Feds will take a closer look at foreign tech investments

The government revealed what recent changes to the law regulating foreign investments in Canadian companies will mean for investors: more paperwork.

What happened: Industry Minister François-Philippe Champagne told Bloomberg that foreign companies will have to give advance warning to the government if they plan to make investments in Canadian AI, quantum computing, and space technology companies.

  • This will let the government conduct a national security review before an investment closes and protect a company’s sensitive data while the review takes place.
  • Champagne said the new rules would also apply to the critical minerals sector, and potentially other sectors in the future.

Why it’s happening: This extra scrutiny is allowed thanks to amendments to the Investment Canada Act that received royal assent last Friday. They give the minister more authority for national security reviews, and also brought rules protecting information during a review and new filing requirements for investments in certain sectors.

  • While the rules apply to all non-Canadian investments, the government is particularly concerned about China.

Catch-up: The government also invoked the act when asked if it would follow the U.S. in forcing ByteDance to divest TikTok. Earlier this month, a new policy note said the government would be tightening scrutiny in digital media investments, which it claims could be leveraged to spread disinformation.

Why it matters: Some have warned that these “advance warning” rules could dampen investment in Canadian tech companies. Even if an investor has nothing to hide, an extra regulatory filing could be too much hassle for an investment that’s not guaranteed to pay off.

  • Canada ranks third among G7 countries for venture capital AI funding per capita, according to Deloitte — but only 28% comes from domestic sources.

Zoom out: The government isn’t totally opposed to non-Canadian companies getting in on the country’s AI sector. Officials have reportedly been trying to convince European AI companies to move their headquarters to Canada.