moved that Bill C-34, An Act to amend the Investment Canada Act, be read the second time and referred to a committee.
He said: Madam Speaker, I am pleased to rise today.
I would like to point out that the Nasdaq opening bell rang for the very first time in Ottawa, Canada, this morning. This is the first time in history that the Nasdaq opened in Canada. OpenText has just been registered in Canada, and I think this is a great moment for Canada and the Canadian industry.
I want to thank my colleagues on both sides of the House. I am pleased to rise in the House today to speak to Bill C-34, an act to amend the Investment Canada Act, or the ICA, and move that it be read a second time and referred to a committee.
Before I talk about the legislative amendments in more detail, I would like to make a few comments about the act. As members know, the ICA is an important asset for our economy because it helps make Canada a top destination for foreign investment by ensuring a stable and predictable system.
Ensuring that Canada remains attractive to businesses and investors through a clear and predictable regulatory regime is ever more important as we continue to attract significant new investment. I think colleagues on both sides would have seen that Canada has what the economy of the 21st century needs.
No matter which country I visit, it is understood that Canada is a great investment destination, particularly when it comes to clean technologies, critical minerals, and automotive and battery supply chains. In fact, Bloomberg ranked Canada second in the world for its battery ecosystem, ahead of the United States and just behind China. This is a great thing that we have achieved in a couple of months, I would say, and we should all be proud as Canadians.
I will continue to work tirelessly to attract more investments to Canada that will create well-paying jobs and spur economic growth, and I look forward to more big announcements in 2023.
Again, this law seeks to encourage economic growth and job growth in the country and provides for intervention only in cases where an investment would harm Canada's national security. I think all of my colleagues are aware of the importance of protecting Canada's national security. What is more, it also gives us the necessary powers to act quickly and decisively as needed.
Over the years, we have noted three major themes, which were addressed during the review of the act. Specifically, these are strategic and geopolitical concerns, the need for greater certainty and transparency for investors and the need to protect the economy and innovation in Canada.
Let me talk about modernizing the law in the current geopolitical context. Canada’s interactions with the rest of the world are changing. Hostile state and non-state actors pursue deliberate strategies to acquire goods, technologies and intellectual property. They do so in ways that are incompatible with Canada’s interests and principles. We also know that foreign investments can be used as a conduit for foreign influence activities that seek to weaken our norms and institutions.
The nexus between technology and national security is now clear, and I think we have recent examples of that. It is here to stay for the long run. Rapid technological innovation has provided Canada with new opportunities for economic growth, but it has also given rise to new and difficult policy challenges.
I will talk about modernizing the law and supporting investment in Canada. At the same time, we need to support a welcoming investment climate for beneficial investment. This means that the ICA’s operations must be clear, transparent and, I am sure we would all agree, efficient. We know that regulatory certainty and the speed of reviews are important factors in attracting investments to Canada. It is all about predictability and having a very stable regime.
I will now mention trends in innovation that we are seeing now. Canada’s foreign investment regime also needs to adapt to the speed of innovation. Intangible assets, such as intellectual property and data, have grown in importance in defining Canada’s economic strength, and at the same time they pose new challenges in terms of how these are to be managed.
A good example of this challenge is quantum technology. Our government recognizes the value of the intangible economy, its growth and the relevant opportunities for Canadians across our nation. That is why, in January, I announced the launch of Canada’s national quantum strategy, which will shape the future of quantum technologies in Canada and will help create thousands of jobs across our nation.
Quantum science and technologies are at the leading edge of research and innovation, with enormous potential for commercialization and game-changing advances, including more effective drug design, better climate change forecasting, improved navigation and innovations in clean technologies.
The Government of Canada is committed to supporting the continued growth of this emerging sector as it helps drive Canada’s economy and supports highly skilled jobs and, I would say, well-paying jobs as well. To ensure we protect it, quantum science is already listed as a sensitive technology area under the ICA’s national security guidelines.
The amendments we are proposing today are based on those themes. Our government has already taken steps to modernize the ICA by updating our policies to improve transparency and provide certainty to investors.
I will outline some of the developments from the past few years. In 2021, we updated the guidelines on the national security review of foreign investments. In 2022, in the wake of the unprovoked and unjustified invasion of Ukraine, we issued a new policy on reviewing foreign investments originating in Russia. We also introduced a voluntary filing mechanism for investors wishing to obtain regulatory certainty, within the same statutory deadlines as a mandatory filing. Investors gain certainty with respect to their plans, while the government gains greater visibility and will have five years to review and adopt measures regarding an investment in the absence of a voluntary filing. Finally, a policy on investments made by foreign state-owned enterprises into critical minerals under the ICA was announced last fall. This is one of the most important measures.
How are we responding to the evolving environment that I just mentioned, which I think all colleagues would recognize in this House?
Canada remains an open economy that is the envy of the world. However, our country is increasingly targeted by hostile actors. We are seeing it more and more. This is a threat for our national security and Canadians' prosperity now and in the future. That is why our government is taking bold steps today to protect the Canadian market by developing our tools to provide better protection against current threats.
Suffice it to say that we are living in unprecedented times, when foreign investments are being examined more closely with respect to national security, not only here in Canada but around the world. Some of the reasons for this include the COVID-19 pandemic, the repercussions of climate change on security, global supply chain disruptions and changing geopolitical considerations.
Only by taking appropriate action today to address the threats of tomorrow will we ensure that Canada remains a top destination for foreign investors. Last year, we reached a new all-time high in total number of filings, which is consistent with the overall recovery of the Canadian economy. I want to reiterate that the ICA plays a key role in Canada's economic security, and I think that is a fact all parliamentarians agree on. This legislation has served Canada well, but it needs to be updated. It provides for the review of significant foreign investments to ensure that they are of net benefit to Canada. The ICA also provides for the review of investments that may be injurious to Canada's national security.
All investments, regardless of value or country of origin, including minority investments and investments to create new Canadian businesses, are subject to this review process. The proposed amendments do not affect the key aspects of the net benefit review. They provide for improvements to the national security review process by making it more efficient and, I would argue, more predictable.
The time is right to pursue modernization of the Investment Canada Act. That is certainly my belief, and when I talk to CEOs and investors around the world they understand that we need to modernize an instrument that has served our country very well.
Now more than ever, we need to make sure we are doing everything we can to foster an innovative and healthy economy. The global environment has evolved significantly in recent years, including in global competition, investment and technology. Under my leadership, our evolving policies and guidance have been addressing these developments as they arise. We have taken clear and decisive action on transactions when necessary to protect Canada’s national security, and I can commit to the House that we will continue to do so. However, we cannot rest, and are not resting, on the success of our past actions.
The guidance and decisions issued over the past several years make it clear that some transactions, particularly those by state-owned or state-influenced investors, may be motivated by non-commercial imperatives that could harm Canada’s national security. Allow me to repeat that these investments currently face enhanced scrutiny under the ICA. We have never hesitated and will never hesitate to take action to protect Canada’s national security. That is our responsibility and we take it very seriously.
Canada’s well-known excellence in emerging and sensitive technologies and critical minerals is an attractive target for hostile states. Through these amendments, we are making sure we have the right tools to protect those sectors along with our IP, personal data and critical infrastructure. The volume and complexity of foreign investment reviews are increasing, and this significant change provides a strong rationale for supporting ICA modernization. I hope every member of the House will support that, because it is working for Canada. There is nothing partisan or political about it. This is about protecting our national security and making sure we remain a destination for foreign investment.
Fundamentally, we believe that an effective regime must be robust, transparent and flexible to adapt to a changing world, and now is the time to make these changes. This new bill represents the most significant update of the ICA since 2009. Think of where the world is today and what it looked like in 2009. I put it to all members that we would all agree that it needs an update. We are making important moves now to review and modernize key aspects of the act, while ensuring that the overarching framework to support needed foreign investment to grow our economy remains strong and open.
Let us talk about the amendments set out in Bill C‑34. We are proposing seven amendments to the Investment Canada Act.
First is the new requirement for prior notice of certain investments. That way, Canada will have greater oversight over investments being made in certain designated industries, especially when they give investors access to material assets and material non-public technical information, such as cutting-edge intellectual property and trade secrets, once the investment is finalized.
In my opinion, this is a necessary measure in a world where intangible assets are becoming increasingly important.
This will enable the government to prevent potentially irreparable damage. Investors will have to provide notice of investment within the timelines specified in the regulations.
I want to stress that we are taking a targeted approach here. An across-the-board pre-implementation filing requirement without regard to nuance of business sector, type of transaction or other relevant facts would have an unnecessarily burdensome impact on needed and beneficial investment into Canada without providing improvements to national security analysis. Our targeted approach will support transparency and certainty for investors, which is something we all want.
Second, the bill would make the national security review process more efficient by providing me, as Minister of Industry, in consultation with my colleague, the Minister of Public Safety, the authority to extend the national security review of investments, whereas previously a Governor in Council order was required at that stage. This is about being efficient. This is about going at the speed of business, and this is about agility in light of different types of transactions.
Removing the additional step of getting an order by the Governor in Council would give more time to our interdepartmental experts in security and intelligence to complete their vital work, including the intelligence analysis assessing the national security risks of a transaction.
Third is amendments to penalties for non-compliance with Investment Canada Act provisions. The penalties were set decades ago and do not reflect the current value of transactions or inflation.
For example, under the current Investment Canada Act, the maximum penalty of $10,000 per day that was established in 1985 will go up to $25,000 per day per violation indefinitely. There is also a new penalty for investors who fail to submit prior notice, which I discussed earlier. They will be fined $500,000 or the amount specified in the regulations, whichever is higher.
This update will make the penalties more effective deterrents.
Fourth, the bill introduces the authority for me, as Minister of Industry, after consultation with my colleague, the Minister of Public Safety, to impose interim conditions on an investment. This would reduce the risk of national security injury taking place during the course of the review itself, such as through the possible transfer of assets, intellectual property or trade secrets before the review is complete.
Fifth, the act provides greater flexibility for mitigating national security risks by allowing me, again in my capacity as Minister of Industry and again in collaboration with my colleague, the Minister of Public Safety, to impose binding commitments on investors. These commitments will need to demonstrate that they adequately reduce the national security risks that could arise from the investment in question.
I would add that this is a measure that is used fairly often in other countries, including our American neighbours.
Previously, undertakings to mitigate the national security risks related to a transaction could only be imposed by an order of the Governor in Council. With binding commitments that can be discussed and agreed upon at the departmental level, these can also be potentially modified or even terminated as needed.
Sixth, the bill would allow Canada to share case-specific information with international counterparts to help protect common security interests. This type of co-operation is so important when considering an investor who may be active in several jurisdictions seeking the same technology, for example. We would have more discretion to share such information, and of course it would be based on the evaluation of confidentiality and other concerns in doing so.
Canada’s investment review regime is world-leading and we share information and collaborate closely with our allies, several of whom, including among the Five Eyes, have either updated or introduced new screening mechanisms responding to geopolitical threats.
Finally, the legislation introduces new provisions for protecting information in the context of judicial review of decisions. This change will enable the government to rely on sensitive information to defend its national security decisions, while protecting that information from disclosure. These new provisions will also allow applicants to participate fully in the process.
Our record as government makes it clear that where national security is concerned, we do not hesitate to take decisive action. Our assessment of risk keeps pace with evolving economic and geopolitical circumstances.
While the ICA provides broad authorities to intercede and address national security risk that can arise in foreign investment, these amendments build on that strong foundation and improve on the mechanics of the process around national security.
I hope that members will take this bill as seriously as they should, because the world is watching. We want to remain an attractive destination for investment, and this law would achieve that.