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

If either of the standards--the financial standard and the cultural standard--is met, the investor must apply for review of the transaction by Investment Canada. (79) The transaction must receive a certificate of approval from either the Minister of Industry when the monetary threshold is met, or the Minister of Canadian Heritage when the transaction implicates cultural heritage. (80) In rare cases involving transactions that meet both standards, both Ministers must approve. (81) The certificate of approval attests to the fact that the reviewing agency believes that the transaction would be a "net benefit to Canada." (82) If the investment would not provide a net benefit to Canada, the transaction is stopped or, if the transaction has already been completed, the investor may be required to divest control. (83)

In determining whether a transaction will be of net benefit to the country, Investment Canada weighs a number of different factors. Section 20 of the Act sets out several factors to be considered, including:

   [T]he effect of the investment on the level and nature of economic
   activity in Canada: the degree and significance of participation by
   Canadians in the business in question: the effect of the investment
   on productivity, industrial efficiency, technological development,
   product innovation and product variety in Canada: the effect of the
   investment on Competition within Canada; the compatibility of the
   investment with national industrial, economic and cultural
   policies: and the contribution of the investment to Canada's
   ability to compete in world markets. (84)

The ICA further provides that these factors are to be considered as a whole and that each factor be given "different weight in different circumstances" depending on the specific facts of each case. (85) Thus, the government has created even more definite guidelines for some "politically sensitive and economically important sectors of the economy," like the telecommunication and the oil and gas industries. (86) It is also of particular interest to note that none of the factors consider the transaction's effect on national security. (87) Overall, the review process is flexible in order to allow Investment Canada to consider a multitude of different factors that can be tailored in the way that the reviewer deems most appropriate for each transaction as opposed to formulaic application of the same factors to every transaction regardless of circumstance.

C. ICA in Practice Today

The Conservatives passed the ICA with the intent of boosting foreign investment in the country. The government wanted to simplify the system by streamlining the process and enable potential investors to complete transactions within a reasonable time. (88) To this end, the ICA appears to have largely achieved its purpose--it seldom operates as a real barrier to the foreign acquisition of Canadian companies as the vast majority of the deals reviewed under the ICA have been approved without much conflict. (89)