Overview of the administration of the Investment Canada Act

While there are a number of federal and provincial statutes that are sector-specific and that limit foreign investment in Canada, the Investment Canada Act (“ICA”) is the only statute of general application in Canada that provides for the review and approval of foreign investments. For investments other than investments in cultural businesses, the ICA is administered by the Investment Review Division (“IRD”) of the federal Department of Innovation, Science and Economic Development (“ISED”). Investments in cultural businesses are administered by the Cultural Sector Investment Review (“CSIR”) unit of the federal Department of Canadian Heritage (“Heritage Canada”). Where a transaction involves both non-cultural and cultural businesses, both IRD and CSIR may be involved. IRD is solely responsible for the administration of the national security provisions of the ICA. Decisions to approve or disallow investments are made by the Minister of ISED for transactions not involving cultural businesses and by the Minister of Canadian Heritage in the case of transactions involving cultural businesses. Both ministers may be involved in the review process where a transaction involves both cultural and non-cultural businesses. The federal Governor-in-Council (“GIC”) (essentially, the federal cabinet) is the ultimate decision-maker with respect to investments considered potentially injurious to national security.

2018-2019 Annual Report

On December 27, 2019, the Annual Report on the administration of the ICA for the fiscal year commencing April 1, 2018 and ending March 31, 2019 (the “Annual Report”), was published.

The following are some of the more noteworthy observations contained in the Annual Report:

Increased FDI; filings at an all-time high; very few transactions subject to net benefit review

  1. Foreign direct investment (“FDI”) inflows and cross-border M&A activity in Canada increased in the fiscal year relative to prior years and this translated into an all-time high number of filings under the ICA.
  2. In total, 962 investment filings were certified as complete under the ICA, with only nine being applications for net benefit review and 953 being notifications. As illustrated below, the number of notifications increased significantly from the previous fiscal year although net benefit reviews are at about one-half the number they were in fiscals 2015, 2016 and 2017. The increase in notifications is likely primarily a consequence of increased FDI but also possibly (as implied in the Annual Report) a consequence of increased compliance with the notification provisions of the ICA to manage the possibility of a national security review (“NSR”). The reduction in net benefit reviews is no doubt attributable to the substantial increase in applicable review thresholds for most transactions.
  3. Importantly, the above figures do not take into account net benefit reviews administered by Canadian Heritage in relation to purely cultural transactions. Canadian Heritage’s “Results Report” for the 2018-2019 fiscal year has not, as of the date of this comment, been published.

National security reviews

  1. There were nine notices issued to investors advising them that a GIC order requiring a NSR may be issued. Of these nine, seven were subsequently subject to an order for such a NSR, ultimately resulting in two GIC final orders requiring divestiture and two withdrawals of the investment; three resulted in no further action under the ICA.
  2. The average length of review for the seven investments subject to a NSR order was 161 days from certification to final resolution.
  3. The Annual Report states that in assessing investments under the NSR provisions of the ICA, the terms of the investment under review, the nature of the assets or business activities involved and the parties (including the potential for third party influence) are considered. The Annual Report also notes that, increasingly, parties are voluntarily engaging with the IRD in advance of less than control investments when the proposed investment may present factors set out in the Guidelines on the National Security Review of Investments.
  4. Of the seven investments for which NSR orders were issued in fiscal 2019, four originated in China, two in Switzerland and one in Singapore. Of the 14 investments for which NSR orders were issued in fiscals 2017, 2018 and 2019 combined, 10 originated in China, two in Switzerland, one in Singapore and one in Cyprus.
  5. The 14 investments involved transportation including transportation infrastructure (three), information technology (four), pharmaceutical (one), machinery and equipment manufacturing (three), credit intermediation (one), electronic shopping (one) and heavy and civil engineering construction (one).

Destination and source of investments

  1. Based on the Annual Report and annual reports relating to prior fiscal years, we have developed the following tables:


  • Resources: Significant decrease in number of investments as compared to two previous years.
  • Business and Services Industries: Large increase in number of investments.
  • Other Services: Large increase in number of investments.

*Because there was one application calculated in asset value, to preserve commercial confidentiality and to prevent the risk of identifying the individual investment, the specific amount of the assets was not included in the total for this amount throughout the Annual Report.

Observations – Number of Investments

  • Increase in investments from India.
  • Steady increase in investments from US and EU.
  • Decrease in investments from China two years ago – but steady in 2018-19.

Observations – Value of  Investments

  • Steady increase by the US and EU; steady decrease by Japan and India.
  • China: significant decrease in enterprise value. Although, when comparing the asset value, there is a large increase from $28 million in 2017-2018 to $1.457 billion in 2018-2019.
  • Australia: large increase in enterprise value of investments.


  • Different sectors in the US and EU consistently ranking in the same order in terms of number of investments.
  • Some movement in ranking of sectors in China. In 2018/2019 the sectors rank in the same order as the US and EU, after a decline in resources, other services and manufacturing sector investments over the past two years.