The federal government’s foreign-takeover policy is moving into uncharted territory. The application by CNOOC Ltd. for approval of its proposed acquisition of Nexen Inc. has just been filed, but it had already emerged as a matter of international diplomacy. In these circumstances, the government’s retreat from clarification of its foreign-investment policy, and of the meaning of “net benefit,” should be reconsidered.
Clarity was promised after the rejection of the controversial application of BHP Billiton in its attempted takeover of Potash Corp. of Saskatchewan Inc. Evidently, the government then found it hard to articulate foreign-investment principles and reverted to a case-by-case approach. Recent statements by Stephen Harper, the Prime Minister, and Christian Paradis, the Minister of Industry, raise an inference that in some instances Canada may want to set some of these applications in a much broader context.
The Chinese government has a controlling interest in CNOOC, but the company is traded on the New York Stock Exchange; it has its fair share of Canadian shareholders. The Canadian government is eschewing talk of a direct linkage of the CNOOC application to broader access to the Chinese economy, but is nonetheless canvassing the concepts of leverage and reciprocity.
Last February, Canada and China entered into an investment-protection agreement. The Canadian concern now may be partly about the detailed drafting of that treaty and its practical effectiveness, and partly about trade with China, a rising Canadian interest to be seen in the recent joint Canadian-Chinese “economic complementarities” study.
In general, it would be unfair to treat a foreign corporation, one that wants to invest in Canada, as if it were accountable for its own government’s trade and foreign-investment policies. A state-controlled firm might be an exception to that principle.
The Investment Canada Act does mention “the contribution of the investment to Canada’s ability to compete in world markets” as one of the factors that might be relevant to the government’s net-benefit assessment. But it is the investment that is to contribute, not the foreign state. In principle, a foreign investor should not be held to ransom for its government.