Spotlight on investment in Canada by foreign states

The year 2012 was another very strong year for foreign investment in the Canadian energy sector. On 7 December, Canada’s minister of industry announced the ministry’s approvals of two multibillion-dollar acquisitions by foreign state-owned enterprises (SOEs): the acquisition by China National Offshore Oil Corporation (CNOOC) of Nexen Inc for approximately C$15 billion (US$15 billion) and the acquisition by Malaysia’s Patroliam Nasional Berhad (PETRONAS) of Progress Energy Corp for approximately C$6 billion.

Guidelines revised

The Canadian government also unveiled important new guidelines applicable to foreign investments in Canada by foreign SOEs. Three key changes in the revised guidelines are designed to clarify and provide greater transparency to the review and approval process for large investments by foreign SOEs.

First, the definition of a foreign SOE has been expanded under the revised guidelines to include entities that are influenced, directly or indirectly, by a foreign government (in addition to those owned or controlled by a foreign government).

Second, the government reaffirmed that it will increase the investment review threshold to C$1 billion in “enterprise value”, however the current C$330 million in “asset value” will be retained for foreign SOE acquisitions.

Raj Sahni is a partner and co-chair of the India Business Group at Bennett Jones, a law firm with offices in Calgary, Toronto, Edmonton, Ottawa, Dubai, Abu Dhabi, Doha and a representative office in Beijing. Karma Dolkar is an associate at the firm.