Canada's Minister of Industry announced that “economic security” will be an additional factor considered by the Canadian government when assessing transactions subject to the Investment Canada Act.
On March 5, 2025, Innovation, Science, and Economic Development Canada (“ISED”) released an update to its Guidelines on the National Security Review of Investments adding a new factor – economic security – that can be considered by the Minister or Cabinet when making a decision on a national security review.
Businesses investing in Canada should be aware of this change and watch for future developments or guidance in this area.
Update to the National Security Guidelines
Under the Investment Canada Act (“ICA”), the Minister may review foreign investments in a Canadian business if there are concerns the investment could be “injurious to national security”. Traditionally, national security reviews have related to investments in defense industries, advanced technologies, critical resources, or sensitive information, however the scope has been broadening in recent years. This includes the recent publication of the Sensitive Technology List (“STL”) released less than a month ago, which identifies eleven technological sectors that the government considers to be sensitive and potentially of interest from a national security perspective. The STL is now incorporated within the Guidelines.
The March 5th update signals that the Minister intends to consider “economic security” concerns related to enhanced integration with foreign states as part of a national security review. The update was accompanied by a statement by Minister Champagne, which describes the update as intended to protect Canadian businesses from “opportunistic or predatory investment” as a result of a rapidly shifting trade environment.
Implications for Investments in Canada
This update is not a significant expansion or change in the Minister’s review power, nor is it a fundamental shift in the Canadian government’s approach to foreign investment review. The Minister can already consider similar economic security concerns if there is the potential for the investment to be injurious to national security (such as, for example, investments by sensitive state-owned entities in critical infrastructure).
We do not expect that the statement will have a significant practical impact on most investments in Canada, as the government continues to balance economic security with an investment climate that encourages foreign investment in Canada. However, for significant investments in critical Canadian businesses, investors should incorporate the new policy as part of their regulatory consideration. In practice, this policy may guide more investors to seek up front clearance under the Investment Canada Act for the most significant transactions, a process provided for in the existing law.
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