Dubai or not Dubai?: A review of foreign investment and acquisition laws in the U.S. and Canada

Vanderbilt Journal of Transnational Law, Nov, 2008 by Chris Lalonde

Accordingly, in 1974, the Canadian government enacted the Foreign Investment Review Act (FIRA) that established the Foreign Investment Review Agency (Review Agency) to address these concerns. (65) Under FIRA, the Review Agency reviewed all direct foreign investment in Canada and approved such transactions before they could proceed. (66) The final decision rested in the hands of the Cabinet Council, to whom the Review Agency reported. (67)

In the early 1980s, the tide of permissive foreign investment ebbed following a national recession and mounting criticism of FIRA by the international community. (68) As the country saw the effects of a downturn in foreign investment, "economic nationalism no long[er] assumed paramount importance in Ottawa." (69) The new Conservative government rose to power in September 1984 and cemented the movement away from such a policy. (70) The new government spelled the beginning of the end for FIRA and its stricter controls over foreign investments.

B. The Investment Canada Act

The Conservatives' accession to power led to the passage of the Investment Canada Act (ICA) and prompted new Prime Minister Mulroney to proclaim boldly that "Canada is open for business again." (71) According to Prime Minister Mulroney, the explicit purpose of the new act was "to encourage investment in Canada by Canadians and non-Canadians that contributes to economic growth and employment opportunities and to provide for the review of significant investments in Canada by non-Canadians in order to assure such benefits to Canada," primarily by raising the threshold for review, shortening the time for review, and streamlining the process in general. (72)

Under the ICA, parties to direct or indirect investment by a non-Canadian resulting in the creation of a new business or the takeover of a Canadian business must file a notice or application for review with the Investment Canada review board. (73) Monetary thresholds relating to the size of the transaction determine the cases eligible for review. (74) The thresholds trigger review in three situations: (1) a direct acquisition of control in a Canadian business with more than C$5 million in assets; (2) an indirect acquisition of control of a Canadian business with over C$50 million in assets; or (3) the indirect acquisition of a Canadian business with over C$5 million in assets "where the Canadian assets acquired represent more than 50 percent of the aggregate gross asset value of all domestic and international business acquired, directly and indirectly, in connection with the transaction." (75)

Transactions may require review where the business is related to "Canada's cultural heritage or national identity," even if the transaction does not meet the monetary threshold. (76) While the ICA gives no explicit definition of what businesses will relate to "cultural heritage or national identity," businesses involved in the production, distribution, sale, or exhibition of books, magazines, periodicals, newspapers, film, or music (recordings and print) have all been found to be covered by this provision. (77) The non-Canadian acquisition of such a business, either directly or indirectly, leads to governmental review regardless of whether the acquisition meets the monetary threshold requirements. (78)