The Investment Canada Act (ICA) [1] is a Canadian federal law governing large foreign direct investment in Canada. The ICA was one of the first acts of Brian Mulroney's newly elected Progressive Conservative government, receiving royal assent on 20 June 1985. It has been amended at various times, including recently the Economic Action Plan 2013 Act. [1] [2] Pertinent regulations include the Investment Canada Regulations, SOR/85-611. [3] The Act empowers the government to forbid foreign investments of "significant" size if they do not present a "net benefit to Canada." As of 2017, Canadian policy is to consider over $1 billion "significant." [4] The determination of what substantially constitutes the locus of control of a corporation is governed by the Canadian Ownership and Control Determination Act. [5]
The Act was intended to signal Canada's openness to foreign investment and coincided with a narrowed mandate of the Foreign Investment Review Agency (FIRA), which was renamed Investment Canada. FIRA had been set up by Pierre Trudeau's Liberal government to limit increasing US ownership of Canadian business. [6] Canadian nationalists criticized FIRA's effectiveness, noting that in practice it was rarely used to actually forbid an investment. [7] The business community and opposition Progressive Conservative Party criticized FIRA for its activism, saying it had stifled investment from the emerging global economy. [8]
All transactions that are acquisitions of a Canadian business by non-Canadians must be "notified" (ICA ss. 11-12), but only those above a 5 million dollar threshold (or 50 million dollars for indirect investments, such as shares) are reviewable (ICA s. 14). If the investor is a WTO member, the threshold was 320 million in 2012.
The Act empowers a Director of Investments, who as of April 2015 is Deputy Minister of Industry John Knubley, [9] [10] to produce decisions, and reports of decisions. [11] The thresholds, for valuations above which the ICA is to be invoked, are (according to the legislation) several and hinge on whether or not the investors are part of the World Trade Organization. [12]
While the ICA gives Investment Canada the power to restrict investment, its mandate is only to "review...significant investments...in a manner that encourages investment, economic growth and employment opportunities" unless proposed investments specifically injure national security. [13] [14] According to labour economist Jim Stanford, the Mulroney government never invoked the Act to deter a foreign investment, nor did its successors, the Chrétien and Martin Liberal governments. [15]
Foreign investment in Canada rose significantly in the wake of the ICA, from approximately $100 billion in 1985 to over $550 billion in 2006. [16] [17]
The ICA was invoked for the first time when in 2008 the Conservative government of Stephen Harper blocked the sale of the space division of MacDonald, Dettwiler & Associates, a Vancouver-area technology company, to US-based Alliant Techsystems. [18] As of November 2010, the federal government had reviewed 1,637 takeovers since 1985 and rejected only one, that of MDA. [19]
On 3 November 2010, then-Minister of Industry Tony Clement imposed conditions for approval of the hostile takeover for over $38bn of PotashCorp by Australia-based mining conglomerate BHP Billiton. [19] [20] On 15 November 2010, BHP-Billiton withdrew its bid, saying the conditions had proved too onerous. [21]
While the Act was not used to formally block takeover bids and investments, its presence and vague mandate enables diplomats, public representatives and civil servants to informally dissuade investors, and creates a sense of government risk amongst foreign investment analysts. The scale of impact is difficult to measure and has not been widely studied.
Nationalist critics believe the Act is too narrow and, as a matter of policy, should more heavily restrict foreign investment.
Critics note that Canada's share of world direct investment fell significantly after 1985. [22] Some of this is due to large increases in emerging economies' receipt of FDI, but Canada's share has fallen even amongst developed countries, [23] and in the late 2000s Canada became a net investor in the world. [16] [24]
Some critics note that the Harper government's use of the ICA has seemed unpredictable, resulting in a "chilling" effect on foreign investment in Canadian companies. This hidden effect, if it exists, could suppress the value of Canadian shares and companies by deterring potential investors from even considering Canada as a market or destination. [25] In response to this criticism, on 15 November 2010 the Harper government signalled its intention to provide clear guidelines for its use of the ICA. [26]
BHP, officially named BHP Group Limited and formerly known as BHP Billiton, is an Australian multinational mining and metals public company headquartered in Melbourne, Australia.
Tony Peter Clement is a Canadian former federal politician and former Member of Parliament for Parry Sound-Muskoka in Ontario. Before entering federal politics, Clement served as an Ontario cabinet minister, including as Minister of Health and Long-Term Care under premiers Mike Harris and Ernie Eves.
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Rio Tinto Group is a British-Australian multinational company that is the world's second largest metals and mining corporation. It was founded in 1873 when a group of investors purchased a mine complex on the Rio Tinto, in Huelva, Spain, from the Spanish government. It has grown through a long series of mergers and acquisitions. Although primarily focused on extraction of minerals, it also has significant operations in refining, particularly the refining of bauxite and iron ore. It has joint head offices in London, England and Melbourne, Australia.
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The Canada Foundation for Innovation is an independent corporation created by the Government of Canada to invest in research facilities and equipment in Canada's universities, colleges, research hospitals, and non-profit research institutions.
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The Foreign Investment Review Agency (FIRA) was established by the Canadian Parliament in 1973 to ensure that the foreign acquisition and establishment of businesses in Canada was beneficial to the country. The Foreign Investment Review Act that created the agency was the culmination of a series of government reports and debates. The 1957 report of the Royal Commission on Canada's Economic Prospects (known as the Gordon Commission) firmly planted foreign investment on the political agenda. Next, the 1968 Watkins report (known formally as Foreign Ownership and the Structure of Canadian Industry), called for a national policy capable of handling Canada's interests in the age of the multinational corporation.
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The Olympic Dam mine is a large poly-metallic underground mine located in South Australia, 550 km (340 mi) NNW of Adelaide. It is the fourth largest copper deposit and the largest known single deposit of uranium in the world. Copper is the largest contributor to total revenue, accounting for approximately 70% of the mine's revenue, with the remaining 25% from uranium, and around 5% from silver and gold. BHP has owned and operated the mine since 2005. The mine was previously owned by Western Mining Corporation. Since the 1970s environmentalists, traditional owners and others have campaigned against the mine, largely on the basis of its contribution to the nuclear cycle and its use of underground water.
The idea of ministerial discretion, when employed in Canadian statute law, means the power of a Crown minister to vary or alter the decisions of their bureaucrats, one of their Committees, or one of their Boards. The idea derives from the laws of the United Kingdom, of which Canada, under the rubric of British North America, once was part. The term needs to be written into the statute, as for example in section 51 of the Canadian Oil and Gas Operations Act:
The Governor in Council may at any time, in his discretion, either on petition of any interested person or of his own motion, vary or rescind any decision or order of the Committee made under this Act, whether the order is made between parties or otherwise and any order that the Governor in Council makes with respect thereto becomes a decision or order of the Committee and, subject to section 52, is binding on the Committee and on all parties.