April 18, 2013
Ottawa should take another stab at rewriting its foreign investment rules because what it has done so far has created the mistaken impression that Canada doesn’t welcome offshore money, a new study concludes.
The confluence of the federal government’s rejection of two major takeovers and the introduction of a new test for oil sands investment has magnified the uncertainty among potential investors, according to a report released Thursday by the Institute for Research on Public Policy.
"Investors are not in the business of playing a lottery," explained co-author Dany Assaf, a competition lawyer at law firm Torys LLP in Toronto. “In today’s world, people have a variety of options to deploy their investments. They prioritize, and they go where it’s easiest to invest their money.”
Ottawa blocked the takeovers of Potash Corp. of Saskatchewan Inc. in 2010 and MacDonald Dettwiler and Associates Ltd. in 2008. Last year, it approved takeovers of Nexen Inc. and Progress Energy Resources Corp. by foreign state-owned enterprises, or SOEs, but promised all future oil sands takeovers by SOEs would be approved only on an "exceptional basis."
The combination of the decisions and new rules has left potential investors and many Canadians confused about what is and is not allowed. "People are trying to understand what the foreign investment landscape looks like," said Mr. Assaf, whose clients include Canadian companies investing overseas and foreign companies doing so in Canada. "In trying to answer questions, you can introduce new questions."
The report argues for takeover rules that are at once much tougher and more explicit. But it says the controversial net-benefit test should remain.
Read the full article here.