CETA AND THE INVESTMENT CANADA ACT: WHAT HAS CHANGED

October 10th, 2017

By Adam Allouba, Partner and Lawyer, Didier Culat, Legal Counsel and Richard Epstein, Partner and Lawyer.

The Comprehensive Economic and Trade Agreement between Canada and the European Union (CETA) is provisionally in force since September 21, 2017. As such all the provisions of CETA except those governing the dispute settlement mechanism, the free trade in financial services and camcording are in force as of that date. The remaining provisions of CETA will be in force only upon full implementation which will occur when all Member States of the European Union will have ratified CETA, which could take several years.

The application of CETA, being the first free trade agreement concluded by the EU with a G7 country, is a source of several enhanced opportunities for those Canadian businesses in the medical devices industry seeking to better penetrate the European market with its 500 million consumers.

CHANGES TO THE INVESTMENT CANADA ACT

Under the Investment Canada Act, certain acquisitions of control of Canadian businesses or investments in Canadian businesses by non-Canadians are subject to a pre-closing review and approval by the Canadian government. No pre-closing review is required, however, if the buyers are World Trade Organization investors, are not state-owned enterprises, and the target business has an enterprise value of under $1 billion.

In addition, under the “most favoured nation” clause in the North American Free Trade Agreement and other Canadian bilateral trade agreements, that same higher threshold will apply to residents of the United States, Mexico, Chile, Colombia, Honduras, Panama, Peru and South Korea. These changes will allow a greater number of major acquisitions by residents of Canada’s closest trading partners to proceed without pre-closing review, enhancing deal certainty for would-be buyers and sellers.

It is important to note that the threshold for review will remain $379 million for state-owned enterprises from WTO countries, and $5 million in the case of cultural businesses (in general, any business that produces, sells or distributes books, magazines, periodicals, newspapers, film or music or that is engaged in radio broadcasting). Finally, the legislation does do not preclude the Canadian government from reviewing an acquisition – before or after closing – on national security, cultural heritage or national identity grounds.

BCF

Our specialists at BCF will be pleased to advise you concerning the opportunities offered by the public procurement markets made available with the implementation of CETA. BCF can assist you prepare your entry in the European market with an intellectual property plan, a tax plan, a commercial business implementation plan, a rules of origin plan and a labour mobility plan.