The CPTPP and Brexit: Implications for Foreign Investment into Canada

On December 30, 2018, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) entered into force in Canada, Australia, Japan, Mexico, New Zealand and Singapore. The CPTPP will significantly reduce the regulatory burden associated with investments into Canada by investors based in these countries. However, the U.K.’s pending exit from the European Union (Brexit), which is currently anticipated to take place at the beginning of April 2019, may have the opposite effect on investments into Canada by U.K. investors unless Canada and the U.K. enter into a separate trade agreement.

BENEFICIAL FOREIGN INVESTMENT RULES FOR CANADA’S TRADING PARTNERS

The Investment Canada Act allows the Canadian government to review and approve control investments in Canadian businesses above certain monetary thresholds. Investors based in countries that have signed free trade agreements with Canada can make investments up to C$1.5-billion (in enterprise value) in nearly any Canadian business without requiring pre-approval. Investors based in other countries must obtain approval above the lower C$1-billion threshold unless a foreign government, typically through a state-owned enterprise, is involved in the investment.

In addition to investors based in the U.S., Mexico, the E.U., or other countries with which Canada has a free trade agreement, investors based in Australia, Japan, New Zealand and Singapore are now eligible to invest up to the C$1.5-billion threshold without a review requirement.

In the event of a “no-deal” Brexit, the U.K. will no longer be a member of the E.U., and unless it negotiates a separate trade deal with Canada, the lower C$1-billion threshold will apply to investments by U.K. investors.  

Below is a list of countries whose investors are now eligible for the C$1.5-billion threshold:

Country of Investor Origin

Australia

Greece

Peru

Austria

Honduras

Poland

Belgium

Hungary

Portugal

Brunei*

Ireland

Republic of Korea

Bulgaria

Italy

Romania

Chile

Japan

Singapore

Colombia

Latvia

Slovakia

Croatia

Lithuania

Slovenia

Cyprus

Luxembourg

Spain

Czech Republic

Malaysia*

Sweden

Denmark

Malta

United Kingdom

Estonia

Mexico

United States

Finland

Netherlands

Vietnam*

France

New Zealand

 

Germany

Panama

 

* Once CPTPP has been ratified.

Both the C$1.5-billion and C$1-billion thresholds are expected to increase slightly in the coming weeks.

If you have any questions regarding these developments, please do not hesitate to contact your usual Blakes contact or any member of the Blakes Competition, Antitrust & Foreign Investment group.

Blakes and Blakes Business Class communications are intended for informational purposes only and do not constitute legal advice or an opinion on any issue.

We would be pleased to provide additional details or advice about specific situations if desired.

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