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Investment Canada Act - 2017–18 Annual Report catalogue number: Iu1-15E-PDF
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© Her Majesty the Queen in Right of Canada, as represented by the Minister of Innovation, Science and Economic Development Canada, 2017
Aussi offert en français sous le titre Loi sur Investissement Canada – Rapport annuel 2016-2017
Table of Contents
Message from the Director of Investments to the Minister of Innovation, Science and Economic Development
- Highlights from Fiscal Year 2017–18
- Activities under the Investment Canada Act in 2017–18
- Recent Policy Developments
- Net Benefit Activity under the Investment Canada Act
- National Security Activity
Message from the Director of Investments to the Minister of Innovation, Science and Economic Development
I am pleased to present to you the Annual Report on the administration of the Investment Canada Act (ICA or the Act) for fiscal year 2017–18. The information in this Report does not include information relating to foreign investment proposals in cultural businesses, as responsibility for the review of such investments under the ICA rests with the Minister of Canadian Heritage.
Investments from global companies continue to be a key driver of the Canadian economy, contributing to innovation, growth, and job creation with the Act playing an important role to encourage this investment. In keeping with the Government's priority to attract beneficial investment, over fiscal year 2017–18 the thresholds for net benefit review rose markedly to $1 billion for private sector investors from WTO member countries and $1.5 billion for private sector investors from trade agreement partner countries. This change has focussed net benefit reviews on those investments that are most significant to the Canadian economy.
At the same time, those and all other investments captured by the Act were subject to the multi-step national security review process. I am pleased to include additional facts and statistics on the administration of the national security review provisions in this year's Report. As you know, the Act provides the Governor-in-Council with broad scope to review investments that could be injurious to national security, a process that in its entirety can span over 200 days, and with the authority to take any measures it considers advisable with respect to an investment in order to protect national security, including ex-post intervention. This process is necessary to ensure that investments will not harm national security; however, the government is also committed to minimizing any market uncertainty that may be created as a result.
To that end, over fiscal year 2017–18, we continued to focus on outreach to investors and to Canadian businesses seeking access to the capital they need to innovate, scale-up, and maintain and create jobs for Canadians. The aim was to better inform them of the legal process and potential outcomes and to emphasize the importance of early engagement with the Government on investment proposals. The now-mandatory reporting on the administration of the national security review provisions included in this Annual Report, and continued transparency on the process, will be key to reducing market uncertainty for Canadian business and investors and to ensuring accountability to Canadians. I look forward to continuing to support you over the coming year in administering the Act in a manner that encourages investment, economic growth and employment opportunities in Canada while ensuring that Canada's national security is protected.
Director of Investments
International investment across all sectors is subject to the Act, which has two primary purposes: to review significant investments to ensure they are likely to be of net economic benefit to Canada, and to review investments that could be injurious to national security. The Act requires the Director of Investments to submit a report for each fiscal year on the administration of the Act and for the Minister to make the report available to the public. Pursuant to that requirement, this is the Annual Report for fiscal year 2017–18.
Under the Act, a non-Canadian seeking to acquire control of an existing Canadian business valued at or above the relevant net benefit review threshold must submit an application for review. The review assesses the proposed investment against the net benefit factors set out in the Act, and the investment cannot be implemented unless the Minister is satisfied that the investment is likely to be of net benefit to Canada. In June 2017, the threshold for review was increased to $1 billion in Enterprise Value for private-sector investors from World Trade Organization (WTO) member countries and in September 2017, with the coming into force of the Canada-European Union Comprehensive Economic Trade Agreement, the threshold increased to $1.5 billion for private-sector investors from free trade agreement partners. For state-owned enterprises from WTO member countries, the relevant threshold was $398 million in Asset Value.
For acquisitions of control of Canadian businesses valued below the relevant thresholds, investors must file a notification, but the investment is not subject to review and approval under the net benefit provisions. A notification is also required whenever an investor from a WTO member country indirectly acquires control of an existing Canadian business, or when a non-Canadian investor establishes a new business in CanadaEndnote 1.
The Act sets out six factors that must be taken into account by the Minister in making a determination of likely net benefit. These factors ensure predictability for investors while maintaining the flexibility to ensure the investment's overall economic benefit to Canada. The six factors are:
- the investment's effect on the level and nature of economic activity in Canada, including employment, resource processing, and the utilization of parts, components and services;
- the degree and significance of participation by Canadians in the Canadian business;
- the investment's effect on productivity, industrial efficiency, technological development, and product innovation and variety;
- the investment's effect on competition;
- its compatibility with industrial, economic and cultural policies; and
- its contribution to Canada's ability to compete in world markets.
In order to provide further clarity for investors, the Minister has issued Guidelines about how the Act's provisions are applied in specific circumstances. For example, there are specific guidelines on the net benefit assessment of investments by investors that are owned, controlled or influenced by a foreign state.Endnote 2 Pursuant to the Guidelines on Investment by State Owned Enterprises (SOEs), the Minister takes into account the governance and commercial orientation of the investor and investors will need to demonstrate their strong ongoing commitment to transparent and commercial operations.
The national security provisions of the Act, first introduced in 2009 in Part IV.1, provide the Government of Canada with the authority to review foreign investments for potential harm to national security. These provisions give the Governor-in-Council (GiC) the authority to take any measure related to a foreign investment that it considers advisable to protect national security, including:
- directing the investor not to implement the investment;
- authorizing the investment on condition that the investor (i) give written undertakings that the GiC considers necessary in the circumstances, or (ii) implement the investment on the terms and conditions ordered by the GiC; or
- requiring the investor to divest control of the Canadian business or of its investment in an entity.
The national security provisions provide for a review of a broader scope of investments by non-Canadians than the net benefit provisions, including: the establishment of a new Canadian business or an entity carrying on operations in Canada, the acquisition of control of a Canadian business of any dollar value (i.e., below the net benefit review threshold), and the acquisition of all or part of an entity carrying on operations in Canada. All these investments are subject to a multi-step national security review process led by Canada's national security agencies.
Highlights from Fiscal Year 2017–18
- In June 2017, as a result of amendments to the Act to accelerate the increase of the net benefit review thresholds, the new $1 billion threshold for private sector World Trade Organization (WTO) investors came into force.
- In September 2017, as part of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), the net benefit review threshold for private sector CETA investors increased to $1.5 billion in Enterprise Value. Private sector investors from other free trade agreement partners with relevant most-favoured nation provisions also now receive the same threshold.
- In total, 751 investment filings (applications for review and notifications) were certified under the Act. The total value associated with the applications for review that were approved and all notifications certified in the last fiscal year, was $63.69 billion in Enterprise Value and $39.09 billion in Asset Value. There were 9 approved applications for net benefit review, a significant decrease from the 22 applications for net benefit review that were certified and approved over the 2016-17 fiscal year. The decrease was attributable in part to the significant increase in the net benefit review threshold. There were 742 notifications certified under the Act, 28 more than 2016-17.
- Each of these 751 investments, as well as additional investments, were reviewed by Canada's security and intelligence agencies for their potential to injure national security. A section 25.2 Notice of potential section 25.3 GiC Order for Review was issued in four instances. Two of those investments were subsequently subject to a Governor-in-Council Order for review under section 25.3 of the Act. In one case, the Governor in Council issued an Order under section 25.4 to prevent the implementation of the investment in order to protect national security and in the other case, the investment proposal was withdrawn.
Activities under the Investment Canada Act in 2017–18
Recent Policy Developments
During the fiscal year 2017–18, a number of policy changes were introduced, reflecting Government commitments to encourage Canada as a destination of choice for investment.
As part of Budget 2017, the Government implemented its commitment originally made in the 2016 Fall Economic Statement to increase the net benefit review threshold for private sector WTO investors to $1 billion in Enterprise Value in 2017, two years ahead of schedule. The $1 billion threshold came into force upon Royal Assent of Bill C-44, the Budget Implementation Act, on June 22, 2017. As of January 1, 2019, this threshold will be adjusted annually to reflect changes in nominal gross domestic product according to a formula set out in the Act.
As part of the CETA, the net benefit review threshold for private sector CETA investors increased to $1.5 billion in Enterprise Value. Private sector investors from other free trade agreement partners with relevant most-favoured nation provisions also received the same threshold. These are: Chile, Colombia, Honduras, Mexico, Panama, Peru, South Korea and the United States. Required legislative amendments were introduced in Bill C-30, CETA Implementation Act, which received Royal Assent on May 16, 2017, and associated regulatory amendments were made. The new threshold came into force on September 21, 2017, the date agreed upon by Canada and the European Union for application of CETA.
Finally, the Government's commitment to make reporting on the administration of the national security provisions of the Act mandatory was also implemented, making it consistent with the reporting requirement already in place for the administration of the net benefit review provisions. The amendment to require reporting on national security reviews came into effect upon Royal Assent of Bill C-44.
Net Benefit Activity under the Investment Canada Act
The following section provides information on the scope, scale and origin of investments by non-Canadians in Canada over the last fiscal year that were subject to the filing requirements in the Act.
Note on valuation: The value of an investment is calculated in one of two ways, depending on the nature of the investment. For direct investments by private sector investors from WTO member countries, the “Enterprise Value” of the Canadian business to be acquired is calculated to determine if the investment exceeds the threshold for a net benefit review. Introduced in 2015, Enterprise Value is a calculation that takes into account market value, debt and cash, and is used to better reflect value of the Canadian business being acquired.
In contrast, when an investor is establishing a new business, is a state-owned enterprise or non-WTO member, or is investing indirectly, the value of the investment is calculated using the "Asset Value" of the Canadian business, which is the value of the assets according to the business' financial statements (book value).
In fiscal year 2017–18, a total of 751 notifications certified or applications approved under the Act had a total Asset Value of $39.09 billion and a total Enterprise Value of $63.69 billion.Endnote 3 Figure 1 shows the breakdown of investments across a range of Asset Values and Enterprise Values.
Of the total number of investments, 60 percent (450) were measured by Enterprise Value, and 40 percent (301 investments) by Asset Value. Of these asset valuation transactions, the vast majority (approximately 90 percent) were valued at or below $100 million. The Enterprise Value investments reflect a much more varied range of values, with the largest segment (172 out of 450) coming in the $10 million - $100 million dollar range.
Description of Figure 1: Number of investment filings by value
|Asset Value||Enterprise Value|
Note: Categories include the highest bound, and exclude the lowest. E.g. investments worth exactly 1M dollars are counted in the "0-1M$" category.
Applications for Review
As noted above, in 2017–18, the threshold above which net benefit review and approval is required increased from $800 million to $1 billion for investments from private-sector investors from WTO-member countries and to $1.5 billion for investments from private-sector investors from trade agreement partners. The higher threshold focused net benefit reviews on those investments that were most significant to the economy and lessened the regulatory burden for international investors and Canadian businesses involved in smaller investments.
Accordingly, the number of applications for review received in 2017–18 was lower than in past years. While there has been an average of 16 applications for review required and approved over the last four years, in 2017–18, 9 applications for review were approved (Figure 2). As noted above, one additional application for review was received and certified, but ultimately blocked following a national security review (see text box ).
The implication of the higher threshold is also reflected in the average value of transactions subject to net benefit review. The total value associated with the 9 applications for review in 2017–18 that were approved was $35.13 billion. The average value of approved applications was $3.90 billion, almost three times higher than the 2016-2017 average value of $1.38 billion. Further, the five largest of these applications accounted for approximately $26.10 billion, or 74 percent, of the total Enterprise Value for all applications. By comparison, in 2016-17 the five largest Enterprise Value applications totaled approximately $12.05 billion, or 40 percent.
With respect to review time, in 2017–18, of the nine applications reviewed and approved under the net benefit provisions, it took an average of 77 days from certification to approval. However, the average was affected by one review that was unusually long, and where the investor consented to the extended review period. In contrast, the average period in 2016-17 was 84.6 days. The median review period in 2017–18 was 72 days, in contrast to 74 in 2016-17.
Description of Figure 2: Net Benefit Applications Approved
|Asset Value ($billions)||Enterprise Value ($billions)||Number of applications|
The last fiscal year saw an increase in the number of notifications, with a total of 742 certified; the total value of these investments was $39.09 billion for those measured in Asset Value and $28.56 billion for those measured in Enterprise Value (Figure 3). In contrast, in 2016-17, there were 715 notifications certified and the total value of those was $21.09 billion in Asset Value (54 percent of the Asset Value in 2017–18) and $19.94 billion for Enterprise Value (70 percent of the Enterprise Value in 2017–18).
Overall, the number of notifications associated with the acquisition of control of an existing Canadian business was significantly larger (545, or 73 percent of overall notifications) compared to the number of notifications associated with the establishment of a new business (197, or 27 percent). This is consistent with the pattern for past years.
The average value of notifications filed by Asset Value in 2017–18 saw a significant jump, from $73.76 million in 2016-17 to $129.85 million. The five largest Asset Value notifications in 2017–18 accounted for 76 percent, or $29.67 billion, of the $39.09 billion total. Likewise, the average value of notifications measured by Enterprise Value also saw an increase to $64.77 million, a 39 percent increase over the previous year's average of $46.49 million. The five largest notifications measured by Enterprise Value totaled $5.83 billion or 20 percent of the $28.56 billion total.
These increases can in part be attributed to the continuing increase in the threshold for net benefit reviews; with the increase in threshold for WTO-member origin private sector companies moving to $800 million then $1 billion, and the introduction of the $1.5 billion threshold for trade-agreement country of origin private sector investors. The decrease in the number of net benefit reviews is reflected in an increase in both number and, more significantly, value of the average notification.
A final note on the overall value of notifications relates to indirect transactions: in 2017–18 there were six notifications with an Asset Value over $1 billion dollars. These investments were not subject to net benefit review because they were either indirect investments by a private WTO-investor, as part of a larger global transaction, or the establishment of a new Canadian business. Therefore, the investor was not required to submit an application for review but a notification under the Act.
Description of Figure 3: Notifications
|Asset Value ($billions)||Enterprise Value ($billions)||Number of notifications||Number of new businesses|
Investment by Sector
Investments subject to the Act are characterized as belonging to one of five broad sectors,Endnote 4 based on the North American Industry Classification System (NAICS) codes. Figure 4 below demonstrates the relative values of investment in each of these sectors across the last five fiscal years.
- Resources: 66 investments were processed in 2017–18 in this sector with a total value of $1.79 billion in Asset Value, and $13.97 billion in Enterprise Value. While the number of transactions was consistent with 2016-17 (67 total investments), the value of investment in this sector saw a meaningful increase. In 2016-17, resource investments accounted for $686.88 million in Asset Value and $7.28 billion in Enterprise Value.
- Manufacturing: As with the resource sector, manufacturing saw significant growth in terms of total value of investments compared to 2016-17. With 179 investment transactions and a total Asset Value of $24.72 billion and a total Enterprise Value of $24.29 billion, manufacturing had the highest investment values, in both Asset and Enterprise Value, across all five sectors in 2017–18. It must be noted that one particularly large indirect transaction almost solely accounts for the growth in Asset Value. In 2016-17, there were 175 investments with a total Asset Value of $5.93 billion and $13.49 billion in total Enterprise Value in this sector.
- Wholesale and retail: There was a total of 115 investment transactions filed in this sector, representing values of $7.14 billion in Asset Value and $7.71 billion in Enterprise Value. Both the number of transaction and the total value of the investments are consistent with the previous year, which saw 116 transactions for a total of $3.67 billion in Asset Value investments and $9.51 billion in Enterprise Value.
- Business and services: In 2017–18, this sector accounted for 250 investment transactions, the highest number of investments of the five sectors. In terms of value, the investments totalled $4.39 billion in Asset Value and $13.01 billion in Enterprise Value. By comparison, in 2016-17, 232 investment transactions were processed in this sector representing $3.64 billion in Asset Value and $8.70 billion in Enterprise Value.
- Other services: This final sector saw 141 investment transactions filed, with value totals of $1.03 billion in Asset Value and $4.70 billion in Enterprise Value. While the number of transactions did not change significantly from the 147 filed the previous year, the value decreased considerably from $7.17 billion in Asset Value and $11.34 billion in Enterprise Value in 2016-17.
Description of Figure 4: Asset Value and Enterpirse Value
|Resources AV||Resources EV||Manufacturing AV||Manufacturing EV||Wholesale and retail AV||Wholesale and retail EV||Business and services AV||Business and services EV||Other services AV||Other services EV||Total AV||Total EV|
Investment by Country or Region of Origin
Overall, in 2017–18, the top five source countries or regions of origin for investment accounted for approximately 93 percent of all in-bound investment, or 697 out of 751 total certified or approved investment filings, and 94 percent of the total value of investments measured by Asset Value, and 99 percent by Enterprise Value. These top countries or regions were the United States, the EU, China, and Japan in the top four, with Australia, India and Switzerland tying in fifth place.
Of these top source countries or regions the United States remained the number one source of investments in Canada under the Act (Figure 5), accounting for 403 investments or approximately 53 percent of total processed investment filings. In terms of value, these investments from the U.S. totalled $30.18 billion in Asset Value and $42.42 billion in Enterprise Value, or approximately 77 percent and 67 percent, respectively, of total investment values in the last fiscal year.
Description of Figure 5: Investment by Country or Region of Origin
|Country or region of origin||Number|
|Rest of EU||29|
Collectively, the European Union was the second largest regional source of in-bound investment, with 202 investments in 2017–18 totalling $5.53 billion in Asset Value and $9.38 billion in Enterprise Value. These investments represented 27 percent of the total number of investments, 14 percent of the total value of Asset Value investments and 15 percent of the total value of Enterprise Value investments.
Within the EU, investment by country was as follows, by largest number of individual investments:
- France: 57 total investments worth $1.57 billion in total Asset Value and $199.93 million in total Enterprise Value.
- Germany: 36 total investments worth $658.52 million in total Asset Value and $592.77 million in total Enterprise Value.
- United Kingdom: 33 total investments worth $2.99 billion in total Asset Value and $760.79 million in total Enterprise Value.
- Netherlands: 18 total investments worth $48.5 million in total Asset Value and $6.87 billion in total Enterprise Value.
- Italy: 13 total investments worth $60.46 million in total Asset Value and $384.66 million in total Enterprise Value.
- Rest of EU: 29 total investments worth $2.05 billion in total Asset Value and $431.15 million in total Enterprise Value.
|Number of Investments||Value of Investments ($M)|
|Asset Value||Enterprise Value|
China's investments, on a value basis, were third after the United States and the EU in terms of Enterprise Value. China accounted for a total number of 34 investments representing $28.47 million in total Asset Value and $6.69 billion in total Enterprise Value investments or, 0.07 percent and 10 percent, respectively.
Other noteworthy sources of investment in 2017–18 included:
- Japan: 19 investments worth a total of $1.00 billion in Asset Value and $515.18 million in Enterprise Value.
- Australia: 13 investments worth a total of $80.52 million in Asset Value and $144.55 million in Enterprise Value.
- India: 13 investments worth a total of $8.25 million in Asset Value and $86.01 million in Enterprise Value.
- Switzerland: 13 investments worth a total $14.68 million in Asset Value and $3.74 billion in Enterprise Value.
|Number of Investments||Value of Investments ($M)|
|Asset Value||Enterprise Value|
Sectoral Investment by Top Source Countries or Regions
Within the top source countries or regions of origin for investment, the most common sector for the investment was the business and services sector (35 percent), followed by the manufacturing sector (24 percent), other services (19 percent), wholesale and retail (14 percent), and finally the resources sector (9 percent).
A more detailed breakdown by sector for each of the top six source countries or regions of origin is as follows:
- United States: 133 investments (33 percent) were in the business and services sector, followed by 98 investments in the manufacturing sector, 90 investments in the other services sector and 53 investments in wholesale and retail sector. The remaining 29 investments were in the resources sector.
- EU: Like the United States, the business and services sector represented the largest destination of investment from EU members, with 70 out of 202 investments, or 35 percent, in this sector. This was followed by the manufacturing sector with 50 investments, then the wholesale and retail sector (33 investments), followed by other services for 25 investments and 24 investments in the resources sector.
- China: The business and services was the highest-ranking sector with nine investments out of a total of 34 investments. This was followed closely by the resources sector with seven investments. The Manufacturing sector, wholesale and retail sector and the other services sector accounted for six investments each.
- Japan: Again, business services accounted for the most investment with 10 out of a total of 19. This was followed by four investments in the other services sector, three investments in the wholesale and retail sector and two in the manufacturing sector. There was no investment from Japan in the resources sector in 2017–18.
- Australia: Business led the other sectors with five investments out of 13, or nearly 40 percent. The manufacturing sector and other services sector each had three investments, while the resources sector, the wholesale and retail sectors had only one each.
- India: The business and other services sector accounted for nine out of 13 total investments. This was followed by two investments in both the manufacturing sector and the wholesale and retail sector. No investments were made in the other services sector and in the resources sector.
Description of Figure 6: Investments by Country or Region of origin and Sector
|Resources||Manufacturing||Wholesale and retail||Business and services||Other services|
Description of Figure 7.1: Value of Investments by Principal Province of Destination
|Province||Value of Investments|
|AB & ON||More than 10B$|
|SK & MB||100M$-10M$|
|NFLD & NB||10M$-100M$|
Description of Figure 7.2: Number of Investments by Principal Province of Destination
|Province||Number of Investments|
|NWT & NFLD & NB & NS||0-10|
|BC & QC||101-150|
|SK & MB||11-50|
|ON||More than 150|
National Security Activity
For the last three years, in furtherance of the Government's commitment to transparency, this Report has included details of the administration of the national security provisions of the Act. This began with the 2015-16 report, where for the first time information related to the process was included, to support regulatory certainty for Canadians and investors. In 2017, amendments were made to the Act to require reporting on national security.
The reporting included in this Report is separate and in addition to the Guidelines on the National Security Review of Investments, which were published in December 2016. The Guidelines describe the national security review process, including setting out a number of factors that the Government may consider when assessing whether an investment poses a national security risk. The Guidelines are also intended to provide practical guidance to international investors, Canadian businesses, and their advisors on national security reviews. They advise investors to contact the Investment Review Division to discuss proposed investments and, where applicable, to file a notification at least 45 days prior to planned implementation, whenever such investments may involve the factors outlined in the Guidelines.
Statistics and further information on the outcomes of reviews following a section 25.3 Order, as well as a summary of characteristics associated with investments that have been subject to section 25.3 Orders and examples of mitigation conditions considered or imposed, are provided in the following section. Details of specific cases are not included in this Report, in accordance with the confidentiality and privileged information requirements of the Act, and national security considerations.
The National Security Review Process
All investment filings submitted in the last fiscal year, including all 751 certified notifications or approved applications for net benefit review, plus CCCI's proposed acquisition of Aecon, as well as other investments which were not subject to any filing requirements, were reviewed under the multi-step national security process set out in the Act (see below graphic). This work is led by Canada's national security agencies and the other investigative bodies prescribed in the National Security Review of Investments Regulations for their potential to injure national security.
The initial period of review begins when the Minister becomes aware of the investment, which may be pre-filing, and ends 45 days after certification of the application or notification as complete, unless it is extended. During the initial period of review and throughout the review process, the security agencies and the other relevant prescribed investigative bodies assess information and intelligence related to the Canadian asset being acquired or business being established, the terms of the investment and the foreign investor. They may consult with Canada's allies in order to determine whether the investment could cause injury to national security. The Minister may also require the investor or the Canadian business or entity to provide any information considered necessary for purposes of the review of the investment.
At any time before the end of the 45 day period following the certification of the filing:
- The Minister may send the non-Canadian a notice under section 25.2 that an order for review of the investment may be made by the GiC under section 25.3 of the Act. A notice under section 25.2 may be issued if there are reasonable grounds to believe the investment could be injurious to national security. The effect of the notice is to prohibit implementation of the investment if it has not yet been implemented. The notice triggers an additional 45 day period for review, by the end of which either a notice of no further action is issued under paragraph 25.2(4)(a) or an order is issued by the GiC under section 25.3. Or,
- The GiC may issue an order under section 25.3. A section 25.3 order may be issued on the recommendation of the Minister, if, after consultation with the Minister of Public Safety, the Minister considers the investment could be injurious to national security. The effect of the order is to prohibit implementation of the investment if it has not yet been implemented. It triggers an up to 90 day (or longer with the investor's consent) period for review, by the end of which either a notice of no further action is issued under paragraph 25.3(6)(b) or an order containing measures to protect national security may be issued by the GiC under section 25.4.
A section 25.3 order is required to have been made by the GiC before an order can be imposed on the investment under section 25.4. This order can block the investment, order divestiture, or impose conditions on the investment to protect national security. However, a section 25.3 order is not required for the security and intelligence agencies and other prescribed investigative bodies to review the investment. The legal authorities under the Act to investigate are the same throughout each period of the multi-step review process.
Notes: The initial period of review may begin during the pre-filing period but the statutory clock begins with a certified filing (or implementation, where a filing is not required). Time periods are prescribed in the National Security Review of Investments Regulations and reflect maximums.
Statistical Information on National Security Reviews in 2017–18
Of all of the investments reviewed, there were four Notices issued under section 25.2 of the Act. One notice was subsequently issued under subsection 25.2(4)(a) advising that no order would be made under section 25.3., and one investor withdrew its notification following receipt of the section 25.2 Notice.
Of the two remaining investments against which Notices were issued, both had an Order-in-Council issued under section 25.3. In one case, the proposed acquisition of Aecon Canada by CCCI, a final section 25.4 Order was issued blocking the transaction. In the other case, the foreign investor withdrew the notification before a section 25.4 Order was issued. The average length for these two cases subject to a section 25.3 Order was 209 days, from certification to final resolution (either block or withdraw).
See Table 1 for data on section 25.2 Notices and section 25.3 and section 25.4 Orders for 2017–18. Table 2 provides the 2017–18 data in historical context.
|s.25.2 Notice of potential s.25.3 Order for Review||para.25.2(4)(a) Notice of no further action||Withdrawal following s.25.2 Notice||s.25.3 Order for Review||s.25.4 Final Order*||Withdrawal after s.25.3 Order for Review issued|
The fiscal year runs April 1, 2017 to March 31, 2018.
*The s.25.4 final Order may have been issued in the following fiscal year, but is further to the s.25.3 Order for Review issued in FY2017–18.
|s.25.3 order for Review||2||1||4||1||5*||2|
|s.25.4 Final Order**||1 Block||1 Block||1 Divestiture
2 Conditions Imposed
|1 Divestiture||3 Divestiture
2 Conditions Imposed
|Withdrawal after s.25.3 Order for Review issued**||1||1|
The fiscal year is the 12-month period from April 1 in one calendar year to March 31 the next calendar year.
*One review was pursuant to a Federal Court Order.
**The s.25.4 final Order or withdrawal may have been in another fiscal year, but is further to the s.25.3 Order for review made in the identified fiscal year.
Characteristics of Investments that have been subject to Section 25.3 Orders for Review
Under Part IV.1 of the Act, proposed or implemented investments are assessed based on the facts related to the particular transaction under review. In assessing investments under the national security provisions of the Act, and as articulated in the Guidelines on the National Security Review of Investments, the terms of the investment, the nature of the asset or business activities involved, and the parties, including the potential for third-party influence, are considered. Determinations made by the Minister or Governor-in-Council under Part IV.1 of the Act are made on a case-by-case basis. The information provided below on the characteristics of investments that have been subject to Orders under section 25.3 of the Act, from fiscal years 2012-13 to 2017–18, should be read in that context.
Of the investments subject to a Governor-in-Council Order under section 25.3, the country of origin of the investment as indicated in the investment filing has been as follows: China (10 orders), Russia (2 orders), Egypt (1 order), the United Kingdom (1 order), and Cyprus (1 order). Table 3 provides the breakdown by year, and industry (by NAICS code as indicated in the investment filing) of the investments against which section 25.3 Orders were issued, and the outcomes following the Reviews.
|Origin*||Industry Sector (NAICS or SIC)**||Outcome following Section 25.3 Order|
|China||3254 (NAICS) - Pharmaceutical and medicine manufacturing||Withdrawal|
|China||2379 (NAICS) - Other heavy and civil engineering construction||Block|
|China||3351 (SIC) - Manufacturing Industries - Telecommunication Equipment Industry||Conditions Imposed|
|China||5179 (NAICS) - Other telecommunications||Divestiture|
|China||3366 (NAICS) - Ship and boat building||Divestiture|
|China||3359 (NAICS) - Other electrical equipment and component manufacturing||Conditions Imposed|
|Cyprus||4821 (NAICS) - Rail transportation||Divestiture|
|China||3351 (SIC) - Manufacturing Industries - Telecommunication Equipment Industry||Divestiture|
|China||3359 (SIC) - Manufacturing Industries - Other Communication And Electronic Equipment Industries||Conditions Imposed|
|China||7720 (SIC) - Business Service Industries - Computer And Related Services||Conditions Imposed|
|Russia||0710 (SIC) - Mining & Quarrying & Oil Well Industries - Crude Petroleum And Natural Gas Industries||Block|
|United Kingdom||7720 (SIC) - Business Service Industries - Computer And Related Services||Divestiture|
|Egypt||7720 (SIC) - Business Service Industries - Computer And Related Services||Block|
|China||7720 (SIC) - Business Service Industries - Computer And Related Services||Block|
|Russia||4821 (SIC) - Communication & Other Utility Industries - Telecommunication Carriers Industry||Withdrawal|
* The Origin column provides the Country of Origin of the Ultimate Controller of the Investor, as indicated by the Investor in the filings required by the Investment Canada Regulations.
** Investors are required to provide a NAICS code indicating the industry sector of the investment. Prior to 2015-16, the Standard Industrial Classification system was used. In this table, references are to either the 1980 Standard Industrial Classification - Establishments (SIC-E) or the 2012 version of NAICS, as indicated.
In all cases, the sufficiency of Canada's domestic laws designed to protect against threats to critical infrastructure, organized crime, and proliferation of sensitive goods, technology or data, was considered before an Order was issued or measures were imposed on the investment under the Investment Canada Act. Measures to mitigate the potential harm to national security were also considered and in some cases were imposed through conditions in a section 25.4 Order on the investment. The following are examples of measures that were considered or imposed on investments by an Order under section 25.4:
- Requiring Government approval of proposed business locations in order to avoid proximity to strategic assets
- Requiring that all servicing and support for some or all business lines is conducted in Canada
- Creating approved corporate security protocols to safeguard information and access to a site
- Requiring the engagement of a security-cleared compliance officer to ensure and report on compliance
- Requiring third-party compliance audits on request
- Requiring access to facilities for compliance inspection
- Requiring employees with access to sensitive information to attest to compliance with approved security protocols
- Notifying existing customers of pending new ownership
- Providing notice to the Minister of new prospective employees who would have access to sensitive information or technology as a part of their job description
- Excluding sensitive business segments or assets from a transaction
As demonstrated in this Report, Canada has welcomed billions of dollars in global investments. Canada will continue to be open to investment that benefits Canadians and to advance policies that foster conditions for investment, innovation and economic growth. The Government will continue to administer the Act in as transparent and predictable a manner as possible while protecting commercially confidential information and national security. The disclosure in this Report is in furtherance of that objective. Investments are examined on a case-by-case basis under the Investment Canada Act and Canadian businesses and investors are strongly encouraged to account for the ICA process in their investment planning and to engage with the Investment Review Division as early as possible on specific investment proposals.
Errata: Investment Canada Act - Annual Report 2015-16
In preparing the Investment Canada Act 2017–18 Annual Report, errors were identified in the statistics published in the 2015-16 Annual Report.
The total number of notifications was underreported, with consequential errors in the total Asset and Enterprise values for the year, as well as the sectors and countries of origin referenced. The underreporting was a result of a change in the methodology used in retrieving the number of notifications certified under theAct, as well as a discrepancy in the database software used prior to 2016-17.
Below is the amended data on the administration of the Act for the fiscal year 2015-16, obtained using the same methodology as in the 2016-17 and 2017–18 Annual Reports.
|(Values in $Millions)||Total||Asset Value||Enterprise Value|
|(Values in $Millions)||Total||Asset Value||Enterprise Value|
|Wholesale and Retail Trades||117||59||1,130||58||1,929|
|Business and Services Industries||200||95||10,471||105||5,465|
(Values in $Millions)
|Number||Asset Value||Enterprise Value|
|Brazil, Russia, India, China||36||803||2,516|
|Number||Asset Value||Enterprise Value|
|Rest of European Union||29||3,715||314|
- All references to the 2017–18 fiscal year in data, tables, charts and explanations mean from April 1, 2017, to March 31, 2018.
- Acquisitions are recorded by the Asset Value or the Enterprise Value of the Canadian business to be acquired, based on its most recent audited financial statements, not by the purchase price. The value of a new business proposal is recorded on the basis of the planned amount of investment over the first two years.
- The actual number and value of acquisitions and new business starts by international investors may not be wholly reflected for the following reasons:
- From time to time, two or more investors may submit applications for review to acquire the same Canadian business. In such cases, each proposal is recorded as a separate transaction.
- In June 1999, responsibility under the Act for investments related to cultural activities listed in Schedule IV of the Investment Canada Regulations was transferred to Canadian Heritage. Accordingly, our statistics since that time do not include foreign investments in Canadian businesses engaged strictly in activities listed in Schedule IV.
- Most notifications and applications are submitted to Innovation, Science and Economic Development Canada at the proposal stage and processed promptly under the terms of the Act. However, for commercial or other reasons, the investor may subsequently choose not to implement the investment or to implement it at a later time.
Data Comparison with Other Statistical Sources
The principal purpose of the Act is the review of investment activity by international investors. Innovation, Science and Economic Development Canada data on the value of international investments for a given period therefore reflect operations under the Act. Only data on new business proposals and acquisitions of control by foreign investors are collected. The value of "planned investment" is tabulated from new business notifications and the book value of "assets acquired" from transactions requiring notification or review. Aggregated figures are published quarterly.
Innovation, Science and Economic Development Canada data cannot be compared with either the foreign direct investment flows or stock figures published by Statistics Canada because the data represent a portion of the value of international investment in Canada. For example, the value of major plant expansions by established foreign investors in Canada is not captured.
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