CANADA LAW AND PRACTICE Contributed by: Kevin West, Andrea Hill, Priya Ratti and Meryam Kellow, SkyLaw
regulators in Canada, across its ten provinces and three territories. 2.3 Restrictions on Foreign Investments Investment Canada Act (ICA) and National Security Review Canada has traditionally welcomed foreign investment and has a reputation as an attractive and trusted destination for investors. However, like most countries, the Canadian government may restrict the ability of a non-Canadian to acquire or start a business in Canada, in par - ticular if the investment relates to a cultural busi- ness (for example, broadcasting and publishing) or raises national security concerns. The govern- ment may block proposed foreign investments, allow them to proceed with conditions, or order divestiture if an investment has already been made. A transaction by a non-Canadian is reviewable if the enterprise value of the target business exceeds certain financial thresholds (for WTO investors that are not state-owned enterprises, the threshold is an enterprise value of CAD1.386 billion). If a transaction is reviewable, the for- eign investor must prove that the transaction is of “net benefit” to Canada. If not reviewable, a notification under the ICA must be filed within 30 days after commencing a new business activ- ity or acquiring control of an existing Canadian business. Separately, the Canadian government may review any acquisition on national security grounds under the ICA, whether or not it is sub - ject to a net benefit review. There is no definition of “national security” in the ICA, nor are there specific monetary thresholds that automati - cally trigger a national security review. Any for- eign investments in businesses involved in the Canadian oil sands, the critical minerals sector,
defence, and certain other protected industries are likely to be subject to greater scrutiny. In particular, the government has stated that any investment (regardless of size or industry) into a Canadian business from an investor with direct or indirect ties to Russia, and any investment by a foreign state-owned enterprise into Canada’s critical minerals sector, will trigger a national security analysis. The government is also more likely to take a closer look at opportunistic acqui - sitions of targets hit hard by tariffs. Following amendments to the ICA in 2022, investors may make a voluntary pre-closing fil - ing regarding a proposed minority investment to determine if it would be subject to a national security review, triggering a 45-day review peri- od for the government. If no voluntary notifica - tion is filed, the government has up to five years to make an order for a national security review after becoming aware of the investment. The national security review provisions can apply to acquisitions even where there is a limited con - nection to Canada. Further amendments to the ICA were intro - duced in 2024, including permitting the Minister of Innovation, Science and Industry to impose interim conditions on investors or other relevant parties during the course of a national security review. Such conditions include restricting the investor from appointing board members or sen- ior management, restricting physical access to sites, and suspending the investors’ contracts. Sanctions Canada has sanctioned countries, individuals and entities that it considers to be connected to human rights violations, corruption, or ter- rorist activities. Canada currently has sanctions in place against 24 countries and has enacted measures to freeze or restrain the property of
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