On October 28, 2022, the Director of Investments issued his Annual Report on the administration of the Investment Canada Act (“ICA”) for the fiscal year commencing April 1, 2021 and ending March 31, 2022 (the “2021/2022 fiscal year”). The Annual Report provides insight on key trends relating to foreign investment and national security reviews in Canada.

On October 28, 2022, the Minister of Innovation, Science and Industry, François-Philippe Champagne, released Canada’s new Policy Regarding Foreign Investments from State-Owned Enterprises in Critical Minerals under the Investment Canada Act (“the new policy”). The new policy creates a framework for reviewing future investments, under the Investment Canada Act (the “ICA”), involving foreign state-owned enterprises (“SOEs”) and foreign-influenced private investors in Canada’s critical minerals sectors and critical mineral supply chains.

Net Benefit Review

Under this new policy, when an investment is subject to a ‘net benefit to Canada’ review (which occurs when certain monetary thresholds are exceeded), “applications for acquisitions of control of a Canadian business involving Critical Minerals by a foreign SOE will only be approved on an exceptional basis.” In other words, there is now a presumption that when a foreign SOE submits an application to acquire control of a Canadian business involved with critical minerals, the Minister will only grant approval if the benefit to Canada is quite clear. Going forward, it will be difficult to obtain clearance without some exceptional circumstances—such as a failing business concern with no other options—and foreign SOEs may find it difficult to convince the Minister that such exceptional circumstances actually exist.

For more information on which minerals are considered “critical” in Canada, see our prior bulletin  titled,  “Newly Critical: Copper, Helium and More – Canada’s List of Critical Minerals has Expanded for 2021”. Essentially, Canada has compiled a list of 31 minerals regarded as essential to Canada’s economic security. These critical minerals include everything from lithium to uranium to copper. What is common to all these minerals is that they are indispensable to modern economies and subject to significant supply chain risks.

As the name suggests, the goal of the ‘net benefit to Canada’ review is to ensure that the economic windfall from the proposed investment is not outweighed by adverse features, such as the loss of Canadian participation in and control of the Canadian business. According to the new policy, in addition to the general factors set out in section 20 of the ICA, other factors that will be considered include:

  • the extent to which a foreign state is likely to exercise direct operational and strategic control over the Canadian business as a result of the transaction;
  • the degree of competition that exists in the sector, and the potential for significant concentration of foreign ownership in the sector as a result of the transaction;
  • the corporate governance and reporting structure of the foreign SOE, including whether it adheres to Canadian standards of corporate governance and to Canadian laws and practices, including free market principles, in its Canadian operations; and,
  • whether the Canadian business to be acquired is likely to continue to operate on a commercial basis.

National Security Review

A national security review is much broader in scope than the ‘net benefit to Canada’ review. All investments, whether implemented or proposed, by non-Canadians into Canada may be subject to a national security review in situations where the Minister has reasonable grounds to believe that such an investment could be injurious to Canada’s national security.

Under the new policy, when the Canadian government is determining whether an investment (or proposed investment) involving a Canadian business or entity operating in a Critical Minerals sector in Canada would be injurious to national security, the participation of a foreign SOE or foreign-influenced private investor in that investment “will support a finding by the Minister that there are reasonable grounds to believe that the investment could be injurious to Canada’s national security.”

In assessing whether a particular transaction involving Critical Minerals would be injurious to national security, the policy states that the following factors can be considered:

  • the size, scope and location of the Canadian business;
  • the nature and strategic value to Canada of the mineral assets or supply chain involved;
  • the degree of control or influence an SOE would likely exert on the Canadian business, the supply chain and the industry;
  • the effect the transaction may have on the ability of Canadian supply chains to exploit the asset or access alternative sources (including domestic supply); and,
  • the current geopolitical circumstances and potential impact on allied relations.

On November 2, 2022, Canada moved to operationalize the new policy by ordering the divestiture of foreign interests in three Canadian critical mineral firms.


Amid supply chain disruptions, the energy transition, and escalating geopolitical tensions, Canadian companies and non-Canadian investors should prepare for even more increased scrutiny of foreign investments from state-owned enterprises, especially investments related to critical minerals. Given the new policy, foreign investors with an eye to investing in the Canadian resource sector would be well advised to analyze their investment plans and scan for any associations with SOEs or entities otherwise linked to what the Government of Canada characterizes as “hostile or non-likeminded regimes or states.”

A potential silver lining in the new policy is the apparent recognition by Canada that capital flows like water and with regulatory obstructions come barriers to obtaining access to critical capital by Canadian miners. This is especially true in the development of critical minerals, which are often found in the most challenging parts of Canada’s far-flung geography and governed by a web of regulatory impediments. Miners may take some small comfort in the government’s signal that “…a core purpose of the Canadian Critical Minerals Strategy is to support the development of Canada’s industrial capacity and access to vital Critical Minerals, and attract major investments to develop our strategic assets from mines to manufacturing.” How that core purpose is operationalized in the difficult arena of corporate finance and mineral project development remains to be seen.

If you have questions about the Investment Canada Act or the regulation of foreign investment more generally, please reach out to any member of Fasken’s National Security group or Fasken’s Competition, Marketing & Foreign Investment group. Both groups have significant experience solving business challenges related to all aspects of Canadian foreign investment law.