The Ottawa Citizen, Globe and Mail and others have reported that the federal government, based on a recommendation of Heritage Minister James Moore, made a rather uncommon Cabinet order on March 27th under section 15 of the Investment Canada Act (“ICA”) triggering a cultural review of Target’s planned expansion into Canada.
The Cabinet order issued on March 27th states:
“His Excellency the Governor General in Council, considering it in the public interest, on the recommendation of the Minister of Canadian Heritage, pursuant to section 15 of the Investment Canada Act, hereby orders that the investment by Target Canada Co. to establish a new Canadian business carried on by Target be reviewed.”
Generally speaking, the ICA applies where a “non-Canadian” acquires “control” of a “Canadian business”, all as defined in the ICA (or establishes a new Canadian business, in the case of the Target expansion into Canada).
Where transactions to acquire control of a Canadian business exceed the relevant monetary thresholds under the ICA (currently Cdn. $330 million based on the book value of the target for direct investments by WTO investors), they are reviewable by Investment Canada and potentially also by Canadian Heritage if a cultural business is involved (or, if below the relevant monetary thresholds set out in the ICA, subject to a simple notification only, which are generally filed post-closing). Interestingly, there is no de minimis test for what constitutes a cultural business for the purposes of the ICA.
For investments by non-Canadians to establish a new Canadian business, as in the case of Target, a notification only is required, which may be filed any time up to completion or within 30 days post-completion. Such notifications require, among other things, the investor to provide basic information regarding the investor, the investment and type of Canadian business being established (including a description of whether the proposed investment relates to Canadian cultural business activities, such as the publication or sale of books, the production, distribution or sale of film of video, or the publication, distribution or sale of music).
In such cases, even where a transaction is not initially reviewable in the case of the establishment of a new Canadian business, under section 15 of the ICA the investment may nevertheless be reviewed where it relates to Canada’s cultural heritage (or national identity) and the Federal Cabinet considers it in the “public interest” to order a review. Where such an order is made, the investment becomes subject to the “net benefit to Canada” test under the ICA including a review of whether the investment is compatible with national cultural policies.
The review of foreign investments related to cultural industries is the responsibility of Canadian Heritage and includes investments relating to the publication, distribution or sale of books, magazines, periodicals, newspapers and music, as well as film, video, audio and video music recordings. Relevant factors for net benefit to Canada reviews under the ICA include the compatibility of an investment with Canadian cultural policies, including the creation, production and distribution of Canadian cultural products.
It will be interesting to see what commitments, if any, are negotiated by Target following the filing of its application for review and how a review by Canadian Heritage may delay or alter Target’s planned Canadian expansion.
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