Ottawa stalls foreign takeover review – by Tara Perkins (Globe and Mail – January 17, 2012)

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The Harper government appears to have dropped plans to clarify the rules for foreign takeovers, leaving investors in the dark as to how Ottawa would react if an acquirer were to bid for a major Canadian company.

When the government killed BHP Billiton Ltd.’s proposed takeover of Potash Corp. of Saskatchewan in late 2010, the industry minister at the time, Tony Clement, promised to spell out the principles to guide the global business community on takeovers of Canadian companies. He also said he would ask the House of Commons industry committee to study the Investment Canada Act, the piece of legislation that governs such deals, and suggest improvements to it.

But more than a year later, new Industry Minister Christian Paradis is still quiet on the issue, and the industry committee is not studying the matter, according to two of its members, an indication that the issue is not high on the government’s agenda.

The lack of action is a growing source of frustration on Bay Street, where lawyers and bankers argue that the percolating confusion threatens to cause real harm to the level of foreign investment in the country. It is also a concern because of takeover rumours surrounding Research In Motion Ltd., the smartphone maker that has been hit by a string of troubles, including poor sales of its BlackBerry phones.

The Investment Canada Act has existed since the mid-1980s and currently gives the industry minister the right to turn down deals of more than $312-million, if the government determines the transaction is not a “net benefit” to the country. That provision had never been used to block a takeover by a foreign investor until 2008, when Ottawa rejected Alliant Techsystems’ bid for a division of MacDonald Dettwiler and Associates Ltd., which was followed by the rejection of BHP’s proposed $38.6-billion (U.S.) takeover of Potash Corp.

Lawrence Herman, a lawyer at Cassels Brock who once represented Canada in numerous international meetings at organizations such as the OECD and United Nations, wants Ottawa to clarify the rules around the “net benefit” clause.

“These are shrouded in secrecy, and I don’t think that’s good enough for Canada,” Mr. Herman said in an interview.

“[Mr. Clement] promised general principles, and those weren’t issued. You don’t need to have a Commons committee examine those kinds of things, they can be done by the minister. That should have been done as promised, and it hasn’t been,” he said.

Industry Canada spokesman Derek Mellon said: “We continuously review all of our marketplace framework laws, including the Investment Canada Act, to ensure they are up to date and effective. The Act was recently updated [in 2009] to improve the transparency of our foreign investment review process. It is premature to make any comments on any specific proposed changes to the Act.”

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