Investing In Canada: New Government Initiatives Signal A More Welcoming Regulatory Environment For Foreign Investment

Overview

Canada is actively seeking to attract foreign investment from a variety of sources. The Canadian federal government’s recent Spring Economic Update included several initiatives to support Canadian investment, productivity and growth that create meaningful opportunities for prospective investors, including launching the following:

• Canada’s own sovereign wealth fund, the Canada Strong Fund: This fund will invest C$25 billion in projects and companies that will drive Canadian economic transformation.
• Canada’s first Investment Summit: This summit will be held in September 2026 to convene the world’s largest investors, including top CEOs, entrepreneurs and prominent global business leaders with a view to attracting new investment into Canada. The event will showcase Canada as a compelling investment destination and a trusted convener of global capital, with a focus on priority sectors such as energy and critical minerals, artificial intelligence, defence and infrastructure.
• Canada’s Defence Industrial Strategy: This strategy includes a new Defence Investment Agency committed to ensuring Canadian industry plays a central role in rebuilding the military. As part of the strategy, the government plans to identify and forge strategic relationships with Canadian defence champions in certain areas.
• A Whole-of-Government Competition Plan: This plan intends to strengthen productivity and affordability by ensuring that competition is prioritized throughout the federal government’s policies.

The federal government subsequently issued discussion papers to advance the recently enacted Building Canada Act (BCA). These papers propose ways to streamline various federal approvals for designated major projects of national interest and enhance investor confidence, including by reducing certain federal decision timelines (principally in respect of environmental approvals) from five years to one year. 

For prospective investors, these efforts to attract significant inbound investment into Canada and persify the sources of investment raise important practical questions about navigating Canada’s foreign investment and competition law review regimes. The following overview addresses the key regulatory considerations that investors should understand when planning investments and acquisitions in Canada in the current geopolitical environment.

Investment Canada Act

The Investment Canada Act (ICA) provides for the review of acquisitions or establishments of Canadian businesses by non-Canadians. The ICA establishes two review frameworks: net benefit reviews (NBRs) and national security reviews (NSRs).

Net Benefit Reviews: A direct acquisition of control of a Canadian business by a non-Canadian investor that exceeds specified financial thresholds requires prior approval under the ICA on the basis that the investment is likely to be of net benefit to Canada. A net benefit assessment considers, among other things, the impact of the transaction on Canada’s economy, productivity, efficiency, technological development, innovation, competitiveness and industrial policies. It also considers the impact on Canadian participation in the acquired business. The financial thresholds for a reviewable transaction (outside the cultural sector) are high. For most private-sector investors, the threshold is at least C$1.452 billion in enterprise value of the Canadian business (C$2.179 billion for investors from countries with which Canada has specified trade agreements). Accordingly, net benefit reviews are relatively rare, with the Minister conducting only ten such reviews in the last reported year.

That said, the government has issued a policy statement to the effect that transactions involving important Canadian mining companies engaged in significant critical minerals operations that are subject to an NBR will be found to be of net benefit in only the most exceptional circumstances.

National Security Reviews: The ICA also allows the Canadian government to review a much broader range of foreign investments on national security grounds, such as acquisitions of minority interests in Canadian businesses or entities with assets in Canada. If an NSR is commenced in respect of a proposed transaction, the ICA prohibits completion of the transaction while the NSR is underway. It can take up to 200 days or longer for the government to complete an NSR and reach a final decision on whether to block the transaction, allow it to proceed or allow it to proceed subject to commitments by the foreign investor.

Following recent amendments to the ICA, the Minister may unilaterally impose interim conditions to address national security concerns during the NSR process. For example, the Minister may issue “hold separate,” orders even after implementation of an investment, or limit an investor’s access to sensitive intellectual property and data of a Canadian business pending the outcome of a review.

Pending regulations expected to be implemented by the end of the year will create categories of investments (including minority stakes) that will require pre-closing notification to provide the government with an opportunity to conduct an NSR before closing. Foreign investors who are contemplating an investment in the sectors that are more likely to trigger this requirement (including, for example, critical minerals, AI, quantum computing and businesses handling sensitive personal data) will need to plan for this development.

In recent years, the increasing scope of NSRs has added uncertainty for some foreign investors and effectively reduced the pool of investors in certain sectors. Notably, a 2022 policy states that investments by foreign state-owned enterprises (SOEs) in a Canadian business operating in a critical minerals sector will support a finding that the investment could be injurious to Canada’s national security. Pursuant to that policy, the Canadian government blocked or unwound at least six investments by Chinese SOEs in the critical minerals sector.

Further, a 2025 policy update expressly added “economic security” as a relevant factor for national security assessments under the ICA in light of an “increasingly geopolitically fractured world” where “Canada is facing more frequent threats to its national security through economic means.”

Canada conducted 30 NSRs in the last reported year. Six of those cases resulted in the investor abandoning the transaction or being subjected to a pestiture order, while undertakings were required to clear the NSR in six other cases.

Importantly for prospective investors, some recent developments may signal a greater flexibility and pragmatism in ICA reviews:

• The Teck Resources/Anglo American merger received NBR clearance within about three months of announcing the merger, notwithstanding that it involved an acquisition of a major Canadian company in the critical minerals sector. Historically, average review times have ranged from about 70 to 100 days, with some high-profile transactions taking much longer.
• Earlier this year, the government announced a new strategic partnership with China with a view to accelerating Chinese investment opportunities in Canada. The Minister of Energy also publicly commented that the government is open to more investment by China in the oil sands sector. While national security reviews are likely to remain rigorous and important, especially for Chinese state investments, there may be relatively greater potential for ICA clearance of Chinese minority investment alongside other investors, including the new Canada Strong Fund.
• While the BCA expressly provides that ICA approval cannot be bundled and accelerated along with other federal approvals in a BCA process, both NBR and NSR timelines and outcomes are within the control of the federal cabinet and ministers. It therefore seems likely that the government would aim to complete any required ICA reviews within the BCA timeline for other federal approvals and, more generally, may seek to conduct ICA reviews on timelines and in a manner that do not unnecessarily deter investment in Canada. For example, the government may be relatively more amenable to allowing investments to proceed with commitments rather than blocking the investment or requiring pestiture or cessation of operations. As an illustration, the government recently permitted TikTok to continue to operate in Canada, notwithstanding a 2024 decision to order the wind-up of TikTok’s Canadian operations.

Competition Act

The Canadian Competition Act is enforced by the Commissioner of Competition independently of the federal cabinet and ministers. The Competition Act is neither included nor expressly excluded from the bundle of federal approvals that may be covered by the BCA. As the BCA enables the federal cabinet to add federal approvals that are not expressly excluded, the federal cabinet could potentially add the Competition Act to an expedited federal approval process if considered necessary or desirable to promote important Canadian projects. 

More generally, investors should be aware that amendments to the Competition Act implemented in 2024 have created a more challenging environment for mergers with competitors, customers or suppliers, and possibly also for minority and cross-ownership investments. Uncertainties exist with respect to the application of a new presumed substantial prevention or lessening of competition (and therefore presumed grounds for challenging a merger) at relatively low concentration thresholds, and a new more onerous remedial standard, as well as the extent to which the Competition Bureau or ultimately the Competition Tribunal will consider efficiencies in merger reviews. While the full practical implications of the 2024 amendments remain to be seen, early indications are that they may be resulting in longer merger reviews. For example, data released by the Bureau indicates about a 20% increase in the percentage of mergers it designates as complex (with associated longer target review timelines). The percentage of “complex” reviews has increased from 35% to 43%.

By contrast, some other jurisdictions are adopting a more holistic consideration of competitive dynamics in merger reviews. For example, recently released draft EU merger guidelines adopt a broader, more robust view of competitive effects analyses and consumer impact. These guidelines indicate that the European Commission would take into account and give significant weight to a merger’s impact on factors such as global competitiveness, supply chain security, resilience and dynamic efficiency. The European Commission has said the guidelines seek to

• “modernise the way the Commission assesses mergers to reflect today’s changed geo-political and trade context, where industrial scale and global competitiveness, as well as innovation and investment have become increasingly important, and sustainability and resilience have become relevant parameters for competition”;
• recognize that “the growth and scaling-up of firms in the global markets to reach the necessary size to compete can be procompetitive by favouring innovation, investment and resilience, and are necessary to drive sustainable economic growth and to compete and lead globally”; and
• “recognise sustainability and resilience as important competitive realities, [and provide] guidance on how their positive contributions to the economy and society as a whole may be considered in merger control reviews.”

To date, neither the Commissioner nor the federal government has proposed revisions to either the Competition Act or Bureau guidelines to adopt a similar broader perspective on competitive effects analyses. However, the Competition Act expressly recognizes that its purposes include promoting the efficiency and adaptability of the Canadian economy. The merger provisions also provide that, in assessing the competitive effects of a merger, the Tribunal may consider any factor that is relevant to competition in a market. Indeed, the federal government’s Whole-of-Government Competition Plan may well incorporate a holistic approach to promoting Canadian competitiveness that is similar to that reflected in the draft EU merger guidelines.

The Commissioner who led advocacy for the recent amendments to the Competition Act stepped down in December 2025. An appointment of a permanent Commissioner by the federal cabinet is pending. That appointment and early statements by a new Commissioner will be important indicators of whether future Competition Bureau enforcement will adopt a more holistic approach.

In the meantime, the Acting Commissioner’s decision to refrain from seeking an interim injunction to block the closing of Keyera Corp.’s recent acquisition of Plains All American Pipeline L.P.’s (Plains) Canadian natural gas liquids business may signal some shift in enforcement approach. Before closing, the Bureau publicly outlined its findings that the merger is likely to harm competition and the Commissioner filed an application with the Competition Tribunal challenging the merger. However, the Commissioner did not apply for an interim injunction to block closing under new provisions of the Act making it easier to obtain such injunctions. This decision may indicate relatively more openness to seeking to block or interfere in business transactions only to the extent necessary to protect competition. Notably, Plains is U.S. controlled and Keyera has been described in the media as trying to become a Canadian champion or a “Northern Tiger.” 

What This Means for Your Investment in Canada

• The current Canadian political and regulatory environment may present a favourable window for foreign investors. Consider taking advantage of the federal government’s enhanced openness to foreign investment and investments or transactions that enhance Canada’s dynamic competitiveness and resiliency.
• Early planning and screening for ICA and Competition Act considerations will remain key for transaction planning. Engaging experienced Canadian regulatory counsel at the outset can help investors evaluate transactions and navigate regulatory requirements efficiently.
• Public relations, government and stakeholder communication plans will be important for major projects and other transactions that are likely to attract significant regulatory scrutiny.
• Advance articulation and documentation of merger rationales and benefits will be important where the parties intend to rely on them.
• For sectors with potential national security implications, forthcoming ICA regulations may require advance filing and NSRs before implementation. Investors in these sectors may need to factor additional lead time into their transaction timelines.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.