Canada’s critical minerals sector now occupies a central place in national economic strategy, climate policy and geopolitical positioning. Minerals such as lithium, nickel, cobalt, graphite and rare earth elements underpin clean technology manufacturing, advanced defence systems and the broader energy transition. Meanwhile, demand for these inputs has intensified as governments pursue decarbonization while seeking to reduce strategic dependence on concentrated foreign supply chains. Despite this shift, the legal frameworks governing the ownership and control of Canadian mining companies remain largely rooted in assumptions formed before critical minerals were recognized as strategic assets.
The Investment Canada Act (ICA) is the federal government’s primary instrument for reviewing foreign investment. Its national security provisions apply to any investment by a non-Canadian that could be injurious to national security, regardless of transaction value or whether control is acquired. These provisions have become the principal mechanism for scrutinizing foreign participation in critical minerals projects. National security remains undefined in the statute, and review authority is exercised through a highly discretionary, transaction-specific process initiated only when an identifiable investment occurs. Flexibility allows the government to respond to evolving risks, but it also generates legal and commercial uncertainty in a sector characterized by long development timelines, high capital intensity and reliance on patient financing.
Recent ministerial statements, including the federal government’s October 2022 policy on foreign investment in critical minerals, reflect a more restrictive posture towards state-owned enterprises and state-influenced investors. Divestment orders issued to several Chinese state-owned enterprises with minority positions in Canadian lithium companies signalled that participation by foreign state actors in upstream assets is now treated as a national security concern.
These measures, however, remain policy-based rather than legislatively entrenched. A future government could recalibrate its approach without parliamentary debate, and affected parties would receive limited insight into the criteria applied. In the post-Vavilov administrative law environment, decisions are formally reviewable for reasonableness, but the combination of broad discretion, reliance on classified information and limited public reasons constrains meaningful judicial scrutiny.
A deeper structural challenge lies in the ICA’s focus on discrete transactions. Strategic influence in the mining sector is often accumulated incrementally through minority equity positions, joint ventures, offtake agreements, convertible instruments and governance rights that fall short of formal control. While the ICA can theoretically capture non-controlling investments, it is not designed to monitor cumulative influence across issuers or to assess sector-wide patterns of ownership. This limitation leaves Canada exposed to subtler forms of leverage, including coordinated minority investments across multiple junior companies, concentration of long-term offtake rights in the hands of a single foreign buyer, or indirect influence over project sequencing and downstream processing decisions aligned with a foreign state’s industrial policy.
Securities regulation governs the other side of the ownership landscape. Early warning reporting, insider reporting, takeover bid rules and beneficial ownership disclosure are intended to promote market transparency and investor protection. These regimes are neutral with respect to investor nationality and generally do not distinguish between private capital and state-linked entities. Disclosure thresholds, such as the 10 per cent early-warning trigger or the 20 per cent takeover-bid threshold, are poorly suited to identifying sophisticated influence strategies that rely on dispersed holdings, nominee arrangements or contractual rights rather than large equity blocks. A foreign state-owned enterprise, or a constellation of state-influenced funds, may therefore accumulate material leverage over a junior issuer while remaining fully compliant with securities law.
This regulatory gap is especially significant given the financing realities of Canadian mining. Junior exploration and development companies dominate the early stages of the critical minerals value chain. These firms face persistent capital constraints, with projects that are high-risk, capital-intensive and often pre-revenue for extended periods. Domestic pools of risk capital are limited, and foreign investors—including state-linked entities—are often among the few sources willing to provide early-stage financing. A categorical prohibition on foreign or state-affiliated investment would undermine the development of projects central to Canada’s own critical minerals strategy. The more difficult task is to distinguish between benign capital and investment that carries strategic risk, and to design regulatory tools that permit conditional participation rather than forcing binary outcomes.
Comparative experience illustrates possible paths forward. Australia’s Foreign Acquisitions and Takeovers Act treats state-owned enterprise investment as a distinct category, with lower monetary thresholds and enhanced scrutiny in sensitive sectors such as the resources sector. The United States, through the Committee on Foreign Investment in the United States, has explicit jurisdiction over certain non-controlling investments in critical technology, critical infrastructure and critical minerals businesses, and it routinely imposes mitigation measures tailored to identified risks. Both systems demonstrate that foreign investment review can be part of a broader strategic governance framework rather than a purely reactive process.
Several policy directions emerge for Canada. Key elements of the current policy stance on critical minerals and state-owned enterprises could be incorporated into the ICA or its regulations to enhance predictability and durability. Securities law disclosure requirements could be strengthened for state-affiliated investors, including enhanced beneficial ownership transparency and explicit identification of state influence, at least for issuers engaged in critical minerals exploration and development. Conditional approvals and structural safeguards could also be deployed more systematically, including ring-fencing sensitive assets, limiting access to proprietary information, constraining offtake rights or requiring Canadian or allied participation in governance.
Canada’s challenge is not to exclude foreign investment but to shift from transactional review to strategic governance. A coherent, cross-regime approach that integrates foreign investment law, securities regulation and industrial policy is essential to maintaining openness to capital while preserving meaningful Canadian and allied influence over critical minerals supply chains. Ownership and control in this sector will shape Canada’s long-term economic resilience and security position. Legal frameworks must evolve accordingly.
Carlos da Costa, PhD, is an adjunct professor of finance and risk management at the University of British Columbia and a seasoned financial industry professional with experience in derivatives, structured finance, commodities, market and credit risk management, alternative investments and valuation.
