Last week, the Senate adopted Bill C-34, the National Security Review of Investments Modernization Act.  The Senate Banking Committee, on which the Senator Tony Loffreda serves as Vice-Chair, reviewed the bill and adopted it without any amendments, but with some strong observations directed to the government.  Considering the importance of this bill in attracting direct foreign investments, the Senator chose to write his most recent piece on the bill and the work of the committee. 

OTTAWA – Canadians should be proud of the fact that we are a top destination for foreign direct investments (FDI).  Canada is attracting increasingly more money from abroad, injecting more cash into our economy and creating more jobs.  The OECD ranks us third, behind the U.S. and Brazil, and we lead the pack on a per capita basis.  Hopefully, this trend will continue to go in an upwards trajectory.

However, many of these major investments must be adequately monitored, evaluated, and approved by the federal government through what is known as the Investment Canada Act (ICA).  In broad terms, this Act of Parliament, first adopted in 1985, ensures that the most significant investments into Canada by non-Canadians benefit Canada’s economy. The Act also gives the government the ability to review foreign investments of any size to ensure they are not harmful to Canada’s national security.

The ICA had not been amended in 15 years, yet the economy and the world we live in have changed dramatically. Considering the current geopolitical situation, amendments to the Act were long overdue which is why the government introduced Bill C-34, the National Security Review of Investments Modernization Act last year.  As the Minister of Innovation said before our Banking Committee last week, our country is increasingly the target of hostile actors seeking to acquire goods, technologies, and intellectual property to achieve their own strategic objectives, threatening both our national security and our prosperity.

The changes proposed in the bill, which I support, include providing new ministerial authority to impose interim conditions during a national security review, implementing new filing requirements, and strengthening penalties for non-compliance. 

However, despite our committee’s support for and adoption of the bill, Senators did observe and remind the government that it is important to ensure that government-funded intellectual property and treatment of personal data be considered as economic net benefit factors and that forthcoming regulations reflect that, arguing that the strategic value of these assets may not be fully captured in commercial valuations of acquired corporations.  I strongly support this observation. 

The digital economy is the economy of the future and data will be an integral part of any nation’s ability to attract investments and grow its economy.  One of our expert witnesses, Dan Ciuriak from the Centre for International Governance Innovation, feels the same way and has studied this topic extensively.  As he recently wrote, “while data is often said to be the most valuable commodity of our age, the essential capital of the modern data-driven economy, and the source of instruction for artificial intelligence (AI) whose rapid evolution is ushering in the age of machine knowledge capital, it remains largely invisible on the balance sheets of companies and largely unmeasured in our national economic and trade accounts.”

Jim Balsillie, formerly of Blackberry and current Chair of the Council of Canadian Innovators, concurs.  He wrote to our committee and explained that “the strategic nature of intellectual property and data has restructured the composition of markets by reconfiguring how an economy extracts benefits from technology and introduces new risks.”  He called upon Canada to “develop modern investment screening systems and continue to make dynamic updates” if we want to defend critical infrastructure and assets vital to our prosperity, security, and sovereignty.  In many ways, our committee agrees. 

Recognizing the rapidly evolving nature of FDI and the growing concerns over national security, we recommended that in three years’ time the minister report to parliamentarians on whether the ICA is meeting its objectives.  The digital marketplace is moving at warp speed and is so dynamic that we can’t wait another 15 years to evaluate the relevancy and application of the Act.

The bill received Royal Assent on March 22^nd.  As the minister suggested during his appearance, the targeted legislative changes proposed in C-34 will enhance the visibility of Canada’s investments, improve transparency, and help provide greater certainty for investors, as well as ensure that Canada has strong powers to take action quickly and when necessary, when our national security is at risk.

Ultimately, these changes should reassure Canadians that the current or any future government now has additional tools at its disposal to ensure our national security interests are prioritized and any risks are properly identified, tracked, and mitigated when signing off on major transactions. 

With the bill we adopted last week, the Investment Canada Act has been modernized and strengthened and I feel the government can continue to strike the right balance between protecting our national security interests while ensuring Canada remains an attractive destination for FDIs without being too burdensome from a regulatory and administrative standpoint.  

The Honourable Tony Loffreda, Independent Canadian Senator (Québec)