At a fork in the road: politics and the Canadian regulatory landscape

This article was originally published in Law360 Canada. View the publication here: At a fork in the road: Politics and the Canadian regulatory landscape.

To say we are in a new era of regulatory enforcement is beyond an understatement. These days, in almost every realm, the Canadian regulatory world has been transformed.

Regarding key Canadian legislation, both the Competition Act and Investment Canada Act (ICA) have seen significant overhaul and amendment in recent years. On enforcement, whether considering the Competition Commissioner’s recent challenge to the Rogers/Shaw transaction or the increase in ICA national security reviews, the trend toward increased and more vigorous enforcement is clear.

The new angle to consider is the blurring of regulatory and political lines. Not so long ago, clear lines were drawn between the regulatory and political worlds. However, with increased societal concerns around the economy, competition and national security, and the discussion and commentary on these topics on both traditional and social media proliferating, it has drawn out an almost unprecedented level of political commentary as well.

The intensity and amplification of discourse in political, business and social circles has, in many ways, impacted and expanded the breadth of considerations, and assessments of regulatory reviews.

So, while there is a legitimate need for political leaders to comment on issues of public interest, it has created a heightened political environment that is seeping into the legal regulatory realm where institutional independence was once so cherished. As such, lines are fading more quickly than ever between these two worlds. This is putting pressure on regulators to respond and react to social and political pressures and much beyond traditional technical regulatory concerns, where businesspeople and lawyers had a much more certain playing field with very clear rule of law dynamics.

Now one doesn’t just need to read the law—one needs to read the headlines to tell you where your case may go.

The regulatory environment for dealmaking is at a “fork in the road.” This is not only about how the new stricter competition laws will affect M&A, but also what sectors could be reviewed under expanding ICA national security guidelines, which now include economic security as an important factor. While some obvious sectors—like critical minerals, critical infrastructure and sensitive technology—will likely come under an even brighter spotlight of dealmaking involving foreign investors, agriculture and food security is just one other area it could impact over time.

At the same time, Canadians recognize that, faced with the new reality of a more fractious relationship with the United States, we may have to expand who our friends are to keep our economy strong. It appears prudent in these times to also leave the door open to possibly being less strident in certain cases. The need to best serve the Canadian people and the Canadian national interest will be first and foremost.

Perhaps we need to keep our options open more to nurture other customers and partner relationships, and our regulatory environment may need to take that into consideration to best balance tensions between any political narratives and economic necessities.

A great example of the evolving global reorientation and era of exploring new partnerships in the national interest is a recent arrangement where the U.A.E. offered free-of-charge portable desalination plants to Cyprus to cover the water needs for that summer-tourism-reliant island. Not so long ago, it would have been hard to imagine there would be a desert nation bringing water to an island.

In these challenging times, the overall national interest is clearly paramount. Still, there are questions over how to define that, and what national interest means in the context of a particular case and how that could differ from national security.

Ultimately, we need to chart our destiny to best navigate through these times. We need to look at dealmaking with open eyes, make case-by-case assessments under the new regulatory environment without prejudging, and ask ourselves the fundamental question: does this benefit Canada and make us stronger?

Finding harmony between this priority and the overall trend, both at home and abroad, to the increased politicization of regulatory reviews across the board will require taking an integrated 360-degree view of transactions, pre-planning and coordinating the legal, business, government and appropriate PR strategies in even more thorough and creative ways to effectively managing and de-risking regulatory reviews. We will all need to open our minds to new springs of challenge and opportunity because we now know the water to cultivate the best plans can come from even the most unlikely source.