Speaking recently with The Globe and Mail, Ian Macdonald, a partner at Gowling WLG, shared his insights on the federal government’s recent changes to foreign investment rules.

The government has added “the potential of the investment to undermine Canada's economic security” as a factor it may consider in deciding whether and how to exercise its extensive discretionary national security review powers under the Investment Canada Act. 

Statements made by senior government Ministers, including the Prime Minister, indicate that one of the objectives is to prevent the predatory or opportunistic acquisition of Canadian companies whose valuations may have declined significantly as a result of the trade war. 

It is no coincidence that the amendments were announced the day after significant U.S. tariffs on goods from Canada took effect, which may be an indication that U.S. investors, who have not historically had trouble with Canada’s national security review powers, could see their deals being subjected to heightened scrutiny.

"The government has to walk a real tightrope here. Foreign investment is critical to the Canadian economy, and the U.S. has consistently been, by far, the number one source of foreign investment in Canada," said Macdonald.

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