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The Chair (Mr. Joël Lightbound (Louis-Hébert, Lib.))

05:16:28 p.m.
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Good afternoon, everyone. I now call the meeting to order. Welcome to meeting number 82 of the House of Commons Standing Committee on Industry and Technology. Some hon. members: Oh, oh!

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The Chair

05:18:12 p.m.
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I would ask for a little order, please. Order, please. Let's have a little decorum. I know it's the summer and we're all anxious to get out of here, but we have important work to do. I want to say to the witnesses that I apologize for the delay. Pursuant to the order of reference of Monday, April 17, 2023, we are continuing our study of Bill C‑34, An Act to amend the Investment Canada Act and today we are continuing clause-by-clause consideration. Today's meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Members are attending in person in the room and remotely using the Zoom application. I would also like to invite members to take a look at the guidelines that have been sent regarding the proper use of microphones and headsets for the benefit of the interpreters' hearing health. Joining us again today is Mark Schaan, senior assistant deputy minister, strategy and innovation policy sector, Innovation, Science and Economic Development Canada. From the investment review branch, we have James Burns, senior director, and Mehmet Karman, senior policy analyst. At our last meeting, we left off with clause 14, and CPC‑8 was defeated. We were on CPC‑9, if I'm not mistaken. We will now resume consideration of amendment CPC‑9. I believe Mr. Perkins had the floor. Mr. Perkins, you have the floor.

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Mr. Rick Perkins (South Shore—St. Margarets, CPC)

05:18:12 p.m.
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Thank you very much, Mr. Chair. It's nice to see the officials back again, after talking about the F1 on the weekend. I'm pleased to move CPC-9, which would add a new subsection to the act. I'll read it: (1.1) For the purposes of subsection (1), the fact that a non-Canadian has previously been prosecuted, within or outside Canada, for an offence involving an act of corruption constitutes, by itself, reasonable grounds. This amendment is put forward in tandem with other amendments we've put forward targeting subsections 25.2(1), 25.3(1) of the act and proposed subsection 25.3(1.1). This amendment seeks to ensure that an automatic—we've had that chat before on the “may” versus “shall”—national security review is conducted whenever an investment is made by a non-Canadian enterprise that has previously been prosecuted for corruption. Witnesses like Charles Burton have argued in the committee that Canadians cannot expect companies that behave atrociously in foreign nations to suddenly operate normally once they arrive in Canada. In fact, in meeting 70 on May 1, 2023, Dr. Burton said in his testimony: In terms of our previous policy of allowing Chinese investor immigrants, for example, to come to Canada, the basis for assessment was whether the Chinese person who wanted to invest in Canada had behaved in a way that maintained the standards of China in how much income tax they evaded and how much bribery they paid, on the assumption that if they were following the norms of China, they would follow the norms of Canada. The program was eventually cancelled, because that just doesn't work. You can't expect a company to behave morally in Canada when it's been behaving atrociously in foreign nations. That's my opinion.... That is what he said. I'll use Hytera as an example. I know I've used it before, but I want to mention it again. Hytera—in 2019, I believe it was—acquired Norsat in Vancouver, which in 2011 had acquired Sinclair Technologies. Hytera itself, the parent company, a Chinese state-controlled company ultimately, was charged in 2022 with 21 counts of espionage in the United States, as well as being banned by President Biden from doing business and bidding on contracts in the United States. While it wasn't an acquisition per se, eight months later both the RCMP and the Canada Border Services Agency procured equipment from Hytera. In 2019, the minister of industry of the day put forward only the first level of security review for that acquisition, saying, “That's okay. We don't need to go any deeper.” Now, I've not seen the details of the deeper reviews on any national security reviews in quite a while. The level of detail may have changed. The purpose of this is twofold. One is to make sure that if they are charged.... I guess the reason is this. I've had some discussions with government members about the issue of “prosecuted” versus “convicted”. Here's my challenge there. I think I may have said earlier, in a little email exchange, that I have a problem when a company has a remediation agreement and whether or not that's technically a conviction. Whether or not a company has found itself in a place where it could do a settlement out of court for whatever reason, the undisclosed elements of that, which are usually private and undisclosed, would prevent us from having an automatic review for corruption. If you changed it to say they had to be “convicted” as opposed to “charged”...I've not seen a way, other than to say “charged”, where you can take account of all of those circumstances in legislation. It doesn't mean that this would be rejecting any takeover; it's just forcing it through a review. To me, any time there is a charge on a company, there is a bit of where there's smoke, there's fire. Sometimes there are reasons it got off. To me, that would mean the company is perhaps operating with some not particularly savoury practices. It's been charged. It's probably been doing it well beyond what has been charged in other countries. Some Canadian companies have even been charged abroad with similar types of issues. Famously, we had the issue of the remediation agreement that Canada was putting on SNC-Lavalin. That was the court case that resulted in the Minister of Justice and Attorney General's leaving. Canada has to set a higher standard for the companies it allows to operate in this country. By doing this, we also perhaps send a signal to Canadian companies to be a little more careful. We are not just saying that bribery and corruption in certain parts of the world are a part of doing business and how you get contracts; we aspire to a lot more than that. We aspire to a higher level of business ethics. The Investment Canada Act does not reflect right now the ability for the minister to do that. It has only net benefit review and national security review as options. I believe that corruption, bribery and a charge itself warrant making sure that we take a second look at any company that intends to try to make an acquisition in Canada.

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The Chair

05:25:25 p.m.
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Thank you very much, Mr. Perkins. I will now give the floor to Mr. Fillmore. Mr. Fillmore, you have the floor.

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Mr. Andy Fillmore (Halifax, Lib.)

05:25:35 p.m.
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Thank you, Chair. Mr. Perkins and I have had several conversations about this matter. At the end of it, though, our team is much more comfortable with the language of “convicted”. I would like to go ahead and move the amended language that was distributed last week, which removes “prosecuted” and replaces it with “convicted”.

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The Chair

05:26:09 p.m.
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That's a subamendment that is proposed for CPC-9, to change “prosecuted” to “convicted”.

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Mr. Rick Perkins

05:26:24 p.m.
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I know you and I exchanged some emails, but I don't recall the clerk sending anything out.

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The Chair

05:26:31 p.m.
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I'm not sure. Give me a moment. It will be sent around to members. It's a very simple change. If you look at the third line of CPC-9, it will be “that a non-Canadian has previously been convicted” instead of “prosecuted”. That's the subamendment moved by Mr. Fillmore. On the subamendment, Mr. Williams.

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Mr. Ryan Williams (Bay of Quinte, CPC)

05:27:07 p.m.
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I have a question first, through you, Mr. Chair, to Mr. Fillmore. Could you just clarify why? The second part of that would be, if it's not “convicted”.... Let's say there's a settlement with a company, would that still be included in your definition?

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Mr. Andy Fillmore

05:27:24 p.m.
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At a high level, it's about that old canard of innocent until proven guilty. However, to go deeper on the detail, I would invite Mr. Schaan to weigh in, if that's helpful to you.

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Mr. Mark Schaan (Senior Assistant Deputy Minister, Strategy and Innovation Policy Sector, Department of Industry)

05:27:40 p.m.
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I think “convicted” would be the technical definition of convicted, which would mean that you've been found by a court to be guilty. It would depend on the specifics of the jurisdiction and how their law is structured as to whether or not that would in fact be the case where there may be some form of a plea. Often, that actually involves a guilty trade, in the sense that you agree to the guilt charge in addition to the mitigation factor, so it would depend on the use case and the specifics.

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Mr. Ryan Williams

05:28:16 p.m.
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I'm going to give an example. Everyone knows Walmart. Walmart Mexico was involved in a bribery scam for permits for store openings. I guess it was a big scandal in Mexico. It's a multinational company. It was never convicted. It reached a settlement with the U.S. Department of Justice and the Securities and Exchange Commission. It paid substantial fines. It's an example of one company. There are tons of them. I'm not going to name all of them, but the point was they were not convicted. As a major company.... When we look at the review process of other allies, I've been comparing a lot in this committee CFIUS and the United Kingdom's Investment Security Unit. Both of them will include companies that were even alleged to be in a mandatory review in some part of their process. Walmart may be a bad example for that, because there are going to be other companies that we've talked about at length around a critical strategic list of industries. If any of those companies, for instance, was not convicted or reached a settlement, the premise would be that it could not be involved with a mandatory review. There are lots of examples where we might need that to be included. It doesn't always mean.... Based on our conversations in the last little while, the review process is triggered only in certain circumstances right now. Fewer than 2% are reviewed. Is that correct?

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Mr. Mark Schaan

05:29:49 p.m.
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National security reviews take place in every instance of investment.

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Mr. Ryan Williams

05:29:54 p.m.
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In terms of going through the whole process, though, there's a really low number.

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Mr. Mark Schaan

05:29:58 p.m.
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On the full process, by which you mean they've exhausted the additional avenues available for an extension of the review period, that is correct, but that is a relatively small number of investments. All investments, on the merits of the investment, are contemplated from a national security perspective.

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Mr. Ryan Williams

05:30:20 p.m.
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I guess I look at it the other way, then. What is the risk of any company involved with any bribery or corruption not being reviewed? The innocence, I understand. We want to have every company innocent until proven guilty, but if almost every company goes through the review process as a whole anyhow, why would we not then just include that as a definite? Again, I'll go back to the Investment Security Unit, the ISU, for the U.K. and CFIUS for the Americans. They all include that under part of the process in evaluating an investment security review. They even go so far in the U.K. as to have a National Security and Investment Act 2021. That was legislation that provided a new regime for reviewing and scrutinizing investments on national security grounds. They require mandatory notifications for certain types of transactions and companies with corruption or bribery charges. They've actually named it. This is part of the United Kingdom's legislation. Again, comparing apples to apples, when we look at some of our Five Eyes allies that are doing it, the U.K. has done it.... We need to really ensure that.... The question I have is this: If a company has been named with bribery, corruption or any other kind of malicious intent in that sector, what's the harm in having everyone mandatorily reviewed, if we're already seeing mandatory reviews across the board in many instances? That's a staff one.

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Mr. Mark Schaan

05:31:56 p.m.
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As noted, right now, what determines whether or not an investment moves from section 25.1 to 25.2 is the information that's developed and the analysis that's provided by the national security agencies. This amendment would automatically make the determination that the information warranted a section 25.2, as opposed to allowing information to make the determination. The only consideration I would raise for the committee is that this amendment speaks to any jurisdiction, and there are politically motivated prosecutions and, in a limited number of cases, convictions on the basis of corruption. This would be extending to a firm a mandatory section 25.2, which is not the same as the mandatory national security review, which would allow the national security agencies to determine whether or not we move from section 25.1 to 25.2 to 25.3.

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Mr. Ryan Williams

05:32:51 p.m.
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Mr. Chair, who would make that determination, then? Is that the investment review division? If we leave it up to interpretation—an important question—who makes the determination of whether a company is going to go through that review process?

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Mr. Mark Schaan

05:33:09 p.m.
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National security agencies are consulted, and their advice is sought through the Minister of Public Safety to the Minister of ISED, who makes that determination as to whether or not that investment moves from section 25.1 to 25.2.

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Mr. Ryan Williams

05:33:20 p.m.
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Through you, Mr. Chair, what's the timeline difference if a company goes to section 25.2 in terms of the report period or delaying that transaction?

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