University of Calgary

University of Calgary

September 15, 2011 13:00 ET

University of Calgary: Foreign takeover decisions beg more transparency

Changes to Investment Canada Act could bolster Canada's reputation abroad

CALGARY, ALBERTA--(Marketwire - Sept. 15, 2011) - Today, The School of Public Policy released a study authored by Lawrence Herman that examines how Industry Canada makes decision on foreign takeovers under the Investment Canada Act. Using the scuttled acquisition of Potash Corporation as an example, Herman finds that Industry Canada should be more transparent in their evaluation and decision making for such deals.

"When a foreign acquisition is approved or rejected, the Industry Minister should be required to issue public reasons," Herman writes. "Where investment approvals are given subject to undertakings, the general outlines should be made public."

In the Potash Corporation example, Minister of Industry Tony Clement denied the bid, citing a lack of net benefit for Canada. Since BHP Billiton did not formally contest the decision, Industry Canada did not have to make its reasoning public.

The test of "net benefit" is a standard that Industry Canada applies when considering foreign takeovers under the Investment Canada Act. However, Herman argues the need to "recalibrate the legislation" to require Industry Canada to explain how they apply the net benefit test to deals like Potash Corporation.

Herman also acknowledges there is a legitimate need to protect commercial confidentiality and sensitive national security issues, and argues this can be done by way of public summaries or redacted documentation.
"More transparency and public disclosure will make foreign investors confident the system is fair, objective, and free from bias, bolstering Canada's reputation as a fine place to invest," Herman writes.

A copy of the paper can be found at

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