Transparency of the Regulatory System
Canada’s regulatory transparency is similar to the United States. Regulatory and accounting systems, including those related to debt obligations, are transparent and consistent with international norms. Proposed legislation is subject to parliamentary debate and public hearings, and regulations are issued in draft form for public comment prior to implementation in the Canada Gazette, the government’s official journal of record. While federal and/or provincial licenses or permits may be needed to engage in economic activities, regulation of these activities is generally for statistical or tax compliance reasons. Under the USMCA, parties agreed to make publicly available any written comments they receive, except to the extent necessary to protect confidential information or withhold personal identifying information or inappropriate content.
Canada published regulatory roadmaps for clean technology, digitalization and technology neutrality, and international standards in June 2021. These roadmaps, part of the federal government’s multi-year Targeted Regulatory Review program, lay out plans to advance regulatory modernization to support economic growth and innovation. Canadian securities legislation does not currently mandate environmental, social, and governance (ESG) disclosure for public or private companies. The Canadian Securities Administrators, an umbrella organization of all provincial and territorial securities regulators, released two proposed ESG disclosure policies for public comment between October 2021 and February 2022. The policies would require climate-related governance disclosures and climate-related strategy, risk management and metrics and targets disclosures if adopted.
Canada publishes an annual budget and debt management report. According to the Ministry of Finance, the design and implementation of the domestic debt program are guided by the key principles of transparency, regularity, prudence, and liquidity.
International Regulatory Considerations
Canada addresses international regulatory norms through its FTAs and actively engages in bilateral and multilateral regulatory discussions. U.S.-Canada regulatory cooperation is guided by Chapter 28 of the USMCA “Good Regulatory Practices” and the bilateral Regulatory Cooperation Council (RCC). The USMCA aims to promote regulatory quality through greater transparency, objective analysis, accountability, and predictability. The RCC is a bilateral forum focused on harmonizing health, safety, and environmental regulatory differences. Canada-EU regulatory cooperation is guided by Chapter 21 “Regulatory Cooperation” of the CETA and the Regulatory Cooperation Forum (RCF). CETA encourages regulators to exchange experiences and information and identify areas of mutual cooperation. The RCF seeks to reconstitute regulatory cooperation under the previous Canada-EU Framework on Regulatory Cooperation and Transparency. The RCF is mandated to seek regulatory convergence where feasible to facilitate trade. CPTPP Chapter 25 “Regulatory Coherence” seeks to encourage the use of good regulatory practices to promote international trade and investment, economic growth, and employment. The CPTPP also established a Committee on Regulatory Coherence charged with considering developments to regulatory best practices in order to make recommendations to the CPTPP Commission for improving the chapter provisions and enhancing benefits to the trade agreement.
Canada is a member of the WTO and notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade. Canada is a signatory to the Trade Facilitation Agreement, which it ratified in December 2016.
Legal System and Judicial Independence
Canada’s legal system is based on English common law, except for Quebec, which follows civil law. Law-making responsibility is split between the Parliament of Canada (federal law) and provincial/territorial legislatures (provincial/territorial law). Canada has both written commercial law and contractual law, and specialized commercial and civil courts. Canada’s Commercial Law Directorate provides advisory and litigation services to federal departments and agencies whose mandate includes a commercial component and has legal counsel in Montréal and Ottawa.
The judicial branch of government is independent of the executive branch and the current judicial process is considered procedurally competent, fair, and reliable. The provinces administer justice in their jurisdictions, including management of civil and criminal provincial courts.
Laws and Regulations on Foreign Direct Investment
Foreign investment in Canada is regulated under the provisions of the ICA. U.S. FDI in Canada is also subject to the provisions of the WTO, the USMCA, and the NAFTA. The purpose of the ICA is to review significant foreign investments to ensure they provide an economic net benefit and do not harm national security.
Canada relies on its Invest In Canada promotion agency to provide relevant information to foreign investors: https://www.investcanada.ca/
Competition and Antitrust Laws
Competition Bureau Canada is an independent law enforcement agency charged with ensuring Canadian businesses and consumers prosper in a competitive and innovative marketplace as stipulated under the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act, and the Precious Metals Marking Act. The Bureau is housed under the Department of Innovation, Science, and Economic Development (ISED) and is headed by a Commissioner of Competition. Competition cases, excluding criminal cases, are brought before the Competition Tribunal, an adjudicative body independent from the government. The Competition Bureau and Tribunal adhere to transparent norms and procedures. Appeals to Tribunal decisions may be filed with the Federal Court of Appeal as per section 13 of the Competition Tribunal Act. Criminal violations of competition law are investigated by the Competition Bureau and are referred to Canada’s Public Prosecution Service for prosecution in federal court.
The federal government announced in February 2022 an intention to review competition law and policy including specific evaluation of loopholes that allow for harmful conduct, drip pricing, wage fixing agreements, access to justice for those injured by harmful conduct, adaptions to the digital economy, and penalty regime modernization. The announcement cited competition as a key tool to strengthen Canadian post-pandemic economic recovery.
In September 2020, the Bureau signed the Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities (MMAC) with the Australian Competition and Consumer Commission, the New Zealand Commerce Commission, the United Kingdom Competition & Markets Authority, the U.S. Department of Justice, and the U. S. Federal Trade Commission. The MMAC aims to improve international cooperation through information sharing and inter-organizational training.
Expropriation and Compensation
Canadian federal and provincial laws recognize both the right of the government to expropriate private property for a public purpose and the obligation to pay compensation. The federal government has not nationalized a foreign firm since the nationalization of Axis property during World War II. Both the federal and provincial governments have assumed control of private firms, usually financially distressed companies, after reaching agreement with the former owners.
The USMCA, like the NAFTA, requires expropriation only be used for a public purpose and done in a nondiscriminatory manner, with prompt, adequate, and effective compensation, and in accordance with due process of law.
ICSID Convention and New York Convention
Canada ratified the International Centre for Settlement of Investment Disputes (ICSID) Convention on December 1, 2013 and is a signatory to the 1958 New York Convention, ratified on May 12, 1986. Canada signed the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (known as the Mauritius Convention on Transparency) in March 2015.
Investor-State Dispute Settlement
Canada accepts binding arbitration of investment disputes as obligated under its bilateral and multilateral agreements. As part of the USMCA, the United States and Canada agreed to phase out NAFTA’s investor state dispute settlement procedures over a three-year period. Under the USMCA, U.S. and Canadian investors rely on domestic courts and other mechanisms for dispute resolution. Ongoing NAFTA arbitrations are not affected by the USMCA and investors can file new NAFTA claims by July 1, 2023 provided the investment(s) were “established or acquired” when NAFTA was still in force and remained “in existence” on the date the USMCA entered into force.
Over the history of the NAFTA, 29 disputes have been filed against the Government of Canada. For more information about cases filed under NAFTA Chapter 11, please visit https://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/disp-diff/gov.aspx?lang=eng
International Commercial Arbitration and Foreign Courts
Provinces have the primary responsibility for regulating arbitration within Canada. Each province, except Quebec, has legislation adopting the UNCITRAL Model Law. The Quebec Civil Code and Code of Civil Procedure are consistent with the UNCITRAL Model Law. The Canadian Supreme Court has ruled that arbitration agreements must be broadly interpreted and enforced. Canadian courts respect arbitral proceedings and have been willing to lend their enforcement powers to facilitate the effective conduct of arbitration proceedings, by requiring witnesses to attend and give evidence, and to produce documents and other evidence to arbitral tribunals.
Bankruptcy in Canada is governed at the federal level in accordance with the provisions of the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act. Each province also has specific laws for dealing with bankruptcy. Canada’s bankruptcy laws stipulate that unsecured creditors may apply for court-imposed bankruptcy orders. Debtors and unsecured creditors normally work through appointed trustees to resolve claims. Trustees will generally make payments to creditors after selling the debtors assets. Equity claimants are subordinate to all other creditor claims and are paid only after other creditors have been paid in full per Canada’s insolvency ladder. In all claims, provisions are made for cross-border insolvencies and the recognition of foreign proceedings. Secured creditors generally have the right to take independent actions and fall outside the scope of the BIA.