Canada's Foreign Takeover Rules Changed To Allow More Public Disclosure

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CANADA FOREIGN INVESTMENT TAKEOVERS
Minister of Industry Christian Paradis makes an announcement in Russell, Ontario on Wednesday, March 14, 2012. The federal government will be able to inform the public that it is not satisfied with a proposed foreign investment and explain why it needs more information from the investor under changes to the Investment Canada Act. (THE CANADIAN PRESS/Sean Kilpatrick) | CP

OTTAWA - The federal government is promising more disclosure on decisions to block foreign takeovers that it judges would be detrimental to Canadian interests.

Industry Minister Christian Paradis said in a statement Friday that he will introduce amendments to the Investment Canada Act that would allow him to disclose that he has sent a preliminary notice to a potential investor against a takeover and to explain his reasons.

The explanation would only occur in a manner that does not break company confidentiality or cause harm to the Canadian firm involved or the investor, the statement said.

As well, an amendment would allow Ottawa to accept security in lieu of cash in payment should a court levy penalties on a foreign investor for breaking contractual commitments.

"Canada has one of the best investment climates in the world," Paradis said in a statement. "Our businesses depend on investment to expand, innovate and create jobs."

The government gave no reasons for the changes, but they follow a 2010 non-binding motion in the Commons calling for more transparency, including public hearings, and conditions applied to a successful bidder.

As well, former industry minister Tony Clement had suggested the department would review the act after taking heat from for vetoing the takeover of Potash Corp. (TSX:POT) by Anglo-Australian mining firm BHP Billiton. At the time, the then-minority government was accused of caving in to political pressure from Saskatchewan.

Critics said Canada's reputation as an open-for-business market suffered a black eye and the issue has recently raised questions about whether the government would permit a takeover of the country's best known but troubled high-tech firm, Research in Motion.

NDP critic Peggy Nash called the proposed amendments "a very weak effort" considering the problems associated with the investment act.

The reforms are unlikely to clear up the confusion over the calculations the government makes in determining when a takeover is not considered of "net benefit" to Canada.

"This is just telling people where the process is at, but it doesn't give them any insight into what the proposals are or what the conditions are ... (so) it doesn't given them a chance to propose their views," she said.

Although the government has intervened twice to stop takeovers, Nash said the holes in the current act were revealed recently by the "outrageous" closing of the Electro-Motive plant in London, Ont., by Caterpillar Inc. in February.

The plant was shuttered, resulting in the loss of 450 jobs, only two years after it was purchased for $820 million by the Illinois-based company.

In another case, the government took U.S. Steel to court in 2009 for breaking conditions on job and production levels after taking over Stelco operations in 2007. The U.S. company eventually settled with Ottawa by making new commitments on investment.

"The Conservative government has to do much more to protect the interests of Canadians," Nash said.

Paradis was travelling in Quebec on Friday and could not be reached for comment.

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