In April 2013, the Canadian government passed amendments to the Investment
Canada Act (ICA), which, for the first time, explicitly treated foreign State-Owned
Enterprises (SOE) within legislation. The ICA amendments were intended to provide
clarity and signal future direction of foreign SOE investment in Canada. A clear
investment framework for SOEs is critical to attract the capital needed to encourage
investment, economic growth and employment opportunities in Canada. Weaknesses in
the clarity of the ICA will unnecessarily drive foreign SOE investment away with
ramifications for Canada’s relations with those foreign countries.
Much of the academic literature on foreign direct investments uses nonrestrictiveness
as a measure of success to evaluate foreign investment rules. However,
this paper focuses on one specific portion of foreign investment rules – SOE provisions.
An evaluation of SOE provisions must first understand that the country in question has
made a political decision to be restrictive to SOE investors by installing SOE provisions.
Therefore, the measure of success for good legislation related to SOEs is not
restrictiveness. Rather, clarity is the measure of success for good legislation related to
SOEs. A comparative legislative analysis between Canada and Australia’s foreign
investment rules reveals some weaknesses of the ICA amendments in providing a clear
investment framework for SOEs. In order to begin addressing these issues of clarity, this
paper recommends putting a percentage threshold or guidelines around the definition
of SOE, striking the retroactivity provisions within the ICA, and providing reasoning as to
why oil sands will only be acquired by SOEs on an “exceptional basis” only. This would
help create certainty for SOE investors that the deals they strategically and deliberately
craft in accordance with legislation will receive approval.