State-Owned and Influenced Enterprises and the Evolution of Canada’s Foreign Direct Investment Regime

Abstract

AbstractCanada liberalised its foreign investment regime significantly during the 1980s, intending to open all but a handful of strategic sectors to foreign direct investment (FDI), leading to further institutionalisation through a series of bilateral, regional and multilateral trade agreements. However, the growing global profile of state-owned and influenced enterprises has led to regulatory and legislative changes since 2009, increasing the opacity and unpredictability of such processes, mainly when influenced by national security factors. This chapter explores the evolution of Canadian foreign investment review policies with particular attention to state-owned and influenced enterprises and distinguishes between market-based and politically influenced governance models in both inward and outward foreign investment. It notes the persistence of the “net benefit” test in screening FDI under the Investment Canada Act (ICA), along with principles that have come to shape their application to investment and takeover proposals by state-controlled and influenced enterprises. It also notes the evolving design and implementation of national security provisions to proposed transactions since policy and legislative changes introduced since 2013, changes in concepts of “strategic” or “critical” sectors, and their application to several contested transactions in recent years.KeywordsForeign direct investment policies—CanadaState-controlled enterprisesInternational Investment RegimesNational security—investment policiesInvestment Canada Act.