Enforcement of the NSR Provisions In the government’s 2024-25 fiscal year, Canada conducted 30 NSRs that extended beyond an initial assessment or “triage” period. Six of those cases resulted in the investor abandoning the transaction or being subjected to a divestiture order, and NSR clearance was conditional on compliance with investor commitments in six other cases. From time to time, investors or Canadian businesses have reported that potential transactions were abandoned because the government expressed national security concerns without having initiated a formal NSR process. Details of NSRs are often not made public, but limited disclosure in recent years indicates that NSRs have considered investments in a wide range of sectors. While some sectors obviously attracted potential national security concerns – for example, metal ore mining, data processing, computer systems design, and scientific research and development services – others were less obvious (e.g., grocery stores, taxi and limousine services, and schools and instruction). This diverse range underscores the discretionary and at times unpredictable nature of the NSR process. A 2020 policy statement issued at the outset of the COVID-19 pandemic (COVID Policy) stated that all foreign investments by SOEs or private investors assessed as being closely tied to or subject to direction from foreign governments would be subject to enhanced scrutiny, including under the NSR provisions, because depressed valuations of Canadian businesses might lead to opportunistic or predatory investment behaviour. Although the policy was stated to apply only until the Canadian economy recovered from the effects of the COVID-19 pandemic, the subsequent NSR Guidelines confirmed that such investments will continue to be subject to enhanced scrutiny under the NSR process. The Guidelines clarify more generally that the potential for an investment to undermine Canada’s economic security through enhanced integration of the Canadian business with the economy of a foreign state is a relevant factor in assessing an investment’s impact on Canadian national security.
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