On March 22, 2024, Bill C-34 received royal assent, becoming the National Security Review of Investments Modernization Act. First introduced in the House of Commons by the Minister of Innovation, Science and Industry (the “Minister”) on December 7, 2022, the National Security Review of Investments Modernization Act represents the most significant amendment to the Investment Canada Act (the “ICA”) since the introduction of national security provisions in 2009. Notably, the new legislation:

  • Creates a suspensory pre-closing filing requirement and waiting period for investments in certain (yet-to-be) prescribed sensitive sectors, such as the interactive digital media sector and the critical minerals sector, for instance;
  • Creates a new authority for the Minister to initiate national security reviews under section 25.3 of the ICA and to accept undertakings to mitigate national security risk (previously, the authority for both of the foregoing rested with the Cabinet of Canada); and
  • Increases the maximum penalty for non-compliance with the ICA to $25,000 for each day of contravention, up from $10,000.

Other changes to national security reviews brought about by the new law include:

  • Extending the application of the national security provisions of the ICA to acquisitions of any of the assets of a Canadian business by a non-Canadian state-owned enterprise.
  • Authorizing the Minister to conclude that an investment by a non-Canadian could be injurious to national security based on the fact that the non-Canadian has previously been convicted, within or outside Canada, of an offence involving an act of corruption.
  • Clarifying that the national security provisions of the ICA apply to an investment by a non-Canadian to acquire the assets of an entity operating in Canada, even when the acquisition does not bring about a change of control. This change may be intended to address security risks connected with certain foreign investors acquiring the intellectual property of entities operating in Canada but has potentially much broader application than just intellectual property transfers.
  • Authorizing (though not requiring) the Minister to disclose publicly the identity of the non-Canadian investor (and the Canadian business) that is the subject of an order made in connection with a national security review.

Beyond national security reviews, the new law also modifies the ICA by:

  • Requiring the Minister, when considering whether an investment is of net benefit to Canada, to take into account (i) the effect of the investment on any rights relating to intellectual property whose development has been funded, in whole or in part, by the Government of Canada, and (ii) the effect of the investment on the use and protection of personal information relating to Canadians.
  • Lengthening the period during which the Governor in Council (the “GIC”) may issue an order for the review of an otherwise non-reviewable investment in a Canadian cultural business from 21 days to 45 days.
  • Authorizing the GIC to issue an order for the review of an otherwise non-reviewable investment when the investor is a non-Canadian state-owned enterprise or is controlled by a non-Canadian state-owned enterprise unless the investor is a trade agreement investor. The period during which an order for this review may be issued is 45 days.

Looking ahead

While some elements of the National Security Review of Investments Modernization Act are expected to come into force fairly soon, such as the Minister’s new authority to move forward with national security reviews and to accept binding undertakings without having to receive Cabinet approval, the sections pertaining to the prescribed sensitive sectors cannot be implemented until the regulations prescribing the sectors are enacted, which is not expected to happen before 2025. Pre-consultation with key stakeholders regarding the regulations is expected to begin imminently, and the statutory 30-day public comment period, which will kick off when the Government of Canada publishes the regulations in the Canada Gazette, is anticipated in fall 2024.

While we cannot know for certain until regulations are enacted, there are sectors that we can predict with a fairly high degree of confidence will be included, such as:

Additionally, the Government of Canada indicated in 2021 in its updated Guidelines on the National Security Review of Investments that the Government of Canada considers technologies that have military, intelligence, or dual military/civilian applications to be sensitive and that the Government of Canada views as sensitive any investment that enables access to personal data such as:

  • Personally identifiable health or genetic data (e.g., health conditions or genetic test results);
  • Biometric data (e.g., fingerprints);
  • Financial data (e.g., confidential account information, including expenditures and debt);
  • Communications data (e.g., private communications);
  • Geolocation data; or
  • Personal data concerning government officials, including members of the military or intelligence community.

Fasken’s Competition, Marketing & Foreign Investment and National Security teams will closely monitor the implementation of the National Security Review of Investments Modernization Act. Stay tuned for further updates, and feel free to reach out directly to a member of Fasken’s Competition, Marketing & Foreign Investment or National Security teams with any questions.

The information and guidance provided in this blog post do not constitute legal advice and should not be relied on as such.