consider among the national security review factors to fill a gap since “GATT/WTO law seems to be inadequate to deal with climate change” [70] and the underlying Most Favoured Nation principle (not discriminating between one’s trading partners) cannot deliver opportunity for economic development.[71]

Another factor to consider could be generating diversity of Canadian industry to counteract impacts of fluctuating energy prices. While the threat of the price-system’s volatility is uncontrollable in the current economic atmosphere, any aspect added which would increase considerations of domestic risks such as a heavy economic reliance on one export (with volatile prices), or environmental disasters (especially in provinces concentrated on trade-industries), might further aid the security of the Canadian economy. The impact of disasters in concentrated economic zones was recently evidenced “after a strong first-quarter performance, growth slid into negative territory in the second quarter due to the disruptions in oil production following the Alberta wildfires.”[72]



First, it is highly recommended that a weighted consideration of sovereignty and economic independence is included in the foreign investment review process by potentially revisiting the “substantial benefit” to Canada standard of review; and/or expanding the list national security considerations to address the current deficits. By raising the standard to require the Minister to determine whether an investment would provide “substantial benefit to Canada”, the government would be given greater flexibility to mold investment proposals to Canadians’ benefit. So long as the requirements are made clear and investors are helpfully guided through the process, however strict the rules may be, the markets will inevitably settle into a routine.

This is somewhat complicated by the ad-hoc nature of the national security review process; which is why the second recommendation is to formalize national security review behaviour under the ICA, and/or prohibit ad-hoc reviews. This can be achieved with a more efficient and co-operative relationship between Canadian financial regulatory bodies to enable the Ministers and Investment Review Division to routinize the national security review process and gather sufficient data to gain a more detailed perspective on potentially impactful foreign investments. To minimize resource impact on government and investors alike, a proportionality perspective may be taken to tailor the weight of the burden of disclosure to the significance of the investment’s impact both financially and socially. However, if proportionality is adopted, a minimum level of investigation should be asserted to ensure that lower-valued investments are not left unnoticed.


This proposal should offer a more beneficial investment atmosphere to Canadians by offering more guidance to government considerations of the dimensions of economic ‘national security’ and re-defining investors’ expectations that Canada is looking for sustainable and beneficial corporate participation in society.


[1] Investment Canada Act, RSC 1985 c28, online: <laws-lois.justice.gc.ca/eng/acts/I-21.8/index.html>.

[2] Robert Sroka, “Friends with Net-Benefits: The Investment Canada Act and State Owned Enterprises” (2017) 17 Asper Rev Int’l Bus & Trade L 181, at 190.

[3] Ibid at 186.

[4] Subrata Bhattacharjee: “National Security with a Canadian Twist: The Investment Canada Act and the New National Security Review Test” (2009) 1:4 Transnat’l Corp Rev 12, at 19.

[5] Sroka supra note 2, at 190.

[6] Ibid.

[7] Bhattacharjee, supra note 4.

[8] Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SC 2000 c17.

[9] IMF, “Anti-money laundering and counter-terrorist financing measures – Canada” (Assessment delivered at the FATF Plenary meeting, June 2016), online: <fatf-gafi.org/publications/mutualevaluations/documents/mer-canada-2016.html>.


[10] Ibid at 205-209.

[11] Maíra Martini, “Doors Wide Open: Corruption and Real Estate in Four Key Markets”, Transparency International (29 March 2017), online: <files.transparency.org/content/download/2121/13496/file/2017_DoorsWideOpen_EN.pdf >.

[12] “National Security Consultations: What We Learned Report”, Public Safety Canada (19 May 2017), online: <publicsafety.gc.ca/cnt/rsrcs/pblctns/2017-nsc-wwlr/index-en.aspx>.

[13] Rafael Leal-Arcas, “The Fragmentation of International Trade Law: Is Now the Time for Variable Geometry?”, (2011) 12:2 J World Investment & Trade 145, at 152.

[14] Ricardian trade theory.

[15] Specific-Factors theory of international trade.

[16] Heckscher-Ohlin model of international trade – empirical support with trade between unequal partners benefitting owners of abundant factors of export production.

[17] Internal Economies of Scale theory of international trade.

[18] External Economies of Scale theory of international trade.

[19] Daniel Drache, “Harold Innis and Canadian Capitalist Development” (1982) 6:2 Can J Poli & Social Theory 35.

[20] Alex Healy, “Constitutional Colonization and the Capitalist Catastrophe”, (9 May 2017), From What I Understand (blog), online: <alex-healy.com/2017/05/09/canada-constitutional-colonialism-the-capitalist-catastrophe>.

[21] Sroka supra note 2, at 183.

[22] Jutinder Cheema, Changing Face of Canadian Foreign Direct Investment Policy (LLM Thesis, University of Ottawa, 1993), online: <ruor.uottawa.ca/bitstream/10393/6676/1/MM15597.pdf>.

[23] Ibid at 16-17.

[24] Ibid at 19-21.

[25] Foreign Investment Review Act, RSC 1973, c C-46.

[26] Sroka, supra note 13, at 184.

[27] Cheema, supra note 22, at 13-19.

[28] CED (West 4th) vol 35, title 2, at § 188.

[29] Ibid.

[30] Ibid, at § 193

[31] Moshe Hirsch, “Between Fair and Equitable Treatment and Stabilization Clause: Stable Legal Environment and Regulating Change in International Investment Law” (2011) 12:6 J World Investment & Trade 783.

[32] Ibid, at 785.

[33] Conor Bildfell, “Corporate Decision Making in the Human Rights Context: Using Proportionality as a Supplement to the Guiding Principles”, (2015) 15 Asp Rev Int’l Bus & Trade L 87, at 120.

[34] Ibid.

[35] Cheema, supra note 22.

[36] Ibid, at 2.

[37] Ibid, at 4.

[38] Ibid, at 11.

[39] Angeline Couureur, “New Generation Regional Trade Agreements and the Precautionary Principle: Focus on the Comprehensive Economic and Trade Agreement (CETA) Between Canada and the European Union”, [2015] 15 Asper Rev Int’l Bus & Trade L 265.

[40] Ibid, at 267.

[41] Ibid, at 269-270.

[42] Ibid.

[43] James Donnelly, “Open for Business? Lessons Learned from the Land Down Under for Regulating Investments by State-Owned Enterprises in the Oil Sands”, [2016] 16 Asper Rev Int’l Bus & Trade L, at 8.

[44] Howard Mann, “Civil Society Perspectives: What Do Key Stakeholders Expect from the International Investment Regime?” (London: Oxford University Press, 2011).

[45] “Royal Commission On National Development In The Arts, Letters And Sciences 1949-1951”, online: <collectionscanada.gc.ca/massey/h5-400-e.html>.

[46] Bhattacharjee, supra note 4, at 13.

[47] “Canada’s State of Trade: Trade and Investment Update 2017”, Global Affairs Canada (19 July 2017), online: <international.gc.ca/economist-economiste/performance/state-point/state_2017_point>.

[48] “Guidelines on the National Security Review of Investments”, Investment Canada, online: <ic.gc.ca/eic/site/ica-lic.nsf/eng/lk81190.html>.

[49] Sroka, supra note 13, at 190.

[50] Ibid.

[51] Defence Production Act, RSC 1985 c D-1.

[52] Sroka, supra note 13, at 223.

[53] Ibid, at 194-195.

[54] Gil Lan, “Foreign Direct Investment in the United States and Canada: Fractured Neoliberalism and the Regulatory Imperative”, [2014] 47 Vand J Transnat’l L 1261, at 1290.

[55] “Investment Canada Act amendment potentially focus on foreign state-owned investors” (1 March 2007), Stikeman Elliott (blog), online: <stikeman.com/en-ca/kh/canadian-ma-law/investment-canada-act-amendments-potentially-focus-on-foreign-state-owned-investors>.

[56] “BHP’s bid for PotashCorp: how it unfolded”, CBC News (19 November 2010), online: <cbc.ca/news/business/bhp-s-bid-for-potashcorp-how-it-unfolded-1.929246>.

[57] Sroka, supra note 13, at 195.

[58] Ibid, at 196.

[59] Ibid, at 197.

[60] Ibid.

[61] Ibid, at 198.

[62] Jameson Berkow, “A parade of broken promises: How CNOOC stumbled with its Nexen takeover”, BNN (15 September 2017), online: <bnn.ca/a-parade-of-broken-promises-how-cnooc-stumbled-with-its-nexen-takeover-1.857533>.

[63] Steven Chase & Robert Fife, “Chinese bidder back on track to buy Norsat after matching U.S. offer”, The Globe and Mail (16 June 2017), online: <theglobeandmail.com/news/politics/chinese-bidder-back-on-track-to-buy-norsat-after-matching-us-offer/article35328096>.

[64] Ibid.

[65] Edward Borovikov, Bogdan Evtimov & Igor Danilov, “Trade Defence Instruments in Regional Trade Agreements: Revisiting the Case of Safeguards”, (2010) 16 Int’l Trade L & Regulation 44, at 48-49.

[66] Marc Atkins and Morgan Roesler, “Foreign direct investment in Canada by ultimate investing country”, Statistics Canada (2 October 2017), online: <statcan.gc.ca/pub/13-605-x/2017001/article/54868-eng.htm>.

[67] Leal-Arcas, supra note 13, at 150.

[68] Cecilia Jamasmie, “BHP’s $14 billion Jansen potash becomes latest victim of commodities rout”, Mining.com (10 March 2016), online: <mining.com/bhps-14-billion-jansen-potash-becomes-latest-victim-of-commodities-rout>.

[69] Supra note 44.

[70] Ahmad S.A.S. Al-Tayer & A.F.M. Maniruzzaman, “Addressing the Global Climate Change Problem in GATT/WTO Law: The Vision of a New International Climate Law Based on International Distributive Justice” (2011) 12:5 J World Investment Trade 631.

[71] Ibid.

[72] Supra, note 44.



  1. Jerome Downey · January 14, 2018

    This is simply excellent work Alex, thanks for sharing this paper and sharing this resource.

    Liked by 1 person

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