The federal government’s legitimate concern with foreign investment by state-owned enterprises has grown by leaps and bounds since Prime Minister Stephen Harper’s announcement of new guidelines in December, to a point where there is a risk of arbitrary decision-making.
The latest budget bill, tabled last week by Jim Flaherty, the Minister of Finance, contains amendments to the Investment Canada Act. These provisions have some resemblance to an unedited film with several takes. The minister of industry will have half a dozen different routes to a decision that an applicant is an SOE, with the consequence that the threshold for review is lower. The definition subsection establishes the prospect that an SOE can be “an entity ... influenced ... indirectly” by a government, or an agency of government. Other subsections give the minister power to declare an entity to be an SOE, having considered various types of information (or lack of it).
The new regime might affect, for example, the sale of Canadian assets of Suncor Energy Inc. to the British company Centrica PLC, for 60 per cent, and Qatar Petroleum International for 40 per cent.
The ambiguity of Mr. Harper’s statement six months ago, at the time of the Nexen and Petronas decisions, already invited some concern about possible arbitrariness, but the March, 2013 budget document undertook simply to clarify the new policy; it did not suggest an expansion of such scope.
The changes to the ICA are based on the common-sense idea that a SOE is an enterprise controlled in fact by a government, in spite of any artificial arrangements. But the sweeping approach to detecting all possible de facto SOEs could result in some capricious behaviour on Canada’s own part.