The Investment Canada Act (ICA) allows the federal government to review foreign investments. The ICA provides two distinct processes: a net benefit review and a national security review. The net benefit review grants the federal government powers to ensure that the acquisition of a significant Canadian business is likely to be of net benefit to Canada. Acquisitions are subject to net benefit review when the value of the acquired business meets or exceeds an applicable financial threshold. A national security review provides the federal government the power to prevent a foreign investment from injuring Canada’s national security. Unlike the net benefit review, the federal government can subject any foreign investment to a national security review, regardless of its value. In both cases, the federal government may approve an investment with or without conditions or disapprove an investment. In the latter case, the government may block the investment or, if it was already implemented, order the divestment of the acquired Canadian business.

The House of Commons Standing Committee on Industry, Science and Technology (the Committee) heard how the context of foreign investments changed since Parliament adopted the ICA in its current form. While most foreign investments can and do benefit Canada, the acquisition of sensitive assets by state-owned or -controlled entities raises national security issues. The devaluation of many Canadian businesses experienced in the wake of the COVID-19 pandemic exposed and worsened Canada’s vulnerabilities. Moreover, the federal government could improve the ICA’s net benefit review process by valuing intangible assets in a manner that better reflects their importance to a knowledge-based economy. While the government discloses general information on the administration of the ICA, it could make the net benefit review process more accountable by revealing information regarding specific decisions, such as the conditions in which the government approve foreign investments.

In sum, while the legislation remains strong in many aspects, the evidence shows that the ICA would benefit from a more cautious, responsive, and transparent approach to regulating foreign investments. To that end, the Committee presents nine recommendations to the federal government.