April 21, 2020
Practical Law Canada has published a New Legal Update, which discusses the Canadian government’s April 18, 2020 Policy Statement, which provides for increased scrutiny of certain foreign investments in Canada under the federal Investment Canada Act during the COVID-19 pandemic. Below is an excerpt with a link to the full Legal Update at Practical Law.
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Abstract
On April 18, 2020, the Canadian government issued a Policy Statement on Foreign Investment Review and COVID-19. This policy change seeks to avoid opportunistic investment behaviour during the 2019 novel coronavirus disease (COVID-19) pandemic by subjecting certain foreign investments to increased scrutiny under the Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.). This Update highlights key aspects and implications of this new policy.
Background
Foreign investment in Canada is generally subject to review and approval under the Investment Canada Act if the investment exceeds the applicable financial threshold or raises national security concerns. See Practice Notes, Investment Canada Act: Overview, Investment Canada Act Thresholds for Review and National Security Reviews. The relatively high thresholds for review mean that much foreign investment is not subject to approval, which reflects an acknowledgement of the important role that foreign investment often plays in ensuring that Canadian companies can innovate and compete.
However, during the COVID-19 pandemic, the Canadian government has also recognized that many Canadian businesses have seen their valuations decline, which could lead to opportunistic foreign investment and takeovers. Moreover, in the unique current circumstances, the government has highlighted the need to safeguard the supply of critical goods and services in Canada.
Therefore, the government’s Policy Statement identifies two categories of foreign investment that will be subject to increased Investment Canada Act scrutiny until the Canadian economy recovers from the COVID-19 pandemic:
Investments related to public health or involving the supply of critical goods and services.
Investments by state-owned or closely tied entities. These are discussed in turn.
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For the full Update, see: Canadian Government Announces Enhanced Investment Canada Act Scrutiny of Foreign Investments Due to COVID-19.
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