Minister Paradis Announces Additional Improvements to the Foreign Investment Review Process

OTTAWA, ONTARIO--(Marketwire - May 25, 2012) - Today, the Honourable Christian Paradis, Minister of Industry and Minister of State (Agriculture), announced additional targeted improvements to the foreign investment review process that are designed to promote job creation, economic growth and long-term prosperity in Canada.

"Canada has a strong investment climate, and these targeted changes will ensure that our foreign investment review process continues to encourage investment and spur economic growth," said Minister Paradis. "Foreign investment is vital to the Canadian economy. It helps Canadian companies find new capital and enables them to expand, innovate and create jobs for Canadians."

In order to establish an alternative to potentially costly and time-consuming litigation, the Harper Government has issued a guideline to make formal mediation procedures available under the Investment Canada Act. This guideline will provide a voluntary means of resolving disputes when the Minister believes an investor has failed to comply with an undertaking.

To ensure that the review process focuses on the most significant transactions, regulations will be amended and published to progressively raise the review threshold from $330 million in asset value to $1 billion in enterprise value over a four-year period. This is in line with the core recommendations of the Compete to Win report of the Competition Policy Review Panel as well as previous amendments to the Investment Canada Act.

"Our foreign investment review process is sound and encourages investment, economic growth and prosperity in Canada," added the Minister. "With these targeted changes, we will ensure that it continues to do so for years to come."

Industry Canada has published a report on the administration of the Act and will be reporting annually going forward. The report provides information about investments subject to the Act and explains how the Act is administered.

Last month, Minister Paradis announced proposed legislative improvements to Canada's foreign investment review process to provide greater information to the public and more flexibility in enforcement.

Backgrounder

Proposed Amendments to the Investment Canada Regulations

Proposed amendments to the Investment Canada Regulations are necessary to bring into force the amendments to the Investment Canada Act (ICA) that were passed through the Budget Implementation Act, 2009. The ICA amendments raised the threshold for investment reviews to $1 billion over a four-year period and changed the basis of the threshold from asset value to enterprise value.

The Regulations are related to statutory amendments to the ICA that responded to core recommendations of the June 2008 Compete to Win report of the Competition Policy Review Panel. Recognizing that foreign investment is beneficial to Canada, the Panel recommended that the scope of the ICA be narrowed by focusing the net benefit review process on only the most significant transactions. To this end, the Panel recommended that the investment review threshold be raised to $1 billion and that the standard for determining the value of the Canadian business being acquired be changed to enterprise value. The current standard is based on the value of the assets according to the business' financial statements, or book value. The concept of enterprise value better reflects the value of a business as a going concern and the increasing importance of service and knowledge-based industries.

Proposed amendments to the Regulations setting out the method for calculating enterprise value were first pre-published for public comment in the Canada Gazette, Part I, in 2009. Comments received from stakeholders during that 30-day public consultation period have been considered. Changes to reflect these comments have been made, along with additional proposed changes to the methodology for calculating enterprise value.

Accordingly, the Regulations are being pre-published in the Canada Gazette, Part I, for a 30-day public consultation period to provide stakeholders with another opportunity to provide comments before final publication.

Once the Regulations are in force, the investment review threshold will immediately rise from $330 million in asset value to $600 million in enterprise value for two years, then to $800 million for two years, then to $1 billion (subsequently, the threshold will be indexed to reflect changes in Canada's gross domestic product as is currently the case under the ICA).