Apparently drawing inspiration from the opening lines of British stand-up comedian Alexie Sayle’s 1985 hit, Canadian Prime Minister Stephen Harper has again waded into the issue of foreign investment in Canada. Harper’s is the only government to have used the Investment Canada Act to reject an announced acquisition of a Canadian business, first in 2008 and then again in 2010. Following the latter, BHP Billiton’s proposed hostile take-over of Potash Corporation, the government announced its intention to “clarify” the criteria used to evaluate transactions. More than a year later, no clarification has been provided.
Government officials, including the prime minister, have signalled that the BHP case should not be seen as evidence of a shift in policy toward a more stringent approach to foreign investment review. However, Prime Minister Harper himself has made a number of public comments recently that call into question that assertion, including:
- Telling Reuters that “hostile takeovers of key Canadian businesses” and “takeovers of critical technology that the government’s invested in” are “obviously…widely understood [as] not in this country’s interest.”
- Telling Bloomberg that:
- he will “proceed with caution” when dealing with foreign take-overs of important companies;
- within the context of discussing liberalising foreign ownership restrictions, it is important to ensure that doing so doesn’t trigger “the loss of all Canadian presence in the sector…The important issue for me is that Canada continue to have head offices and some economic leadership in the world…I don’t think we would want a situation, especially one that might not be driven entirely by market forces, where the Canadian economy were entirely owned and operated essentially from headquarters and offices based in every place but Canada;”
- “if [BHP/Potash] had been in Australia, to put the shoe on the other foot, I don’t believe that takeover would have been approved…I think the objectives of BHP, in fairness, probably were beyond merely what we would consider good business in a market sense, but probably more an issue of strategic positioning, and that strategic positioning was obviously not in the interest of the Canadian economy;” and
- although the government welcomes investment by China and other countries, the welcome mat will be out only as long as such acquisitions are “economic in nature and don’t have other strategic or political objectives.”
Statements such as these demonstrate that the calculus of what constitutes “net benefit to Canada” remains a complex one. The Act contains a number of objective criteria, but also several that are susceptible to varying interpretations. Absent a more forceful clarification of the Act, these subjective factors will continue to receive the lion’s share of attention and open the government to charges that political factors are among those considered in making the net benefit determination.
For more information on the Investment Canada Act and its potential politicisation, see our recent publication Canadian Protectionism? Political and Legal Considerations for Foreign Investment in Canada.