ANNOUNCEMENT 27 Jul 2009

In July 2009, the government of Canada announced changed rules for foreign investors.

NUMBER OF INTERVENTIONS

1

  • 0 harmful
  • 0 neutral
  • 1 liberalising

SOURCE



Globe and Mail, Ericsson confident Nortel deal will be approved, 27 July 2009, http://www.theglobeandmail.com/report-on-business/ericsson-confident-nortel-deal-will-be-approved/article1232393/

Globe and Mail, Ontario urges PM to block foreign Nortel sale, 28 July 2009, http://www.theglobeandmail.com/report-on-business/ontario-urges-pm-to-block-foreign-nortel-sale/article1233034/

Globe and Mail, Harper won't intervene in Nortel sale, 11 August 2009, http://www.theglobeandmail.com/report-on-business/harper-wont-intervene-in-nortel-sale/article1248277/


Inception date: No inception date

FDI: Entry and ownership rule

On 27 July 2009, Sweden-based Telefon AB LM Ericsson won the right to purchase Nortel Network Corporation's wireless assets in a controversial auction in which the Canadian firm Research in Motion (RIM) was barred from participating. The German firm Siemens and Finland-based Nokia also submitted bids for the Nortel assets but were unsuccessful. Bankruptcy courts in both the Canadian province of Ontario and the American state of Delware must still approve the sale, as do regulators in Canada and the United States. Should Ericsson's bid win court and regulatory approval, it will receive several patents for Long-Term Evolution (LTE) technology, which represents the latest wave of cellular service provision.
 
On 28 July 2009, the Globe and Mail reported that the Province of Ontario's Minister of Finance Dwight Duncan had publicly asked Canadian Prime Minister Stephen Harper and Federal Minister of Industry Tony Clement to use the government's powers under the Investment Canada Act to block the sale of Nortel to Ericsson. Minister Duncan's call echoes those made by Federal opposition parties, who claim that the assets sold by Nortel are of strategic importance to Canada and should remain in Canadian hands. Thus far, Minister Clement has not demonstrated his desire to intervene, insisting that the sole Canadian bidder, RIM, had ample opportunity to participate in the auction and compete with bids made by Ericsson and Siemens. According to Nortel, RIM was barred from the auction for refusing to sign a non-disclosure agreement, as other bidders had done.
 
Under the Investment Canada Act, any foreign purchase of Canadian assets triggers a government review when the purchase price exceeds CAD312 million. Ericsson has offered CAD1.13 billion for the Nortel assets. Under the Act, the government has the option of rejecting investment deals it deems not to be in the interests of Canada. Provincial Minister Duncan has urged the Federal Government to exercise this right based on the significant subsidies and tax breaks offered by the Government of Ontario to high-tech firms in the province, from which it believes the Ericsson will benefit if the sale is approved.
 
On 11 August 2009, Canadian Prime Minister Stephen Harper, while on an official visit to Panama, stated that he would not take any extraordinary measures to intervene in the regulatory approval process regarding Ericsson's purchase of Nortel. Furthermore, PM Harper stated that he would not "legislate any protectionist measures to block the sale."

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