National security reviews in Canada: are we set for a change in approach?

April 2026 | SPOTLIGHT | FINANCE & INVESTMENT

Financier Worldwide Magazine

April 2026 Issue

On 16 February 2026, the Foreign Investment Review and Economic Security Branch of Innovation, Science and Economic Development Canada released its 2024-25 Investment Canada Act (ICA) Annual Report.

The annual report provides a very useful window into recent enforcement of the ICA, which still operates under a relative veil of secrecy. However, the annual report’s release also comes at the time of a potential inflection point for Canadian foreign investment law, particularly insofar as national security reviews are concerned.

2025, of which the annual report only covers the first three months, saw Canada begin to diversify away from its perennial and largest trading partner, the US. That diversification – which, although still in its initial stages, has had a corresponding ripple effect through all aspects of Canadian government policy – may also influence how the government approaches reviews under the ICA.

In particular, it may herald a softening in approach to investments that the government may formerly have viewed as hostile to Canada’s national security interests.

Review framework in Canada

The ICA establishes two principal review frameworks. The first is a socioeconomic review regime, under which the minister of industry evaluates whether captured transactions (acquisitions of control of Canadian businesses that exceed certain prescribed thresholds) confer a ‘net benefit’ to Canada.

The second is a national security regime, which authorises the government to scrutinise a significantly broader range of transactions for potential injury to Canada’s national security. Over time, the national security review process has overtaken the net benefit review process, at least in terms of numbers of reviews.

In 2024, significant changes were made to the ICA to bolster the framework for national security reviews. The stated purpose of these amendments was to improve “the efficiency and flexibility of the national security review process” in order to provide “more time for security and intelligence partners to complete the increasingly complex intelligence analysis” required for such reviews.

These amendments were consistent with the government’s increasingly strict approach to national security reviews, especially in relation to investments from countries considered hostile to Canadian national security interests, typically China and Russia, among others. This approach was also seen to be more in line with the prevailing attitudes in other allied countries, most particularly the US.

The government took another step in this regard in early 2025 when it issued an update to its ‘Guidelines on the National Security Review of Investments’ to expressly add “economic security” as a relevant factor for national security assessments under the ICA. The statement accompanying the update noted that this was a result of an “increasingly geopolitically fractured world” where “Canada is facing more frequent threats to its national security through economic means”.

The net result was to give the government even more scope and discretion in deciding if and when an investment would be injurious to Canada’s national security interests.

The annual report

The annual report reflects the relative importance of national security reviews as part of the ICA framework and the relative focus on investments from certain jurisdictions.

According to the annual report, 2024-25 saw 30 “extended” national security reviews (i.e., reviews where the government goes beyond the standard 45 day ‘triage’ period in which it decides whether further inquiries are necessary). This represents the second highest number of ‘extended reviews’ on record (there were 32 in 2022-23). In contrast, there were only 10 net benefit reviews in 2024-25, which is actually an increase from recent years (for context, there were six such applications in 2023-24 and five such applications in 2022-23).

Of 30 extended national security reviews under the ICA in 2024-25, 16 went to a full review where the minister must ultimately assess whether the investment “would be injurious to national security” (or conclude that they cannot make such a determination one way or the other).

Of these 16 reviews, 11 involved investors from China (approximately 68.8 percent) with one review each corresponding to investors from Australia, Chile, France, Italy and the United Arab Emirates. Of these 11 investments from China, five were resolved on the basis of undertakings, four were withdrawn, one was an ordered divestiture and one was approved without conditions.

For additional context, there were only 44 ICA filings made by Chinese investors in 2024-25, meaning that 25 percent of all Chinese investments filed in that period were subject to a full national security review.

That the preponderance of national security reviews were focused on China is consistent with prior years. In 2023-24, for example, 8 of 15 investments that went to a full national security review involved Chinese investors (approximately 53 percent), representing 22 percent of all Chinese investments filed under the ICA in that year.

It is no wonder then that the possibility of national security reviews has been an important (and even chilling) factor in the deliberations by Chinese investors on whether or not to invest in Canada. For example, the value of Chinese investments subject to the ICA for 2024-25 was just C$38m in asset value (for transactions measured by asset value) and C$97m in enterprise value (for transactions measured by enterprise value). This is down from highs of C$1.5bn in asset value and C$1.3bn in enterprise value in the past five years.

A potential shift in approach to investment from China?

The question now is whether policy developments that have occurred outside the ICA context and since the period covered by the annual report will have an impact on the Canadian government’s approach to national security reviews going forward.

As is well known, Canada is involved in a difficult and acrimonious trade dispute with the current administration in the US. As a prime example, on 4 March 2025, the US – Canada’s closest trading partner and primary source of foreign direct investment – imposed 25 percent tariffs on almost all Canadian products. The move sent a shockwave through Canadian politics and resulted very quickly in a reassessment of whether Canada is too dependent on the US from a trade and investment perspective.

Over the course of 2025 (continuing into 2026), Mark Carney, Canada’s prime minister, has overseen a shift in Canadian trade policy with the goal of attracting investment from a more diverse group of partners, including from countries whose investments have recently been closely scrutinised under the ICA.

Most importantly, on 16 January 2026, Mr Carney unveiled a new strategic partnership with China to “catalyse massive new levels of investment”. This strategic alliance between China and Canada was announced during Mr Carney’s trip to Beijing, one of the first such visits by a Canadian prime minister in almost a decade.

Pursuant to this partnership, Canada and China announced a roadmap reflecting a “consensus on a series of important economic and trade matters”. This included express recognition that the “Canadian side welcomes Chinese investments in Canada in areas such as energy, agriculture, consumer products, and other sectors”.

In a subsequent statement, Tim Hodgson, minister of energy and national resources, suggested that Canada would even be willing to welcome investment by Chinese operators in Canada’s oil sands, a sector that has largely been off-limits to China since 2012.

A test case of what the new Canada and China partnership could mean for ICA review is already in the offing. On 26 January 2026 (10 days after Mr Carney’s announcement), an affiliate of Zijin Mining Group Co., Limited (a Chinese mining group engaged in the exploration and extraction of copper, gold, zinc, lithium, silver and molybdenum, among others) entered into an agreement to acquire Allied Gold Corporation (a Canadian publicly-listed gold mining company with operations overseas in Africa).

While Zijin has made numerous successful acquisitions of Canadian mining companies (including Zijin and Continental Gold in 2020 and Zijin and Neo Lithium in 2021), a minority investment by Zijin in Solaris Resources was abandoned in 2024, with Zijin citing ICA approval as a factor.

As the first major Chinese investment announced since the advent of the new Canada and China partnership, the Zijin and Allied transaction could serve as an initial barometer to gauge the Canadian government’s posture toward Chinese investment going forward.

Conclusion

The 2024-25 ICA annual report offers a snapshot of foreign investment review under the ICA that is largely consistent with recent experience.

As Canada navigates its evolving relationship with the US and explores new strategic partnerships, including with China, the Annual Report may also signal the end of an era of sorts, the principal question being whether we can expect the reversal of those recent trends under the ICA, particularly insofar as national security reviews are concerned.

It is possible – although by no means yet certain – that the upcoming annual report for 2025-26 will paint a different picture entirely.

Mark Katz is senior counsel and William Rooney is an associate at Davies Ward Phillips & Vineberg LLP. Mr Katz can be contacted on +1 (416) 863 5578 or by email: mkatz@dwpv.com. Mr Rooney can be contacted on +1 (416) 367 7595 or by email: wrooney@dwpv.com.

Mark Katz and William Rooney

Davies Ward Phillips & Vineberg LLP