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Investment Canada Act

Bill to Amend--Second Reading

December 14, 2023

Colleagues, I rise today to speak to Bill C-34, An Act to amend the Investment Canada Act, at second reading. The bill’s short title, the National Security Review of Investments Modernization Act, is longer than its actual title.

This bill, which passed unanimously in the other place, contains both substantive and procedural changes to the current law. It also includes a number of highly technical amendments that, in my opinion, would be inappropriate to deal with at second reading. It will be up to the committee studying this bill to give all of its provisions the full attention they deserve.

Let me begin by giving you a brief history of the origins of this bill.

It was under the Conservative government led by the Honourable Prime Minister Brian Mulroney that the Investment Canada Act was first passed. At the dawn of international negotiations aimed at establishing rules for international trade, the government of the day was eager to stimulate the Canadian economy and encourage infusions of new foreign capital. Naturally, it wanted to create a framework for foreign investment and establish predictable, transparent mechanisms for authorizing such investments and protecting national security. Adopted on June 20, 1985, the main purpose of the bill read as follows:

Recognizing that increased capital and technology benefits Canada, and recognizing the importance of protecting national security, the purposes of this Act are to provide for the review of significant investments in Canada by non‑Canadians in a manner that encourages investment, economic growth and employment opportunities in Canada and to provide for the review of investments in Canada by non-Canadians that could be injurious to national security.

Then came the international trade negotiations from 1986 to 1994, which led to the adoption of the World Trade Organization Agreement, signed in Marrakesh in April 1994. In December of that year, the federal government passed the World Trade Organization Agreement Implementation Act.

Then, in 2009, still under a Conservative government, but this time led by the Right Honourable Prime Minister Stephen Harper, the Investment Canada Act was modernized through Bill C-10, An Act to implement certain provisions of the budget tabled in Parliament on January 27, 2009 and related fiscal measures. This was the first time the Investment Canada Act had received a serious facelift since it was originally passed in 1985. Given the dramatic changes to the global context over 25 years and the exceptional pace of technological advances, the Investment Canada Act had to keep pace and adapt to the reality of the 21st century.

It has been 14 years since the Investment Canada Act was last updated. Because of the extremely rapid pace of change in international trade, numerous sensitive geopolitical issues, and technological advances that are occurring at breakneck speed, a new version of the Investment Canada Act was unavoidable. This is why we have before us today Bill C-34, which is sponsored in this chamber by my colleague, the Honourable Clément Gignac.

Speaking of sensitive geopolitical issues, the matter of foreign interference into Canadian affairs by certain countries calls on us to be extra vigilant. Some transactions, particularly those involving state-owned or state-influenced investors, may be motivated by non-commercial imperatives that could harm Canada’s national security. Russia and China are getting more aggressive in this area. They come in openly, through the front door, but also through the back door, and we need to be very vigilant about that.

Let’s come back to the heart of Bill C-34. I will go over some aspects of the bill without belabouring every provision. Senator Gignac gave a very informative presentation on Bill C-34 during his speech at second reading on November 23.

Bill C-34 amends the Investment Canada Act to reinforce the Government of Canada’s jurisdiction to detect, review and limit proposed foreign investments that could be harmful to Canada’s national security.

Essentially, it strengthens the security review of foreign investments by doing the following: establishing a new pre‑implementation filing requirement for certain investments; making the national security review process more efficient by extending and clarifying the spheres of activity covered by the Act; increasing penalties for non-compliance with Investment Canada Act provisions; making it possible to impose interim conditions on an investment; making it possible to impose binding commitments on investors; allowing Canada to share case-specific information with other countries to protect common security interests; and, finally, introducing new provisions for protecting information in the context of judicial review of decisions.

Honourable senators, I mentioned at the beginning of my speech that Bill C-34 was passed unanimously in the other place. I must nevertheless point out that the Standing Committee on Industry, Science and Technology studied this bill in great detail. Several amendments were debated and adopted.

Conservative Party MPs participated in the process earnestly.

First, the government was prepared to pass a bill that would have given state-owned enterprises, or SOEs, carte blanche to invest, regardless of their relationship with Canada. When the government introduced this bill, it contained no provision automatically subjecting SOE investments to a national security review. Our amendment reduces the $512-million review threshold to zero, thus requiring all SOE investments in Canada to undergo a national security review.

Second, the Conservatives introduced an amendment whereby the acquisition of any asset by an SOE would be subject to review as part of the national security review process. This amendment ensures that not only new business establishments, acquisitions and share purchases, but also all assets, are considered as part of this review, which is another very good amendment to the bill.

Third, when the government introduced the bill, it did not take into account concerns about companies previously convicted of corruption. The Conservative amendment requires an automatic national security review whenever a company with a past conviction is involved.

Lastly, the government would have been pleased to pass a bill that gave the minister more authority and discretion, despite the many blunders committed over the past eight years, when very real threats posed by certain foreign investments were not taken seriously. The original bill would have left it up to the minister to launch a national security review after a certain threshold was met. The Conservative amendment closed this loophole and made the review mandatory, rather than optional, once a $1.9-billion threshold was reached.

These amendments were brought forward and accepted by the House.

Naturally, a number of other amendments didn’t make it to the committee stage and were defeated. One of these is of special concern to me.

Subsection 25.3(1) of the Investment Canada Act reads as follows:

An investment is reviewable under this Part if the Minister, after consultation with the Minister of Public Safety and Emergency Preparedness, considers that the investment could be injurious to national security and the Governor in Council, on the recommendation of the Minister, makes an order within the prescribed period for the review of the investment.

However, the relevant provision in Bill C-34 does away with the Governor in Council step stipulated in the Canada Investment Act, which gave responsibility to “. . . such member of the Queen’s Privy Council for Canada as is designated by the Governor in Council as the Minister for the purposes of this Act.”

In other words, we’re talking about the minister here. However, Bill C-34 states the following:

 . . . authorize the Minister of Industry, after consultation with the Minister of Public Safety and Emergency Preparedness, to impose interim conditions in respect of investments in order to prevent injury to national security that could arise during the review;

The enactment could also “. . . require, in certain cases, the Minister of Industry to make an order for the further review of investments . . . .”

It seems to me that to bypass the cabinet stage in this way is to shirk government responsibility. It’s entrusting a single person with important decisions that are potentially damaging to the interests of Canada and its people. I would therefore respectfully invite the committee studying Bill C-34 and the bill’s sponsor to pay particular attention to this issue of government responsibility.

That is even more important since, recently, we saw a sad example of how national security can be compromised when certain safeguards are not put in place.

In 2017, a company called Norsat set up shop in British Columbia, and it is still there today. It also owns Sinclair in Toronto. The company was acquired by Hytera, which is partially owned by the Government of China and works in the critical telecommunications sector. Even though the then Minister of Industry was urged many times in the House to conduct a national security review of that acquisition, he refused to do so, and therefore there was no national security review.

In January 2022, Hytera was charged with 21 counts of espionage in the United States, and President Biden subsequently banned the company from doing business in the U.S.

However, eight months later, the RCMP purchased radio frequency equipment to integrate into the communications system, giving the Chinese state-owned subsidiaries access to all the locations of the RCMP communications services.

No public security review has been conducted to date. Shockingly, Public Services and Procurement Canada has confirmed that security concerns were not taken into account during the tendering process for this equipment. This is alarming. The Liberals also failed to consult their own government’s Communications Security Establishment about the contract.

Instead, the contract was simply awarded to the lowest bidder. Another angle worth examining more closely is the mining claims issue. With the exception of oil and gas, in Canada, the right to develop a deposit that is part of the Crown domain is acquired by claim, whether on federal or provincial territory. Bill C-34 establishes thresholds below which comprehensive and security reviews will not be mandatory.

How will Bill C-34 work with respect to claims of negligible value, negligible, that is, until a deposit of some sought-after critical resource is discovered? How will Bill C-34 align with Canada’s Critical Minerals Strategy? Frankly colleagues, I asked public officials these kinds of questions at a technical briefing but I never got a satisfying answer. I think that the committee tasked with studying Bill C-34 should explore this important aspect, which has potential economic and geostrategic consequences for Canada. The question is quite simple: Are we willing to let our natural resources slip away to foreign companies or powers?

Colleagues, these are the few comments I wanted to share with you about Bill C-34. Obviously, now that the bill is at second reading stage and was unanimously passed by our colleagues in the other place, I’m going to recommend that it be passed at second reading and sent to a Senate committee for study. Thank you.

The Hon. the Speaker pro tempore [ + ]

Are senators ready for the question?

The Hon. the Speaker pro tempore [ + ]

Is it your pleasure, honourable senators, to adopt the motion?

Hon. Senators: Agreed.

(Motion agreed to and bill read second time.)

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