The proposed buyout of Nexen Inc., a Canadian oil and gas company which has been discovering and developing energy resources in some of the world’s most significant basins – including Western Canada, the UK North Sea, offshore West Africa and the Gulf of Mexico – has been causing quite the commotion amongst politicians and the public. Why is that? The interested buyer happens to be wholly owned by its government – a government, it can be argued, whose values and beliefs differ greatly from our country, Canada. China National Offshore Oil Corp (CNOOC), China’s largest producer of offshore crude oil and natural gas, has placed a bid of $15.1 billion to takeover Nexen Inc. It wasn’t long ago in 2005 when China Minmetals made a bid for Noranda, then Canada’s largest mining enterprise. The proposal was abandoned when it became aware that Minmetals was a branch of the mines department of the Beijing government.
There are obvious areas of concerns, which have been brought to light by both politicians and everyday Canadian citizens. Most notably:
- National security and the pursuit of certain state-owned enterprise agendas;
- The nationalization of a strategic Canadian company;
- The sale of domestic ownership of our non-renewable natural resources;
- CNOOC’s corporate governance standards – the likely refusal to abide by Canada’s standards and the Toronto Stock Exchange (TSE) regulations;
- Equivalent access to China’s market;
- Undisputed access to Canada’s technological innovations – innovations that have been paid for by Canadian taxpayers;
The Harper government, as well as the Senate Leader of the government, has stated repeatedly that there is a process in place to review and scrutinize this transaction closely in order to determine if it is of net benefit to Canada. What exactly is this process, however, and what constitutes a “net benefit”? The Investment Canada Act, which obliges the government to review significant investments in Canada by non-Canadians, provides few factors that are to be taken into account such as: the effect of the investment on the level and nature of economic activity in Canada, and the effect of the investment on competition within any industry or industries in Canada; however, the “net benefit” test remains undefined and the review process opaque.
I have since, on two separate occasions, proposed to the Senate Leader to submit to the Prime Minister a request for a clear mandate enabling the Banking, Trade and Commerce Standing Committee to conduct a thorough study that would allow for the clarification of the current opaque “net benefit” criteria of the Investment Canada Act. A similar process took place when the Bank Act was under review, and, consequently, the Committee’s recommendations were considered and implemented. Evidently, this proved to be a success as Canada’s banking system became a leading model during the global economic crisis.
A thorough study would allow the Committee members to hear from experts, stakeholders, international organizations such as the Organization for Economic Co-operation and Development (OECD), provincial governments, Obama’s Administration, amongst others. Such a diverse panel could provide significant input based on their knowledge and experience. In turn, the Committee can make recommendations to the government proposing an amendment to the current legislation for a more transparent and rational process