Canadian Foreign Investment Law: An Update

Introduction

Canadian review of foreign investments is governed by the federal Investment Canada Act (ICA).

The ICA contains two separate regimes. Under the ICA’s socioeconomic review regime, the Minister of Industry (Minister) assesses whether certain transactions (direct acquisitions of a Canadian business above specified asset values) are of “net benefit” to Canada. Under the ICA’s national security regime, the government is empowered to review a much broader set of transactions to consider whether they are injurious to Canada’s national security.

From a policy perspective, the most notable recent development is the Canadian government’s new effort to diversify the pool of foreign investors investing in Canada while at the same time retaining the ability to review and regulate  investments that could harm Canada’s economic and national security interests. These dual objectives have naturally influenced the government’s scrutiny of foreign investments on a socio-economic basis as well as on national security grounds.

A Shift in Approach?

In 2025, the Canadian government positioned itself to leverage amendments made the year prior to address shifting foreign investment priorities. In 2024, significant changes were made to the ICA to bolster the framework for the national security review of investments. These amendments included:

• Enhanced Ministerial Powers. The amendments transfer the authority to order an extended national security review and to accept undertakings to the Minister and give the Minister the power to conclude a national security review based on the undertakings provided by the investor (previously, these powers were held by the Governor-in-Council). Additionally, the Minister can now impose interim conditions on an investment during a national security review.

• Refined Scope of National Security Provisions. Alterations were made to section 25.1 of the ICA to capture acquisitions of any of the assets of a Canadian business by a non-Canadian.

When these amendments were introduced, the stated purpose of the enhanced Ministerial powers was to improve “the efficiency and flexibility of the national security review process” in order to provide “more time for security and intelligence partners to complete the increasingly complex intelligence analysis”. In this way, the suite of new Ministerial powers sought to provide for flexibility to address national security concerns at an administrative level (including potential collaboration with foreign national security partners), instead of relying on a cumbersome order from federal Cabinet. Accordingly, alongside these amendments, the government also released two administrative notes (on interim conditions and national security undertakings), describing the administrative processes by which the Minister would address potential national security risk (and impose interim conditions to preserve the status quo pending a review).

Yet since 2024, the geopolitical landscape has evolved. On the one hand, this led the government initially to broaden the scope of its review beyond the traditional boundaries of national security. Thus, on March 5, 2025, one day after the United States of America imposed 25% tariffs on almost all products imported from Canada, the government issued an update to the Guidelines on the National Security Review of Investments to expressly add “economic security” as a factor it will consider in the context of a national security review. The statement accompanying the update noted that this was a result of an “increasingly geopolitically fractured world” where “Canada is facing more frequent threats to its national security through economic means”. The updated guidelines confirm the availability of the ICA’s national security provisions to advance economic objectives, which was traditionally reserved for the “net benefit” regime. This is significant because, while the ICA “net benefit” review process applies to relatively few investments, the national security provisions of the ICA are much broader in scope.

However, while the Canadian government has sought increased flexibility to review investments on the basis of economic security, it has also undertaken to attract investment from a more diverse group of partners (including investment from countries that have in the past been closely scrutinized). In January 2026, for example,  Prime Minister Mark Carney unveiled a new strategic partnership with China to “catalyse massive new levels of investment”. Pursuant to that partnership, Canada and China announced a roadmap reflecting a “consensus on a series of important economic and trade matters”. This included express recognition that the “Canadian side welcomes Chinese investments in Canada in areas such as energy, agriculture, consumer products, and other sectors”. In a subsequent statement, Minister of Energy and National Resources Tim Hodgson suggested that Canada would be willing to welcome investment by Chinese operators in Canada’s oil sands. This can be contrasted with earlier, more hawkish foreign investment policy in this area. In 2012, concurrently with the approval of the acquisition of Nexen Inc. by CNOOC Limited (a Chinese state-owned oil and gas company) the Canadian government issued a statement noting that “the Minister of Industry will find the acquisition of control of a Canadian oil sands business by a foreign [state-owned enterprises] to be net benefit to Canada on an exceptional basis only”.

The extent to which the Canadian government will fully embrace foreign investment from China remains to be seen. That said, the initial indicators are positive. For example, only 10 days after Prime Minister Carney announced Canada’s strategic partnership with China, on January 26, 2026, an affiliate of Zijin Mining Group Co., Limited (Zijin) entered into an agreement to acquire Allied Gold Corporation (Allied).  This was the first major reviewable investment in Canada by a Chinese company since the announcement of the new strategic partnership and thus could be regarded as a useful barometer to gauge the Canadian government’s posture towards Chinese investment going forward. As of the date of publication of this article, news reports suggest that the government elected not to initiate a national security review under the ICA, and that it has now approved the transaction under the net benefit review process.

Another possible indicator of a shift in approach is reflected by the course of the Canadian government’s national security review of TikTok’s presence in Canada.

By way of background, the Canadian government ordered ByteDance Ltd. to wind up the Canadian business conducted by TikTok Technology Canada, Inc. (together with its affiliates, TikTok) in November 2024, citing national security concerns after a review process under the ICA. The government did not disclose the specific reasons for its decision. The order affected TikTok’s Canadian employees and advertisers, but did not block Canadians’ access to the app or their ability to create content. In December 2024, ByteDance challenged the order in Federal Court, alleging that the decision was unreasonable and that the process used to reach it was procedurally unfair. The company’s application alleged that the government failed to engage with it meaningfully, provide guidance on possible remedies, or respond to its proposed undertakings intended to mitigate any national security risk.

The case proceeded as a specially managed proceeding, such that the typical (short) timelines for a judicial review of an administrative decision did not apply. The parties sought a series of extensions to file materials over the course of 2025, including to address procedural matters such as confidentiality. Outside of the court, TikTok itself continued to engage at the political level. In July 2025, TikTok’s CEO wrote a letter requesting a meeting with the Minister to discuss the implications of the national security order.

The matter, which has proceeded in the shadow of American national security enforcement action in relation to TikTok, was resolved on consent in January 2026. In a brief order, the Federal Court sent the matter back for redetermination by the Minister, allowing the government to proceed with a new national security review. On March 9, 2026, the Minister announced that the government had completed the further national security review and “decided to permit the investment to proceed” subject to conditions. Those conditions include enhanced data protection measures for Canadians (including new security gateways, privacy-enhancing technologies, and strengthened safeguards for minors) with an independent third-party monitor appointed to audit and verify data access controls.

This result bears a certain resemblance to the prior national security review process for the acquisition by Hong Kong-based O-Net Communications (O-Net) of Montréal-based ITF Technologies. In 2015, the Canadian government (led by Stephen Harper’s Conservative party) had blocked the deal on national security grounds. Subsequently, after a change in governments (to Justin Trudeau’s Liberal party), the transaction was reconsidered and approved (notwithstanding reports that the China Electronics Corporation, a Chinese state-owned enterprise, holds a 25% stake in O-Net).

In this instance, the timing of the shift in approach to TikTok – the initial order for redetermination came just a few days following Prime Minister Carney’s trip to China to announce Canada’s new strategic alliance – seems to offer yet another signal of the Canadian government's increased willingness to engage constructively with Chinese investors as part of a broader move to reset relations between the two countries.

Enforcement

While foreign investment review in Canada may be in somewhat of a state of flux, it is still valuable to look at recent enforcement examples as a way of gauging where matters currently stand overall.

Net Benefit Reviews – The Statistics

Net benefit reviews feature prominently in the 2024-2025 fiscal year annual report from the Foreign Investment Review and Economic Security Branch (FIRES) of Innovation, Science and Economic Development Canada (the administrative body responsible for overseeing reviews of non-cultural investments under the ICA). This report covers the period from April 1, 2024 through March 31, 2025. Key highlights include:

• Sustained Filing Volume. There were 1,138 filings in fiscal year 2024-25. This represents the third highest total number of filings ever recorded under the ICA. In terms of value of investments, investments in 2024-25 totalled over $132.5 billion. This was the second highest value ever recorded.

• 5-Year High for Net Benefit Applications. Of these filings, 10 applications for review were approved as being of likely net benefit to Canada. This is the highest figure in five years (for context, there were six such applications in fiscal year 2023-2024 and five such applications in fiscal year 2022-2023).

• Country of Origin Breakdown. In FIRES’ 2024-2025 fiscal year, the United States of America continued to lead investment figures by a significant margin, with 687 filings representing an enterprise value of approximately C$79.5 billion. Behind the United States of America, the second and third largest investors were the United Kingdom (at approximately C$17.6 billion in enterprise value) and France (at approximately C$4.2 billion in enterprise value), respectively.

National Security Review – The Statistics

FIRES’ 2024-2025 annual report demonstrates that national security continues to be a key governmental priority. For instance, fiscal year 2024-2025 saw a high level of “extended” national security reviews (i.e., reviews where the government takes action to exercise its national security jurisdiction pursuant to s. 25.2(1) or 25.3(1) of the ICA). Fiscal year 2024-2025 saw 30 such reviews, the second highest number on record (there were 32 in 2022-2023). The government also noted qualitatively that the “evolving reality of the global economic and security environment means that reviews under the ICA are becoming longer and more complex”.

Of these 30 reviews, 16 were subject to orders under s. 25.3(1) of the ICA (which requires the Minister to consider that an investment “could be injurious to national security” and provides for a significant extension of the statutory timeline for the review of the investment). Of these 16 reviews, 11 were from investors from China (approximately 69%) with one review each corresponding to Australia, Chile, France, Italy, and the United Arab Emirates. Of these 11 investments by investors from China, five were resolved on the basis of undertakings, four were withdrawn, one was an ordered divestiture, and one was approved without conditions. While a national security focus on Chinese investment is a consistent trend from past years, the Canadian government’s shifting stance on foreign policy may change this going forward.

Notably, eight (50%) of these s. 25.3(1) orders resulted from the establishment of a new Canadian business.  One of the exceptional features of the ICA is that its mandatory notification requirement applies to the establishment of a new Canadian business by non-Canadians, in addition to acquisitions. The result is that, where a mandatory notification is not filed, the Canadian government’s national security jurisdiction over the establishment of that business continues (until 45 days following the receipt of a completed notification).

Yet perhaps the most informative statistic in the report relates to voluntary notifications under the Investment Canada Act. Notifications under the ICA are only required for establishments of a new business or acquisitions of control. Historically, then, foreign investors making minority investments were left without any formal mechanism to advise the government of their investments and obtain pre-closing comfort that their investments would not face a national security review. The voluntary filing process was introduced in August 2022 to address this gap. The government incentivized foreign investors to make “voluntary” filings by providing that minority investors who did not submit a notification could potentially face a national security review for up to five years post-transaction. In this way, filing a voluntary notification would allow an investor to crystallize any national security risk by giving the government 45 days post-filing to initiate a national security review.

FIRES’ most recent annual report offers a useful empirical window into the operation of the new voluntary filing process, with several years of data on these filings. In 2024-25, 17 voluntary notifications were certified. The United States of America accounted for seven voluntary filings and China accounted for three filings. The European Union (two), Australia (two), and Japan (two) together with limited filings from other countries (three) were responsible for the remaining voluntary filings.

Since the voluntary filing mechanism was introduced, a total of 43 voluntary notifications have been certified. The report notes that this number is lower than FIRES had anticipated. In our view, this is consistent with the relatively niche use case for voluntary notifications under the ICA, namely, where there is: (i) an investment by a non-Canadian that is not otherwise subject to mandatory notification with (ii) appreciable national security risk that an investor believes could credibly crystallize in the next five years, and where there is (iii) a good chance that the potential national security concern could be resolved through a national security process.

Critical Minerals

Critical minerals was a key area of activity in 2025. By way of background, the Minister issued a Ministerial Statement on Net Benefit Reviews of Canadian Critical Minerals Companies (Critical Minerals Statement) the year prior, on July 4, 2024. The Critical Minerals Statement applies to transactions involving “important Canadian mining companies engaged in significant critical minerals operations” subject to net benefit review under the ICA. It explains that “such transactions will only be found of net benefit in the most exceptional of circumstances”. The Critical Minerals Statement was issued concurrently with the approval of Glencore plc’s (Glencore) US$6.9 billion acquisition of a 77% stake in Teck Resources Limited’s (Teck) steelmaking coal business (coal is not a critical mineral, but Teck Resources’ non-coal business is focused on copper and zinc, which are critical minerals). That approval followed a seven-month review as to whether the transaction would be of “net benefit” to Canada. To secure approval, Glencore committed to ensuring that Teck’s coal business remained a strong and well-capitalized Canadian operation, with a Canadian head office, majority Canadian directors and executives, and significant employment levels in Canada.

No transaction appeared to fall within the scope of the Critical Minerals Statement until the announcement by Anglo American plc of a proposed acquisition of Teck in September 2025. Ultimately, that transaction was approved by the Minister in December 2025, which represented a fairly short review period in the circumstances (other outstanding regulatory approvals remain and the transaction has not yet closed). In approving the transaction, Minister Joly issued a press release providing details on the undertakings made by the investor to secure approval. The statement noted that the combined company would be required to “maintain the management oversight” in Canada “in perpetuity regardless of any future transactions”, together with other commitments to preserve Canadian jobs, senior management and capital expenditure (among others). Typical undertakings given under the ICA last for fixed periods of time (most commonly three or five years). One question that has been raised is whether the government’s approval of the Teck acquisition fits within the “exceptional circumstances” paradigm set out in the Critical Minerals Statement or whether this signifies a relaxation of the standard given the Canadian government’s desire to encourage foreign investment and diversify sources of that investment beyond the United States of America.

Hikvision

The Canadian government announced a federal Cabinet order winding up the Canadian business carried on by Hikvision Canada, Inc. (Hikvision) on June 27, 2025. The broader Hikvision group is engaged in the manufacturing and sale of video surveillance equipment. In a statement, Minister Joly simply noted that the “government has determined that Hikvision Canada Inc.’s continued operations in Canada would be injurious to Canada’s national security” and that “determination is the result of a multi-step review that assessed information and evidence provided by Canada’s security and intelligence community”.

This decision came more than a decade after Hikvision was established in 2014. Under the ICA, the establishment of a Canadian business by a non-Canadian requires a mandatory notification. If that notification is not filed, the Canadian government retains national security jurisdiction over the transaction until 45 days following the receipt of a completed notification.

In a statement responding to the Minister’s order, Hikvision argued that the decision was made without a “factual basis, procedural fairness, and transparency”. In particular, the company stated that the decision “appears to be driven by the parent company’s country of origin, reflecting broader geopolitical tensions and an unjustified bias against Chinese companies”.

Hikvision initiated a judicial review of the government’s decision in Federal Court on July 7, 2025. In the application for judicial review, Hikvision mirrors the concerns set out in its statement. In particular, the company alleges that the order was unreasonable, driven by improper purposes, and that the process used to reach the decision was procedurally unfair.

As part of its application for judicial review, Hikvision sought a stay of the decision. Ultimately, in reasons released September 22, 2025, the Federal Court denied the stay. The court concluded that, while there was a serious issue to be tried and Hikvision Canada would suffer some irreparable harm if the stay were not granted, the balance of convenience (in particular in light of potential harm to the public) spoke in the government’s favor. The appellants filed a notice of discontinuance in the underlying substantive judicial review application on April 21, 2026.

Gator Capital

On February 11, 2025, the Attorney General of Canada filed an enforcement application under section 40 of the Investment Canada Act seeking court-ordered divestitures for non-compliance with the ICA's national security regime.

The application targeted Gator Capital Ltd (Gator). Gator acquired a minority stake in Lithium Chile Inc. (Lithium Chile) in 2023 as a divestiture buyer following federal Cabinet's November 2022 order requiring Chinese investor Chengze Lithium International Limited to divest its 19.35% interest in Lithium Chile (one of three high-profile divestiture orders targeting Chinese investors in the critical minerals sector).

Following the original divestiture, the government made repeated attempts to verify whether Gator was Canadian-controlled or connected to the Chinese state, issuing three formal demands for information under section 39 of the ICA between June and December 2023, none of which Gator answered.

In response, the Attorney General filed an application requiring Gator to divest its Lithium Chile shares to a government-approved trustee within 30 days, or alternatively, to comply with the government’s information demands, along with monetary penalties. The file has been inactive and may have been resolved on consent. Nevertheless, this enforcement action underscores Canada's enforcement capabilities in the event of alleged non-compliance with the ICA.

Conclusions

Looking ahead, the trajectory of the 2024 amendments suggests that further amendments to the Investment Canada Act will continue to expand the Canadian government's capacity to leverage national security provisions in pursuit of economic objectives. The enhanced ministerial powers introduced in 2024, originally framed as procedural improvements to streamline national security analyses, appear poised for adaptation and deployment in a rapidly shifting global landscape.

Amendments anticipated to come into force in the future are likely to build on this foundation. These further amendments to the ICA include:

• A New Pre-Implementation Filing Requirement. For investments in yet-to-be-specified “sensitive sectors”, even where they are not otherwise notifiable, it is widely anticipated that the government will commence regulatory consultations necessary to develop and finalize a mandatory pre-closing filing regime later this year.

• Increased Penalties. Amendments that have yet to come into force would provide for greater penalties (including of up to $50,000 per day) for failure to comply with the Act (including a breach of the new pre-implementation filing requirement).

• “Call In” Power for State-Owned Enterprises. For acquisitions of control by a buyer that constitutes a “state-owned enterprise” under the ICA, the new amendments would empower the Minister to make the proposed transaction subject to pre-closing review and approval under the ICA’s “net benefit” provisions, irrespective of the value of the investment.

Together, these amendments will further bolster the ICA’s investment review regime. At the same time, however, the government’s imperative to diversify sources of foreign investment may open a more favourable window for investors than might otherwise have been anticipated when the amendments were first enacted.