TORONTO, Dec 7 (Reuters) – Following is the full text of a
statement on Friday by Industry Canada regarding investment by
foreign state-owned enterprises in Canadian companies:
LINK: http://www.ic.gc.ca/eic/site/ica-lic.nsf/eng/lk81147.html
Our Government has a long-standing reputation for welcoming
foreign investment. Canada has a broad framework in place to
promote trade and investment, while at the same time advancing
Canadian interests.
In response to increased levels of global foreign SOE
investment, in 2007 the Government released guidelines that
outline some of the key considerations the Minister of Industry
accounts for when reviewing foreign investments made by SOEs to
determine if they are likely to be of net benefit to Canada.
The considerations focus on concerns that foreign SOEs could
present certain risks. First, foreign SOEs are, although to
varying degrees, inherently susceptible to foreign government
influence that may be inconsistent with Canadian national
industrial and economic objectives.
Second, SOE acquisitions of Canadian businesses may also
have adverse effects on the efficiency, productivity and
competitiveness of those companies, which may have negative
effects on the Canadian economy in the longer term.
The continued growth of foreign SOE transactions, with a
particular increase in acquisitions of control of Canadian
businesses, suggests that further clarification would be useful
for the marketplace.
For these reasons, the Government is clarifying how it
applies the Investment Canada Act. The Canadian oil sands are of
global importance and immense value to the future economic
prosperity of all Canadians.
While the vast majority of global energy deposits are
state-controlled, Canada’s oil sands are primarily owned by
innovative private sector businesses. If the oil sands are to
continue to develop to the benefit of all Canadians, the role of
private sector companies must be reinforced.
For these reasons, while the Government welcomes foreign
investment, it is clarifying how it applies the Investment
Canada Act (ICA) to foreign SOE investment in the Canadian oil
sands, and the broader Canadian economy.
Under the ICA, the burden of proof is on foreign investors
to convince the Minister that the investment is likely to be of
net benefit to Canada.
For the purposes of evaluating proposed investments by
foreign SOEs, Section 20 of the ICA and supporting Guidelines
require that the investor satisfies the Minister of the
investment’s commercial orientation; freedom from political
influence; adherence to Canadian laws, standards and practices
that promote sound corporate governance and transparency; and
positive contributions to the productivity and industrial
efficiency of the Canadian business.
Each case will be examined on its own merits; however, given
the inherent risks posed by foreign SOE acquisitions in the
Canadian oil sands the Minister of Industry will find the
acquisition of control of a Canadian oil sands business by a
foreign SOE to be net benefit to Canada on an exceptional basis
only.
In applying the ICA, the Minister of Industry will also
continue to carefully monitor SOE transactions throughout the
Canadian economy to determine whether they are likely of net
benefit to Canada.
The Minister of Industry will closely examine the degree of
control or influence an SOE would likely exert on the Canadian
business that is being acquired; the degree of control or
influence an SOE would likely exert on the industry in which the
Canadian business operates; and, the extent to which a foreign
state is likely to exercise control or influence over the SOE
acquiring the Canadian business.
Where due to a high concentration of ownership a small
number of acquisitions of control by SOEs could undermine the
private sector orientation of an industry, and consequently
subject an industrial sector to an inordinate amount of foreign
state influence, the Government will act to safeguard Canadian
interests.
Also consistent with the above, the Government intends to
liberalize the review threshold under the Investment Canada Act
to $1 billion in enterprise value over four years only for
private sector investors.
The review threshold for foreign SOEs will remain at $330
million in asset value. This will mean that the Government will
retain its current authorities to assess the net benefit of
foreign SOE transactions in the future.
