Like its predecessor, the North American Free Trade
Agreement (NAFTA), the Canada-United States-Mexico Agreement
(CUSMA) will influence the competition and foreign investment
landscape in Canada, the U.S. and Mexico.
Notably, with CUSMA coming into force on July 1, 2020, investors
can expect:
- Enhanced cooperation and coordination between Canada, the U.S. and Mexican competition authorities
- Continued beneficial treatment for U.S. and Mexican investors under the Investment Canada Act by means of a higher review threshold before an application for review must be submitted, as compared to investors from countries that do not have a trade agreement with Canada
- Amendments to the Competition Act and Investment Canada Act to reflect the change from NAFTA to CUSMA
COMPETITION ACT
While NAFTA noted the importance of coordination and cooperation
among the parties' national competition agencies, CUSMA sets
out several competition law principles that point to the
parties' commitment to opposing anticompetitive conduct and
promoting such coordination and cooperation.
These principles include:
- Maintaining and enforcing national competition laws that proscribe anticompetitive business conduct to promote competition in order to increase economic efficiency and consumer welfare
- Ensuring procedural fairness in the enforcement of competition laws
- Strengthening cooperation and coordination among the national competition authorities, and adopting or maintaining measures to promote such cooperation, including through investigative assistance, notification, consultation and exchange of information
- Adopting or maintaining consumer protection laws that proscribe fraudulent and deceptive commercial activities
- Making competition enforcement and advocacy policies as transparent as possible
As Canada's Competition Act already embodies these
policies, a relatively small number of changes will be enacted to
reflect these commitments.
CUSMA further entrenches the parties' desire for enhanced
international cooperation among their competition authorities,
which has been a hallmark of cross-border issues—particularly
between Canada and the U.S.—for decades. CUSMA also
references the Competition Committee of the Organisation for
Economic Co-operation and Development and the International
Competition Network for their work in respect of promoting
international cooperation and coordination.
CUSMA specifically requires the adoption and maintenance of
measures to permit negotiations of cooperation instruments among
the parties, which Canada's Competition Act already
contains. Indeed, Mutual Legal Assistance Treaties
(MLATs)—negotiated treaties that allow the party countries to
request assistance with obtaining information from each
other—are already in force between Canada and both the U.S.
and Mexico for criminal matters. While the Competition Act
also allows for the negotiation of MLATs for civil matters, these
are not yet in place and the Competition Act's
requirements for MLATs—which must be negotiated by
Canada's Department of Justice and ultimately approved by
Global Affairs Canada—impose strict standards for MLATs which
may prove difficult for the CUSMA parties to meet.
INVESTMENT CANADA ACT
CUSMA also enshrines certain thresholds under the Investment
Canada Act that are used to determine whether an acquisition
of a Canadian business by a foreign investor will require the
investor to submit an application for review—in which case,
the investment cannot close until the relevant minister is
satisfied that the investment is likely to be of "net benefit
to Canada"—or a notification filing, which can be filed
post-closing; this is notable for direct acquisitions of
non-cultural Canadian businesses.
Investors from the U.S. and Mexico will continue to benefit from a
higher threshold—currently set at an enterprise value of
C$1.613-billion—than World Trade Organization (WTO)
investors—threshold currently set at an enterprise value of
C$1.075-billion. State-owned investors, regardless of country of
origin, will be subject to an even lower threshold, currently set
at C$428-million book value.
The inclusion of these thresholds in CUSMA—and Canada's
other trade agreements—may introduce barriers, should the
Canadian government decide to lower the net benefit thresholds for
investors. This may be a relevant consideration as the Standing
Committee on Industry, Science and Technology is preparing to study
the Investment Canada Act to consider whether adjustments
to the net benefit thresholds and the national security review
regime need to be altered in response to the COVID-19
pandemic.
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