Michael Byers holds the Canada Research Chair in Global Politics and International Law at the University of British Columbia.
Canada's foremost space company, MDA, recently relocated to the United States – weakening our national security and limiting our ability to compete in space.
MacDonald, Dettwiler and Associates Ltd. was founded in Vancouver in 1969; it went on to build the Canadarm and became a world leader in synthetic aperture radar satellites, which can produce high resolution images of the Earth's surface through darkness and clouds. MDA is now incorporated in Delaware and managed from California by an American chief executive officer who reports to a board composed almost entirely of Americans. As of October, 2017, the company has been listed on the New York Stock Exchange under a new name – Maxar Technologies.
The government of Stephen Harper would never have allowed this to happen. In 2008, Industry Minister Jim Prentice used the Investment Canada Act to block the sale of MDA's space division to a U.S. company because of its importance to Canadian security and sovereignty, especially in the Arctic. That experience prompted the Harper government to introduce an explicit national security test into the Investment Canada Act. The Trudeau government could have used that test to block MDA's transformation into a U.S. company. The Investment Canada Act applies to any acquisition of a controlling interest in a Canadian company by non-Canadians, which is what has happened – since October – as a result of Maxar Technologies' listing in New York. There is little doubt that MDA's transformation into a U.S. company weakens Canada's national security. MDA is currently building three new synthetic aperture radar satellites for the Canadian Space Agency, which justifies the nearly $1-billion cost for the need to monitor Canada's Arctic and coastal areas – especially the increasingly important Northwest Passage, where Canadian sovereignty is contested by the United States. Moreover, MDA was the only Canadian space company with the size, scope and expertise to serve as a prime contractor for major Canadian Space Agency or Department of National Defence projects. As such, it was a natural choice of partner whenever the Canadian government had space-related work involving classified information.
The Trudeau government had just been elected when MDA announced the details of its "U.S. Access Plan" for obtaining the right to bid on U.S. government contracts that, in the lucrative defence and intelligence fields, are available only to U.S. companies.
The first step in the plan had already taken place in 2012, when MDA acquired Space Systems/Loral Inc., a major commercial satellite maker based in California.
The second step came in early 2016, when MDA proposed to set up a holding company that would be incorporated in Delaware and to appoint an American CEO to run MDA's operations from the United States.
But not to worry, the company's leaders said: MDA would keep its head office in Vancouver, remain listed on the Toronto Stock Exchange and maintain thousands of high-tech jobs in British Columbia, Ontario and Quebec. As the new CEO, Howard Lance assured both the media and the Trudeau government that becoming a U.S. company in law "doesn't make the company any less Canadian." The Trudeau government should have recognized the warning signs, including that Mr. Lance had previously served as executive adviser to New York-based Blackstone Group. But it made no move to review the "U.S. Access Plan" under the national security test in the Investment Canada Act.
On arriving at MDA, Mr. Lance promptly engineered a $2.4-billion (U.S.) acquisition of DigitalGlobe, a U.S. satellite operator that specializes in producing optical imagery for the U.S. government. The sale closed in October, 2017. At that point, MDA and DigitalGlobe were merged under the Maxar name and listed on the New York Stock Exchange. For the moment, Maxar is also listed on the Toronto Stock Exchange. But this is unlikely to last, with Mr. Lance having told Washington Technology magazine that Maxar's current structure will remain in place until 2019, when the company will undertake another reorganization to be fully incorporated in the United States.
Now, it might be unrealistic to expect corporate leaders to make decisions based on Canada's security and sovereignty interests. Defending his actions, Mr. Lance has said: "The No. 1 mandate for any public company is around growth and creating value for its shareholders." But this is precisely why the Investment Canada Act exists, to enable our government to defend the national interest with regard to transactions that move the control of Canadian companies offshore.
It is too late to stop MDA from becoming American, but not too late to consider punitive measures. If the company's CEO or directors knowingly misled the Trudeau government, they should be investigated for possible violations of Canadian law. As for the company, it could be blocked from bidding on Canadian government contracts for a period of time. For instance, Maxar is part of a consortium, led by Lockheed Martin and BAE Systems, that recently submitted a bid for the design contract for Canada's next generation of warships.
To be clear: I am not alleging wrongdoing. However, the Trudeau government should not turn the page on MDA's transformation unless and until it is certain that no misconduct took place.
The loss of Canada's foremost space company is a serious matter. Without MDA, we are – quite literally – lost in space.