Something is not quite right with Canada's foreign takeover rules when even the arbiter of them, the country's Industry Minister, doesn't seem to know whether they apply to a big transaction like the sale of Nortel Networks' patent portfolio.
Industry Minister Christian Paradis has asked his department to figure out whether the rules apply to the sale of the patents to a group including Apple Inc. and other foreign players, (as well as Canada's Research In Motion Ltd. ).
It's yet another example of the need to update and clarify the Investment Canada provisions that govern the "net benefit" test, something the Conservative government has been moving ever-so-slowly upon since promising a better system in the wake of the decision to block the Potash Corp. of Saskatchewan Inc. takeover attempt.
After Potash Corp., the minority Conservative government in place at that time had done the bare minimum on the issue, kicking it to a Parliamentary committee that had yet to get started on the review before the spring election call.
As long as there is no clear framework, the risk is that deal approval could be seen to be as much based on economics as politics, as it appeared to be in the case of Potash Corp. (Then, the minority Conservative government faced losing significant support in Saskatchewan, where it owned most of the seats, if it didn't block the deal.)
Now, with a clear majority, the Conservatives have a chance to move more quickly on the issue and lay out clear guidelines that depoliticize the review process.
That's not to say the rules shouldn't have teeth, and Canada shouldn't be able to stop deals that are not in the best interests of the country. It's just that everybody should have a better sense of how net benefit is defined, how decisions are made and when they apply.
The Nortel sale, as well as the recent potential merger of the TMX Group Inc. and London Stock Exchange Group Plc, are reminders that the issue is not going to go away in an open economy like Canada's.