Counterfactual

The ICA and Canada’s National Security Strategy: A conversation with Vincent Rigby and Thomas Juneau

Episode Summary

Canada’s national security is at the forefront of conversation once again. We sit down with national security experts, Vincent Rigby and Thomas Juneau, to discuss the current threat landscape facing Canada and its allies and how the Investment Canada Act fits into Canada’s broader national security strategy.

Episode Notes

In our third episode, we sit down with the former national security and intelligence advisor to the Prime Minister, Vincent Rigby, and Associate Professor and security expert at the University of Ottawa’s Graduate School of Public and International Affairs, Thomas Juneau, to discuss their recent report on the threats to Canada and Canadians’ security, the sufficiency of Canada’s current strategy to protect its national interests, and how the Investment Canada Act fits into the broader national security toolbox.

Episode Transcription

00:00

Welcome to Counterfactual, the podcast brought to you by the Competition Law and Foreign Investment Review Section of the Canadian Bar Association. Counterfactual takes a fresh look at issues relevant to business, competition, and related areas of regulation, and explores the real and hypothetical worlds to gain practical insights and debate policy. Hope you enjoy the show!

 

00:28

Welcome to Counterfactual, the official podcast of the Canadian Bar Association's Competition Law and Foreign Investment Review Section. Today we are talking Foreign Investment Review, more specifically the national security review of investments under the Investment Canada Act. Our guests today are Vincent Rigby and Thomas Juneau. Vincent has recently retired from public service after 30 years focusing on security and intelligence, foreign policy, defense and development issues most recently as national security and intelligence adviser to the Prime Minister. Thomas Juneau is an Assistant Professor at the Graduate School of Public and International Affairs at the University of Ottawa, focusing on the Middle East, Canadian foreign and defence policy and the relationship between intelligence and policy. They are the lead authors of “A National Security Strategy for the 2020s: Report of the Taskforce on National Security” at the Graduate School of Public and International Affairs at the University of Ottawa. We discussed where the ICA sits in Canada's broader national security establishment, and what changes are needed to strengthen Canada's toolbox to protect its national security. We hope you enjoy the conversation.

 

01:41

So thanks, everyone for joining us here on Counterfactual the Podcast of the CBA Competition Law Section. I'm Kate McNeece from McCarthy Tetrault and I'm very pleased to be joined today by Thomas Juneau and Vincent Rigby, who are going to speak to us about national security in Canada. So Thomas, Vincent, welcome. Thank you very much for joining us today. So, we're coming at this podcast from the perspective of primarily foreign investment lawyers. So our interaction with national security tends to be through national security reviews of investments that are tied to a particular investment. But I know that your expertise in the national security field is significantly broader. So what I'm primarily interested in today is, you know, as ICA lawyers, what should we know about how foreign investment review under the Investment Canada Act fits in to the national security establishment as a whole? And what are the key issues facing Canada today that we need to think of when we're speaking about national security and protecting it through these many tools?

 

02:52

Sure, well, maybe I can, I can kick off, Thomas. And then you can, you can, you can supplement. So I guess, maybe start off just by talking a little bit about the overall national security threats to Canada right now. Because I don't think you can understand the place of the ICA and its efficacy as a national security tool unless you understand the threats out there. And so the report that Thomas and I came out with, I think it was back in May. With Ottawa U, it was produced under the auspices of Ottawa U where Thomas teaches. 

 

03:26

We, we talked about a couple of things, and we tried to deliver two key messages, I think. The first key message was that there have been a number of worrying national security threat trends over the last five or 10 years, and that these trends were, if anything, intensifying, and were not going away, far from  going away. So everything from great power rivalry, which has been popping up in the news, quite clearly in the last year or so, especially with the invasion of Ukraine by Russia. But this this is something that I think has been playing out over the last 10 years or so, whether it's Russia and the West, China and the West, and so on. International ideological competition and ideological competition at, at home. Seeing through violent extremism and polarization of views, and that, and that sort of thing. Also, issues like pandemics, issues like global warming, which can also be very serious national security threats and not something when so they're going to get into in any detail today. But at a certain point, it reaches a threshold where these kinds of things can, can definitely affect our economy, greater social cohesion, all those sorts of things. Technological disruption that is out there, cyber attacks and so on. Talked a little bit already about extremism at home, but also in the context of, of actual terrorism, international terrorism and, and organized crime. 

 

05:03

So there's a lengthy, lengthy list. And these things have kind of come together to create what but I've been talking about lately, it's almost like a gathering storm. I don't want to sound too much like Winston Churchill, but there's a lot of stuff out there. And I think most international security experts would, would tell you that we live in a very troubled world, and that we are facing some serious challenges. So that's, that's the first message that we have to acknowledge that these threats are out there. 

 

The second message, central messages is that we don't believe that Canada or Canadians writ large are taking these threats seriously enough. And not just governments, but as I say, the country, the Canadian people, the entire population. And that's because we never really have. And that, you know, we chose some, some words quite carefully. One word that comes out in the report on several occasions is complacency. There's a certain complacency within Canada, when it comes to national security threats, we tend to wait until the last minute before we really start paying attention and take our, our heads out of the out of the soil. And we've been complacent because we've never really been directly attacked on Canadian soil. And we've also been comfortable under the umbrella of United States. And so we've kind of let others do our dirty work to, to a certain extent, I'm not suggesting that we've, we've never responded when the bell rings because we, we do. But again, we, we tend to sit back on our, on our heels until the threat is directly in front of us. And we're saying right now that these threats are getting closer and closer to our faces, and we need to do something. 

06:43

So those are the two essential messages that Canada needs to wake up and Canada needs to take some pretty serious measures to respond to these threats. And, and within that broad overview of the international security threat environment we talked about,

one of the centerpieces is economic security and threats to our economic security. And we need to sharpen some of our tools to really counteract things like intellectual property theft and espionage and, and things like that. 

 

07:18

And the, the Investment Canada Act is one of those tools and we've used it in the past. And we feel that it can probably be strengthened a little bit, the government's made some progress in the last couple of years and strengthened it. But we could probably go even further. But the, the ICA is an important tool in responding to the economic security threat as part of that broader threat environment, which we feel is deteriorating, quite, quite significant. So that's a rather long-winded answer to your question. But I think it's important context.

 

I think that's really helpful. And that certainly sets up the broader context in which we're speaking. So before we sort of drill down into economic security and into the ICA, and how that functions and how it can be improved. Could, could one of you just sort of take us through what Canada's other tools are to protect its national security, both in the economic sense and more broadly? And how that national security apparatus sort of functions together? Or as opposed doesn’t within the government to protect candidate security?

 

07:39

One, one way to answer your question, and also to tie it into some of the points that Vincent mentioned in his answer to the first question, is to make a bit of a difference between your traditional national security partners – agencies , departments – and the non-traditional ones and how increasingly they have to work together and how that's difficult. So, your traditional security partners are the obvious ones, the ones that we all know about, at least their names: CSIS, the Security Intelligence Service, the RCMP, the Border Services Agency, and National Defense and the Canadian Forces also have a role to play. These are the traditional ones and they, they address traditional security threats, whether it's military or you know, counter espionage, CSIS and RCMP have a role, counterterrorism again CSIS and RCMP have a role. But to tie it into what Vincent was saying, and this works as a general point, but also specifically on what is of interest to you, which is the ICA and economic security, to address a lot of the threats that Canada faces today, the traditional security tools, the traditional security agencies, obviously have a major role to play, but it's not enough. 

 

09:25

Putting aside the case of economic security for a minute, since I guess we'll focus on it a lot after that, think about the pandemic. The pandemic on its own is a public health issue. It's not a national security issue, but it's a non-national security issue that has major national security implications. So to give you, you know, obvious examples that, that we can all grasp: early on during the pandemic,one thing that the government realized was that Canada's pharmaceutical sector, biomedical research sector, academic research in universities, were very fast becoming major targets of espionage by China, in particular, but also other countries who were trying to steal intellectual property. 

 

10:07

That's a national security problem. But to address that CSIS, CSC, which is the signals intelligence agency, and the RCMP had to reach out to nontraditional partners, like the private sector, like universities, you know, provincial governments, in other cases, the Public Health Agency of Canada and talk to them, to work together to deal with these issues, and these were relationships that didn't really exist in the past and in some cases, not at all. So getting these people to work together, who speak a different language, who have very different culture, cultures within their organizations who have different protocols, different ways of doing business, we're not used to sharing information, that's really difficult. So when thinking about how the intelligence community is set up and how it deals with today's threats, it's useful to think about your traditional players. But it's essential to keep in mind that pretty much everything we have to deal with in the national security world has to involve a whole range of other actors. And we can dig down much deeper into that. But when you think about foreign direct investment, and the work of the Investment Canada Act, CSIS, CSC, the RCMP, CBSA, the Border Services, they all have a role to play, but they have to work closely with the private sector with eyesight Innovation, Science and Economic Development Canada, Trade, Natural Resources Canada, and so on, who are not core members of the national security community, but have a role to play in this. And again, just like we were saying, for the pandemic, these are people who live on a different planet in many ways, and getting them to work together across either a real physical table or, or, you know, just the analogy of working together across the table has been quite a challenge.

 

11:07

One of the points, if I can just jump in to, to build on what Thomas just said, one of the points you make in the report, as well as that a lot of the threats that you’re seeing in the 21st century security threats are not state-to-state anymore. It's often state or non-state actors who are targeting individuals, targeting Canadians. And so that's why we say that it can't just be a government response, we often refer to it as a whole of Canada, all of Canada response. So this goes to Thomas's point about everybody gets the need, everybody needs to get inside the tent. We need to have federal government, provincial, territorial, municipalities, private sector, etc, etc, etc. And we need to respond at the strategic, the operational and tactical levels. And so your, your question about well, what are the other tools? What are the other things that we need to do to respond? It's not just the ICA. ICA is one of many things that we think needs to be needs to be looked at. We argued that you have to start at the strategic level, we don't feel that we have a strategic game plan, or policy or a statement that defines our, our national security strategy. We don't we don't have a strategy. So we call for the development of a national security strategy. We haven't had one since 2004. And that we make sure that it's fully integrated with all the other tools at the government's disposal in terms of foreign policy and development policy and national defense, etc, etc. 

 

And then in terms of some of those practical tools, in the zone of the ICA, all kinds of legislation needs to be looked at the CSIS Act is, is 40 years old, almost. 

 

13:22

We'd like to joke that cutting edge technology, when the CSIS Act was created in 1984, was a fax machine and it just hasn't kept up with technological innovations. The Emergencies Act needs to be changed. The Money Laundering Act needs to be needs to be looked at. And to Thomas's point about all the different players, we need to share information better and we're not we're not great at sharing at sharing information. We have problems inside the federal government. But if again, if you want a whole of candidate response, we've got to share intelligence, share information, with other levels of government, with the private sector, etc. We talk a little bit about governance in the report, about the kinds of bodies that we, we need to actually implement a national security strategy and defend the country against, against these threats. So we talked about the possible creation of a National Security Council type body in Canada, a cabinet committee, chaired by the PM that will deal with these issues on a regular basis and try and get ahead of the power curve. And then we talk a lot about transparency. So again, going to Thomas's point, and he's the transparency expert. If you truly want the trust and support of Canadians in responding to all of these threats, you need to, you need to be more transparent, more open with them as to as to what you're doing. So again, this goes back a little bit to the sharing of information. But you can't ask Canadians to help you, if you don't tell them what you're doing. And so we advocate very strongly for you know, public threat assessments and sharing information with other levels of governments and threat briefs to parliamentarians, and all that, all that sort of stuff. So that again, you know, we'll get into the ICA specifically. But those are some of the other things that we recommend in the report and some of the tools and policies, legislation that we think we need to unpack.

 

15:06

Thanks. That's, that's really fascinating. So I guess, if you were to put together a wish list of your top three changes to the national security establishment as it is that would help us best react to this, to the threat environment. What do we think those top three would be? What's like a real critical lacuna that were 

 

15:27

It’s really difficult to come up with only three and in our report that we released in the spring, we had 65 recommendations and we were we didn't even bother with a ranking. Because I'm not sure on what basis (cough, sorry) we would have done that. I think the number one is, what Vincent mentioned, we need a national security review. And we don't have a strategy. And we need to do a serious, not just government-wide, but society-wide, involving the media, the private sector, and others in thinking about that. So Vincent mentioned that. So I think that's, that's clear. And then, that’s clearly the first one. Beyond that, it really depends. If you want to talk about specific tools, Vincent mentioned modernizing the CSIS Act.It's it's absurd that we haven't done that for decades. Now, you could talk about countering foreign interference, which is a major problem that we don't talk about enough. There's, you know, with the major protests going on in Iran right now that I've been following a lot. And you hear so much about Iranian Canadians here, whose families themselves are being pressured, clandestinely, in some cases, blackmailed by members of the Islamic Republic, either here in Canada or online. We're really not doing a good job at that. So, I would include that in the list too. At the cyber level, we could also mention a lot of things that Vincent mentioned. Information sharing, we have improved. That's important to recognize. But there is so much more than we could do, in terms of facilitating the exchange of information within government, among the core national security agencies that I mentioned, with the non-traditional partners elsewhere in the government, but even beyond the government. The government, it has to do a much better job of sharing information with people like yourself, in the private sector, whether in lawyers or elsewhere, who are targets in many cases, or represent targets or work with targets and so on, and who just don't have access to that information. And our, the federal government here does some things very well. But one thing it doesn't do well, even if it is improving slowly, it's to engage with stakeholders and brief them, share information, explain to them, give them advice, raise awareness, and things like that. So I'm not sure I think that's a bit more than three. But I could go on, but I'll identify these four or five.

 

17:45

So I'm going to add another three and make it six. No, I'm just kidding. So I would totally agree, we have to start at the strategic level. So I think Thomas is 100% right. We, we need to review and  we need a strategy, because everything is going to flow from the strategy. And it's just been a huge gap in Canada. You talked about a lacuna. I mean, that's, that's a big one. And it's being noticed by other countries, you know, whether it's in the Five Eyes, or NATO or G7 countries just saying,” Where is your, your big framework for all of this? How are you going to address all of these issues?” We also haven't had a foreign policy statement since 2005. So we're not,, we're not big on those on those strategy pieces, but they're really critical. The only other one that I would I would add, is this idea of a national security committee, chaired by the PM. We do not have a mature or sophisticated security intelligence culture inside Canada, as I've already said, but inside the Canadian government. And one of the reasons is that at the political level, we don't really have the bodies to talk about these sorts of things. So a lot of security intelligence issues don't necessarily get discussed in, in full Cabinet. They get discussed in Cabinet Committees, sometimes, but then the expertise inside the Cabinet Committee may not always be as extensive as you'd like. If we had a Cabinet Committee on National Security chaired by the Prime Minister, him or herself, and you had four or five dedicated ministers - National Defense, Foreign Affairs, Public Safety, the Deputy Prime Minister, maybe the Minister of Finance, who could really develop the expertise and national security, talk about these issues, every couple of weeks, get briefed on a regular basis on all of the issues out there. I think that'd be incredibly important to implement a strategy, to get ahead of the power curve, and not always be in reactive mode, because we're always in reactive mode. We have a body called the Incident Response Group, which you've probably heard of, and the government always makes a big deal of it when the IRG meets. But it's always as its name implies, it's in response. It's, it's, it's in response to the horrible storm that's happened on the East Coast or in response to the pandemic or in response to rail closures by indigenous groups. I'm just reading off some of the stuff that I used to be involved in when I when I was the Secretary for the body. But the strategic thinking that doesn't take place there and there's no body at the political level where that strategic thinking is taking place. It might also be a body where you talk about the ICA. Where you talk about economic security. I don't know if it’d necessarily talk about specific cases. If it's a really important case, maybe it would be discussed that that kind of a committee. We don't have it right now and we're the only Five Eyes country that doesn't have a body like that. So US, UK, Australia, New Zealand, the other Five Eyes members, they all have a body like this. So often people go, “Oh God, it's just a body, a body's not going to solve everything that just sounds like boring old governance, blah, blah, blah.” Governance is sometimes really important. And you know, that Field of Dreams line, you know, “if you build it, they will come.” If you build it, that's where you're going to have the discussions that are actually going to generate the culture. And that will, that will hopefully flow down into the public service writ large as well. But I think that the political level there is a big, big gap.

 

21:00

That's fascinating. So I think one of the themes that you've touched on, so first of all, we're talking about really big picture issues here, issues here, you know: national security strategies, government wide, government high-level committee is chaired by the Prime Minister, if we zoom in a little bit to the problem of, of economic security, obviously, the tool that we is competition and foreign investment lawyers work with the most is the Investment Canada Act, which is, I think, more of a pinpoint tool, right, it's more of a surgical tool, because we're dealing with one investment at a time, based on the Canadian, you know, based on an investment in a Canadian business, so not necessarily sort of dealing with all threats. So how does something that detailed fit into the strategy? And how do we make a strategy - How do we implement that strategy through a piece of legislation, like the ICA, where you are dealing with really discrete issues? And how should we think about the assessment of whether an individual transaction with an individual company, often who may be quite small sort of fits into the bigger, broader national security picture in terms of what constitutes a threat to Canada? And you know, whether and how that threat should be mitigated?

 

21:46

That's a good question. And that's where the point that Vincent and I are making about the lack of an overall national security strategy that provides guidance on the broad objectives: what are the threats? How do we counter them? What do we want to achieve? Who are our main rivals? What do they do to us? And so on. In the absence of such a threat, the ICA operates in a bit of a vacuum. And that, I think, is a bit of a problem. There are in some cases, it's very clear that a specific investment poses a national security threat. But in many other cases, it's not so clear: which countries in which sectors over what amount of money? What has to be the consequences? What distinguishes a good from a bad investment from a national security perspective? How do you balance a threat to national security with economic benefit, because as we all know, in the real world, an investment can, hypothetically speaking, bring major economic benefit, but pose a limited national security threat, in which case, we may want to take the risk. But on what basis? And the ICA brings a certain level of clarity, I think there's a case to be made that it could bring more clarity, but it brings a certain level of clarity on the specifics, right? The threshold, the timelines, the 90-day review, etc, etc. But where there's a much bigger gap that from my perspective, as a non-ICA specialist, but someone looking at the bigger picture, what I find is much more problematic is this absence of an overarching strategy to help us guide decisions in a coherent way. Because so far, what I've been seeing on the operation of the ICA is that it's very ad hoc. We see cases being evaluated on, on an individual, on a case-by-case basis, which in a way is as it should be, but I'm not sure how they fit together. And because we don't know, you know, what is the China strategy and so on. So from my perspective, that's where the problem tends to be.

 

23:38

I would agree with that. I, again, we need the broad overarching strategy that pulls it all together, integrates everything right across government, right across government. But as a subcomponent of that, I think we also need an economic security strategy because economic security is so under threat these days, and so many hostile state activities, (non-state actors, as well, on the cyber side, for example) are targeting our economy. They're going after our intellectual property. They're trying to get hold of our sensitive goods. They're, they're, they're looking for information, sensitive personal information. I mean, it just runs the whole gamut. And all of these have a, have an economic dimension. So this has become a really, really sort of sub-component of national security writ large. 

 

24:52

And I think putting together a strategy like that. I think public safety has been, been working away on one for quite a while now. We still haven't seen it. Maybe something will come out of this taskforce that was that was struck last year. But if we could see that strategy that would identify the threats and then identify the tools.But then not just identify them, because I think we know what they are. ICA is one of the tools. You know, we've got a Control;ed Goods Program. We've got an Export Import Permits Act. We've got all kinds of different stuff. But identify the tools but also where they need to be improved. And, and I agree with Thomas. ICA, I think it's come a long way. The government  has done some good, good stuff over the over the last, over the last couple of years. They fine-tuned it. But I still think you need to completely pull up the hood and, and not deconstruct and start from scratch, I don't think you need to do that some people would suggest that, but I don't think you need to do it. But you, you still need to give it, the engine a good, serious overhaul and ask some pretty fundamental questions about what its purpose is and how it works. I mean, Thomas is right. 

 

25:54

You know, I sometimes scratch my head at some of the cases and, and go, “Okay, I understand here that there's been a decision to not block this particular investment or not even to take a national security review. I'm thinking of Neolithium, for example, which has become the classic case of the last six months. It's not seen as a direct threat to our national security. But you know, a lot of us scratch our head and go, “Okay, it's not a, however, you want to define a direct threat to our national security, but it's a strategic asset. It's in the hands of a hostile state actor, which is affecting a lot of our allies, and it's affecting, affecting global politics and global security. So what's, what's, how is this going to work? I mean, there's no, there's no definition of national security in the legislation. And, and a lot of people will say, well, that's not a bad thing, because you want to have maximum flexibility for the government. And that's fine. I think that a lot of the definition is being fleshed out and regulations and, and in the guidelines, more the guidelines than the regulations, but what's the strategic outcome you want at the, at the end of the day, so that we can understand how some of these decisions are made? I mean, I've been at the table for a lot of these decisions. And I, I know, it's really, really hard. It's hand-wringing at times trying to figure out where to where to land on, on some of this stuff. But sometimes I think we felt hamstrung by the legislation to a certain extent. We would have liked to have taken the decision and move it in a certain direction but, but we couldn't because of the way the legislation, the guidelines were crafted. So...

 

27:23

Well, I think that brings up a really interesting point, which is, you know, the ICA probably always will be an imperfect tool, but it's certainly a tool that we can identify some issues with and try to improve them. So, I think I'd be interested in digging down a little bit more on where you see issues within the ICA and sort of key fixes that are needed to the legislation. So, I think that's one question. The second question I have, which may be related, is on the transparency point. So the government certainly has provided guidelines, the guidelines on foreign investment and national security reviews, which you know, do provide some at least categories of investments. They've made some policy statements identifying certain categories of investors, state owned enterprises, for example, that they identify as requiring additional scrutiny. But again, it is sort of, to your point, very high level that I don't know that it really identifies the threats, to put those guidelines in context, which makes it difficult for some of our clients in the private sector to assess the potential impacts that a given investment may have on national security or how it may be perceived by the government. So I think that's one part of it is the public facing stuff, the other part of it, and here's where I think we run into some real difficulty, so I'd be interested in your views as to how to navigate the appropriate balance, is that at least in my experience, advising people through a national security review, often the information that you get, as the investor going through this confidential review from the government is very minimal, sometimes so minimal, that it's difficult to even identify what concern is being raised, even if you were to wish to try to address or mitigate it. And then on the other hand, to the market, obviously, we have confidentiality in respect of these reviews, but how can we inform the market of the decisions that the government is making, and use that to better inform the public's and the private sector’s understanding of the threat environment and how it's being addressed through this tool?

 

29:20

I'll try to kind of fuse your, your two questions with, with one answer on how to improve the ICA and the issue of transparency, because I think there's, there's obviously a clear link there. And this is one point that we specifically make in our in our report that came out in the spring. One complaint that that we heard of, and that, that I certainly am sympathetic to is that the ICA is a bit vague in its criteria. And from the government's perspective. Now, I didn't write the ICA, I didn't draft the legislation, so I can't say if it was on purpose or not, but from how government thinks in many cases, it might have been that vagueness provides the government with a fair bit of discretion on how it implements it. So from the government's perspective, from an executive perspective, there's something appealing there. But from the private sectors perspective, and it's not ideal because it's not clear. So how do we improve the process? (A) there's the issue of clarity of the criteria, but (B) there's the transparency around the process as a whole. And here, I think there is massive scope for improvement on the ICA, how it works, how it operates, the criteria, the precedents, the process, and so on the results. But also, it's a point that you can make about the lack of transparency in general. And this is something that I've been very interested in, in the last few years how the government's lack of transparency and national security matters in general, not just on the ICA in general, and I won't go into the lack of transparency in non-national security matters, there would be a lot to say, but that's not my, my scope, or my field. Think about something like disinformation, right? The government being so not transparent on so many issues creates an information vacuum or void, that hostile actors can fill with disinformation, propaganda. So the lack of transparency in this field is counterproductive. Of course, that's easy to say. And in practice, it's hard to do. But the fact is, it's counterproductive. And in many cases, when you listen to private transparency advocates in the public sphere, NGOs and so on. They talk about the lack of transparency, much more from a moral perspective how in a democracy, you shouldn't do that. That's absolutely true. But there's a very good pragmatic case to be made, that the lack of transparency hurts national security. That's true in disinformation. And you can make that that case in multiple other fields. And I think that a similar logic applies to the ICA, where the lack of transparency, the vagueness around the criteria, separate but linked, things hurts investment, and it hurts the process as a whole. So to sum up, where to improve on the process, not only make it clearer and more specific and less vague. That's a bit counterintuitive for governments because they sometimes enjoy that because it gives them a bit more control or scope or discretion. But I think it's counterproductive in the end, for it's in ways similar than it is in other fields.

 

32:20

I think I mean, if I was still a government official, probably my former hat on, I would say, well, just a second here. Take Take a look at the guidelines that were introduced, I guess it was in March or April of 2021, which are, which are beefed up. And the factors that go into a decision on whether to launch or proceed with the national security investigation or review, you know, there's a there's 10 factors altogether, they added a couple of new ones, including personal information, I think critical minerals were added as well. There's all the criteria there. So you should know what you're dealing with. But to Thomas's point, there's not a lot of detail there. I mean, they are very, very high level. And they're basically just, just listed as, as topics or issues. And so do you need to flush those out a little bit more to give to give more information to private investors are there? So we use whatever the case may be? Yeah, potentially, you could. And again, none of this is laid out in the legislation itself. It's an it's in the guidelines, which you know, is fine. It doesn't need to be in the legislation. But you could probably add a little bit more in terms of the information that we give directly to companies when when they're investing, trying to invest and we get in negotiations with them. And, and we're getting information from them. And they're asking for information for us. I mean, yeah, you want to be as transparent and as available as you possibly can. But there's also stuff you can't tell, right? And if you're if you're poking around certain areas, and a lot of this stuff is, is top secret, very, very sensitive information. You're, you're, you're following threads here into some pretty, pretty sensitive areas, there's only so much information, you can tell him you can't tell them necessarily who you're going to be talking to, or, you know, the concerns of, of allies, because oftentimes, the United States will have views on a lot of this stuff, etcetera. So you, you do have to be careful. So there's always that that balance. But on the public side, I think there,, there can be more transparency. I again, I think to a certain extent that the guidelines and the regulations and how the process works and, God knows, it is a complicated process. It's very complicated. It's not easy to understand you have you have to read the regs about 15 times in order to get the, the 45-day periods down pat, when it goes to an order in council, etc, etc. But I mean, I think it's better. And sometimes the summaries done by other law firms like yours are easier to read than the actual government stuff, but it's, but it's out there. But what I'd like to see is a little bit more unpacking or private of individual cases. And so again, you know, I use the Neolithium case where this Chinese company bought up by a Canadian company dealing with the production of lithium, this mine in Argentina and they didn't even do a national security review at the end of the day. They, they basically said it was it was tickety boo. And it would just seem so counterintuitive to everything they'd said, especially when as part of the new guidelines, they had identified minerals, critical minerals as a criteria. And yet, here's an SOE, trying to buy up a Canadian critical minerals company, lithium company, strategic asset, and it didn't even go to the review period. And then you saw government officials appear before the Industry Science and Technology Committee, and they're asked to explain it. And it was pretty, pretty high level to put it mildly. You know, the mines in Argentina and, and it wasn't the kind of lithium that's actually going to be a great strategic value. And it really wasn't a Canadian company. And then, then when they were asked to unpack it, very little said, and so we're all left scratching our head. Now again, if I put my official hat, I'd be going well look, just a second Rigby, you should know that we can't divulge too much of that stuff publicly. Blah, blah, blah, blah, blah, yes, but you can certainly provide more than you provided right now. So then companies will learn, Canadians will learn the issues and what gets thumbs up, what gets thumbs down, because right now you have a lot of people screaming ranting and raving going, “That was ridiculous”. That decision, and you'd like the government to come out and go, “Okay, we're going to give you a little bit more on why that decision was taken”. But, but we've not seen that. So I'd like to see a little bit more, more, more transparency on that level if we possibly, possibly could.

 

36:49

Now, that's a great point. I think that the, I guess, so-called negative disclosure. So the disclosure, when a decision is not taken is certainly something that's missing entirely from, from the government's transparency. And, and of course, you know, putting on my, my outside counsel hat, of course, we've got a number of clients who do not want it to be made public if, for example, a transaction is not public, that they were subjected themselves to national security scrutiny. So there is a balance there between, you know, not having a chilling effect on investment, if it could be splashed across the front page that you were blocked when it would otherwise have been completely confidential. But, you know, the government does set out an annual report on the Investment Canada Act every year, at the close of the fiscal year. And I think over the past several years, they have been including more information. So, you see now some statistics on the number of decisions that were taken in terms of, you know, to your point about having a very complicated structure, obviously, we have a national security notice period that is followed then by potentially ordering a national security review. So you know, they've identified countries from which investors have been subject to the national security review, but not necessarily that preliminary national security notice part, which I always be interested to hear, because the national security reviews are about half of them.

 

38:09

Exactly and so you don't you don't get a lot, as you know, you, you know the process very well, better than me, probably, but there's that there's a could period, and then there's that would period and the could period, having been through a number of these, is just as interesting as the would. Because if you get to would, the seeds are planted in the could. And so, again, not to not to beat a dead horse. But to come back to this specific case over Neolithium, it didn't get past the could, which was kind of bizarre for a lot of people. And so even to explain a little bit, and the government would probably say, Well, we did. And again, it's not a mine in Canada, it's bla bla bla bla it wasn't really a Canadian company. I didn't get that part. You could probably explain that to me better. But I've read I've read the annual report. And you're right, it's, it's that they are improving that the numbers are broken down, you're, you're seeing the trends a little bit. And I'm not expecting them to provide pages on individual cases, but in certain cases, and in this one, quite frankly, it was as much a political football as anything else. You think they would want to address it and say to the Conservative Party, “Listen, you guys are you know, you don't know what you're talking about. This is actually why we made the decision we made.” But anyway, it's, it's tough. But again, I overall I think the government is has done a lot, as I said, and those guidelines in 2021. And then what they came out with during the pandemic in 2020 the changes to the regulations with respect to advanced notification or sorry, voluntary notification, I thought that was really important. It gives a lot more clarity to companies, but it's also good for the government, right? So they can get ahead of the power curve. And they're not tapping someone on the shoulder four years after the investment and saying, “Hey, we've got a concern now”. So these are these are all good things. And I hope the taskforce comes up with some stuff, but there's still there's still some stuff I'd like them to take a take a look at. And I think the fundamental question is: do you open it up a little bit more? So nothing falls between the cracks? So the focus on the SOEs over the last couple years? I think it's great. But do you make, do you make all SOE investments mandatory? Do you do you list, strategic sectors and anything that falls in those strategic sectors, it goes at least to that preliminary review. So that again, you're, you're getting a little bit ahead of the power curve. They take a long time. We even complained about it inside government. I mean, I think I read in the annual report that the average, average review takes like 225 days, so everybody gets frustrated. But if you if you want to make it faster, it's I don't know if you can streamline the process, because I think all the steps are necessary, but you have to throw more resources at it. So does public safety, have enough resources, CSIS, CSC, et cetera, et cetera. So, some of these things, I think, need to be looked at. And the mitigation measures, there's, it's very rare for a deal to proceed with mitigation measures. And I can tell you that one of the reasons why we often didn't go the mitigation route is because they're almost impossible to enforce a lot of the mitigation measures. And then can you maybe you enforce them more by increasing the fines or something like that? Maybe. But there's still, despite all the all the progress, I think there's these little, little spots here that that need maybe a slightly more magnified magnifying glass with a little bit more power to take, take a look at them and expose them.

 

41:37

Yeah, I think their recommendation for a mandatory filings in certain sectors is a very interesting one, because that certainly seems to be the model that a number of other jurisdictions are following. Obviously CFIUS in the US is relatively well-established. But it has relatively recently implemented that type of model where it was previously an entirely voluntary national security review system. Ours is a bit more of a hybrid because there are investments for which a notification is required. But the national security piece is always at the discretion of the government. So you know, it's not always clear that you're going into a national security process. When you file and ICA notification. I think the UK has recently eliminated law, so has some sort of mandatory versus voluntary filing. So I think that's interesting. One other question. I think we're nearly out of time here. But one other question, I wanted to ask us about intellectual property. So you've mentioned intellectual property theft as a real national security concern in your opening remarks? You know, right now, I think there's some question as to whether the national security provisions of the ICA would, would apply to an investment that was only in that intellectual property sort of like patents or copyrights or, or that type of that type of asset, rather than an entity in Canada that has that has intellectual property that could be exploited? Is that something you think is missing from the Investment Canada Act? Or is that something that should be dealt with perhaps elsewhere and the government security establishment

 

43:05

I’ll let Thomas jump in if he wants to, but intellectual property and sort of domestic versus International and etcetera? I mean, I think that there are other tools on the domestic side that could perhaps address this as opposed to dealing with it under the ICA, I think there are, are bigger fish to fry with the ICA what it covers right now, without looking to expand it and give it more in a slightly different, different category. Let's, let's take the stuff that the ICA deals with right now. And let's, let's try and get it working as well as it possibly can before we before we look at broadening it out in that, in that respect. I think there are other tools we could use domestically.

 

43:37

Not being an expert on the specifics of the ICA, I don't have a precise answer to your question. What I would say as a broader point is that the theft of intellectual property, as I said at the beginning, emerged as a major problem to which we were not fully ready, fully prepared, in the context of the pandemic. IP theft in the biomedical sector, and so on. One of the biggest threats on the economic security front that we will face in the next years and decades, and for which we really have to start thinking about much more. And by the way, as the Senior Policy official at CSIS, made a public comment on this at a conference last year, publicly, so that was….of climate change. One of the most valuable economic assets that this country and other advanced economies will have in the 21st century is technology to adapt to and mitigate the effects of climate change, as solar panels and everything you can imagine at that level. My very vague understanding is that there is a growing recognition of this threat and the government. Is the ICA one of the tools to work on this? I'm not the right person to address that specific point. But at a broader level, we really need to up our game at that level.

 

44:54

All right, thanks. I think we're just about out of time. I mean, I feel like we can continue talking about this for literally hours, although I'm sure our audience would get very tired by then. So I'll just ask if there are any sort of final takeaways that you have before we before we end this conversation, sign off.

 

45:13

I would just make the point that even if incident I were critical on some aspects, sometimes critical in a constructive way, sometimes maybe not so constructive. But I think the ICA process has improved a lot. And this is a point that we make. In the report, I released a book with a colleague at Carleton, Stephanie Carvin, last year on the role of intelligence analysis and policymaking in Ottawa. We do talk about the ICA every now and then in that book, and you know, Stephanie, and I interviewed about 70 people in the Canadian intelligence community and other communities for the research for that book. And one of the striking points was the frustration. And really, I mean, frustration, and the bitterness of the people who were involved in the early meeting of the ICA, you know, 6, 7, 8, 9 years ago now, where I'm not sure that I've heard stories, right living in Ottawa, I'm not sure that I've ever heard stories of meetings that were as difficult as that, where you had the pro trade people and the pro security people, and I'm massively simplifying here, who had to get together and figure out is it a yes or no. And these were really bloody meetings. And is the system perfect today? No, it's not, it's never going to be perfect. And by definition, these processes have to be conflictual. I mean, that's how it has to be. But it's a lot better today than it was. It's a lot more effective. There's still a lot of scope for improvement, as Vincent and I discussed, but you know, it is important to recognize and not, not give the impression that we're only here whining, it has improved quite a lot. In the last,

 

46:44

you know, a bit less than 10 years. 

 

Yeah, I would, I would, I would back that up. And it's a, it's a delicate balancing act, right? it it. You can't. We played up a threat today, Thomas and I and we've said that, you know, we you really got to have strong national security provisions within the ICA. But Canada needs investment. This is about prosperity, as well, and you can't start blocking everything. Otherwise, we are going to undermine our economic prosperity. So where do you strike that balance? I mean, what's interesting, again, going back to the annual report, I think the percentage of, of investments that actually go under the microscope national security review, I think it's like one or 2% correct me? I think it may be less than that. Is that the right number?

 

47:32

I think that's exactly right. I think it's around 1.5% of all notified or reviewed investments.

 

47:38

Is that enough? Is that too much? I don't know. But we are certainly not advocating that. Everything that that comes from a state-owned enterprise, everything that comes from China, everything comes from Russia, you just slam the door on it? No, you have to take each case, you have to you have to study it very, very carefully, and take it, and take it seriously. I would, I would suggest that in this day and age, given the threats that we've laid out there that the provisions can probably be a little bit stronger. And you may want to err on the side of caution a little bit more. And that was my standard rule when I was at the table. You know, if you're if you're not sure, look at the country, look at the SOE, look at on balance the intelligence, and we're not sure. Probably better, better safe than sorry. I can tell you that. Yeah, the process is ugly at times. Thomas is absolutely right. There was almost literally physically blood on the floor at some of the meetings I went to, and I chaired some of them. And I was the Associate Deputy at Public Safety. I used to just walk out of them. I was almost on my knees. And, and traditionally it was sort of I sit on one side of the table and everybody else on the other side of the table. But you'll notice that the guidelines, the strengthenedd guidelines that came out in 2021. I mean, they were driven by the ISED minister, and I think you've got a minister now who, who gets it and I think that his predecessors got it as well. So I think we're moving in that regard. And one last point, you know, I know that the parliamentary committee was kind of scratching their head a little bit about in its in its report. Did all the departments work well together? And, and I think they even suggested that it be enshrined in the legislation that when the ISED Minister spoke to the Ministry of Public Safety to look into a specific national security case, that they actually listed all the departments that had to be engaged and so on so forth. It works pretty well. Yes, it's tough, but these are tough, tough cases. But I'll tell you. I've seen the work that's come out of CSIS and CSC and CFMCom and DND, because they often, their intelligence agencies, these intelligence agencies did a lot of the big work in terms of the initial intelligence assessment, which drove the discussion then. And these things were done extremely well. And we all rolled our sleeves up. And if the discussions were tough, it's because it was taken extremely, extremely seriously. So I think it works. It works well. Could it be faster? Could it be more streamlined? Could more resources be through an edit? Absolutely. But to backup Thomas, I think the trend line is in the right direction, and I hope the taskforce if it ever does report, they promised a public report I hope that they are sort of the icing on the cake in terms of pushing the ICA over to the right the right side of the ledger. It’s close there.

 

50:19

All right, well, Thomas Juneau, Vincent Rigby, thank you so much for your insights. This has been a fascinating conversation. We're very pleased to have had you on the podcast. For our listeners, the report that we've been referencing is entitled, “A National Security Strategy for the 2020s”. It's available on the University of Ottawa's website, and we will also do our best to link to it in the show notes for people who want to learn a little bit more in more detail about Thomas’ and Vincent’s insights. So thank you very much for joining us today. Once again, this has been Counterfactual.

 

50:53

Thank you for listening, counterfactual is produced and distributed by the competition law and Foreign Investment Review section of the Canadian Bar Association. The opinions expressed by the participants in this podcast are their own and do not necessarily represent those of their employer or other organizations. If you enjoyed this podcast or would like to join the Canadian Bar Association, please visit www.cba.org/sections/competition-law