Prime Minister Stephen Harper lays out the federal government's response to takeover bids for Alberta oil firms by foreign state-owned enterprises
The impact of Ottawa's new restrictions on foreign state-owned enterprises on the wider business climate will take years and more regulatory decisions to determine, said several analysts who spent the last several days deciphering the new rules.
While simultaneously approving over $20 billion in foreign takeovers during a rare news conference Friday evening, Prime Minister Stephen Harper also announced that the oilsands would from now on be off-limits to foreign SOEs and that similar firms in other sectors would receive extra scrutiny for any "influence" by their home governments.
"To be blunt Canadians have not spent years reducing the ownership of sectors of the economy by our own governments only to see them bought and controlled by foreign governments instead," said Harper on Friday.
But the straight talk didn't deter observers from pointing out that Harper's new rules outlined in a speech, a revised set of guidelines and a policy statement are rife with unknowns.
They wondered what exactly was meant by the caveat that foreign ownership in the oilsands will still be permitted under "exceptional circumstances," why a clearer definition of "net benefit" to Canadians wasn't provided, and how exactly Ottawa will define "influence" from foreign governments a term that didn't previously exist in policy documents.
"How will you know (foreign influence) when you see it?" asked Douglas New, a senior partner with Fasken Martineau and former chair of the firm's antitrust, competition and marketing law group. "It's not a question of what will the prime minister see when he sees it the question is in the investing community that businesses will know it when they see it."
Harper's policy statement effectively provides terms that the Industry Minister uses in judging whether a foreign takeover is of "net benefit" to Canadians, terms like influence and exceptional circumstances.
When asked about possible exceptional circumstances for the oilsands, Travis Davies, spokesman for the Canadians Association of Petroleum Producers, said he "wasn't sure what those would be."
During his speech, Harper alluded to only bigger rules becoming subject to the new, tighter restrictions.
"We're talking more strictly and more focused on investments that involve controlling interests in the companies acquired," he said.
As for the political opposition, Liberal leadership candidate Marc Garneau said both the terms net benefit' and exceptional circumstance' are "opaque."
NDP energy critic Peter Julian called the lack of clarity in the language indicative of a "sadly broken" process.
Nomura Group economist Charles St-Arnaud said investors, observers and Canadians "are still waiting" for clarity on what a net benefit' really is. He pointed to Australia's more specific guidelines for takeovers as a model for Canada.
But Yuen Pau Woo, president of the Asia Pacific Foundation, a Vancouver-based think tank, said exceptional circumstances' would act as "an instrument of flexibility" for the government "to adjust to changing circumstances" in the energy sector, adding that a drop in oil prices could be reason enough to open up investment again.
Beyond the oilsands, the warning to SOEs more generally adds a whole new layer of legal nuance that foreign firms will have to understand.
"The question I'm left with is does this apply to other sectors?" said New. "Does this apply to the energy sector generally oil, gas, coal, uranium? (Harper) made mention of the fact that the Canadian government had exited certain industries and so you think transportation and you think telephone services, telecommunications."
Then there are those who say the real fact behind that announcement that Harper approved over $20 billion in takeovers of Canadians businesses by China's CNOOC and Malaysia's Petronas are a more important signal than the rules.
"That's the most powerful and visible statement of approval," said Woo. "One has to assume that if CNOOC would pass the net benefit test, then can do it as well."
From another perspective, all this uncertainty may very well be intended to give Ottawa as much discretion as possible.
"The prime minister's announcement was intended to send a general message while retaining (for) he and his government maximum flexibility to deal with SOE investment proposals on a case-by-case basis," said New.
Investors will look to future decisions by the federal government to determine just how welcome they are in the country, said New, meaning any firm assessment of Canada's policy might take years.
New compared it to a Russian doll where each removed lawyer will reveal another uncertain layer.
"I think we've just pulled the first one opened and we're going to be going down, like an onion, layer by layer," he said.
Many of the experts said flexibility is the norm in other countries with rules limited ownership by foreign SOEs.