Canada is a country with an explicit official position in favour of FDI. Nevertheless, this positive attitude towards FDI does not prevent the country having a system for the evaluation of FDI proposals or certain limitations on FDI in several sectors of the economy, for example limitations on foreign ownership in the area of transport or telecommunications. In fact, in 2016, Canada ranked as one of the most restrictive developed countries in relation to FDI in the OECD FDI Regulatory Restrictiveness Index. The country is said to have a ‘mediocre record’ when it comes to FDI inflows.

LEGAL FRAMEWORK ON FOREIGN INVESTMENT

INVESTMENT CANADA ACT OF 1985, REGULATIONS AND GUIDELINES

FDI is governed in Canada by the Investment Canada Act of 1985 (ICA). Despite the explicit mandate to welcome FDI in section 2 ICA, the Act was in fact enacted to prevent US multinationals from controlling the Canadian economy. The ICA was for much of its history a sort of ‘rubber stamp’, a nuisance for foreign investors who wished to invest in Canada but not a real obstacle to investing or conducting business afterwards. However, the financial crisis, the rise of globalisation and the consequent acquisition of many iconic firms by foreigners have all fostered protectionist and nationalist sentiments in many countries and, in the case of Canada, has caused the ICA to slowly ‘grow teeth’.

Recent reforms have also been apparently driven by the goal of preventing attempts by foreign firms – mainly Chinese firms – to gain significant presence in the Canadian economy, especially in the Canadian energy industry.

The Act is complemented by the Regulations Respecting Investment in Canada (SOR/85-611), which set out the meaning of some of the notions found in the Act and supplement the procedure for notification and review, as well as by the Guidelines on the National Security Review of Investments (also referred to as the Guidelines – Investment by foreign state-owned enterprises – Net benefit assessment).

ADDITIONAL APPLICABLE CANADIAN LEGISLATION

Like in other countries, the complex system for the evaluation of FDI proposals in Canada exists in parallel to areas where FDI access is limited and with some pieces of legislation in other areas of law. For instance, competition law is also applicable to cross-border mergers and legislation on transport also affects FDI.