Canada introduces tougher security reviews of foreign investments

FILE PHOTO: Canada’s Minister of Innovation, Science and Industry Francois-Philippe Champagne speaks during Question Period in the House of Commons on Parliament Hill in Ottawa, Ontario, Canada February 26, 2024. REUTERS/Blair Gable/File Photo

OTTAWA (Reuters) – Canada has introduced tougher national security reviews of proposed foreign investments in sensitive sectors to enable it to quickly spot potentially problematic deals, the government said on Wednesday.

The new powers are part of a revision to the Investment Canada Act (ICA) that became law last week.

“We will not hesitate to take action on transactions that could harm Canada’s national and economic security,” Innovation Minister Francois-Philippe Champagne said in a statement.

The new regulations mean a foreign firm wishing to buy a company in a sensitive sector must inform Ottawa about its plans before the transaction closes.

This will “provide the government earlier visibility on investments where there is risk that the foreign investor could gain access to sensitive assets, information, intellectual property or trade secrets”.

The law allows the innovation minister to order that a security review be extended, a move that previously had to be formally announced by the government. Penalties for non-compliance will also be increased.

Sectors the government is particularly focused on include quantum science, robots and artificial intelligence.

Canada, wary of Chinese state-owned enterprises snapping up companies in sensitive areas, has already been cracking down.

In 2023, Ottawa tightened foreign investment rules for the critical minerals sector, a year after forcing Chinese investors to sell their stakes in three Toronto-listed lithium firms.

(Reporting by David Ljunggren; Editing by Timothy Heritage)