July 4, 1972

PC

Robert Jardine McCleave

Progressive Conservative

Mr. Robert McCleave (Halifax-East Hants):

Mr. Speaker, the House is in such an agreeable mood tonight that I hoped that by staying away these very worth-while amendments would pass with little or no discussion, thus adding greatly to the commercial law of the country. However, speaking more seriously, they are here to clear up what may be defects in the present bill. I am not saying that there are defects in this line in the present legislation, but after consultation with lawyers who are much more learned in this matter and have much more experience than I ever could have, I have decided that these amendments should be presented for consideration of the House and, more particularly, in the hope that the minister and his advisers would agree to them.

Perhaps the main purpose of the amendments is to make sure that this legislation not only encourages Canadian ownership of Canadian enterprises but encourages also the use of Canadian-made goods. The anomaly that I think I spotted in this legislation is that there is uncertainty about the leasing business and it might very well pay in large transactions to use American-made chattels rather than Canadian-made chattels. If this were so, and I think it could be so, then we would be defeating the purpose of this legislation.

I think we should not only look at the legislation from the standpoint of encouraging ownership of Canadian operations by Canadians, but also we should encourage if

possible the greater manufacture of goods within Canada rather than their importation from abroad. Yet, unless one of these amendments passes, I suggest that companies may find that it is much more advantageous to go abroad to buy such products as large sawmills, jets or the like- the cost of which falls within the figures set forth in this legislation-than to buy them in Canada.

Another purpose of the amendment is to ensure that when businesses are to be financed it is possible to make the loan in the first place without falling in the ambit of this legislation. There have been some exceptions made already, thanks to representations made in the committee, but I think I carried it a logical step further.

The two purposes of the amendments are, first, to solve the problem which would prevent non-eligible companies from providing financial services for Canadian business- and this would involve hundreds of millions of dollars worth of transactions, so we are not exactly dealing with peanuts-and, second, to make it unnecessary for non-eligible Canadian companies to do their major leasing abroad. So it is in the spirit of helpfulness, of trying to make the law as crystal clear as possible, that both these amendments are offered. I hope they will, therefore, find favour with the House.

I understand, also, that discussions have been going on between certain people who are familiar with this type of law and the minister's officials. This makes me perhaps a little more confident that the point I am making is a rather valid one. If the minister wanted more time to study these amendments, and if he cannot accept them now, I hope he will agree that they be stood until just before the votes on these matters.

As I say, it is in the spirit of trying to make the law crystal clear, and seeing that Canadian made goods to the value of a third of a million dollars are encouraged, rather than importation of goods of that amount from abroad, that I have proposed these amendments this evening.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
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NDP

Max Saltsman

New Democratic Party

Mr. Max Saltsman (Waterloo):

Mr. Speaker, while I would like to accommodate the hon. member for Halifax-East Hants (Mr. McCleave) on his amendments, I have some reservations. I am sorry that he did not take a little more time to be specific on how his amendments would work. I am concerned that in trying to correct some difficulties that occur in a leasing operation, his amendments would provide a large opening to nullify certain provisions of the bill. They might lead to a situation in which businesses, instead of being purchased, would be leased out in order to evade provisions of the bill.

There is a growing tendency for ownership to be somewhat meaningless and for the operation and command of resources to be more important. Many companies are switching to long-term leasing arrangements rather than direct ownership. I am concerned that these amendments would enable such a loophole to appear and in effect would nullify what the rest of the bill is trying to do. Unless the hon. member can persuade me to the contrary, I do not see how we can support his amendments.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
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LIB

Jean-Luc Pepin (Minister of Industry, Trade and Commerce)

Liberal

Hon. Jean-Luc Pepin (Minister of Industry, Trade and Commerce):

Mr. Speaker, to use the words of the hon.

July 4, 1972

member for Halifax-East Hants (Mr. McCleave), with the help of people much more learned than I am I have tried to analyse the meaning of motions Nos. 10 and 11. In general I think I can summarize it by saying that in the case of motion No. 10 it requests exemptions to allow a non-eligible leasing company to acquire property for leasing, and in the case of motion No. 11 to allow a non-eligible company to lease from a leasing company.

I contend that to cover these two situations his amendments are not needed. That which he is attempting to exempt is already actually exempt, but it is only exempt inasmuch as it does not involve the actual acquisition of a business, which is the point that I think the hon. member for Waterloo (Mr. Saltsman) was making, situations which involve the acquisition of a full business, or for that matter the leasing of a whole business, which would have to be screened.

May I put this in more specific terms, reading from the notes that I have here, Mr. Speaker. There appear to be some observers who believe that the bill will adversely affect people who are in the leasing business. I want to try to clear up this matter. According to the bill, a person who acquires a leasehold interest in a property used in carrying on a business is deemed to have acquired that property. Does this mean that a non-eligible person who leases or rents a computer, a fleet of trucks, an aircraft or a ship will have to go through the screening process? The answer is no in almost all cases, because that person has not acquired "all or substantially all of the property used in carrying on a business" as stipulated in clause 3(3)(a)(i)(B), or indeed has not acquired "a part of a business that is capable of being carried on as a separate business" as stipulated in clause 3(5)(g).

This person has simply acquired "hardware." A business is more than hardware. A business involves at least some of the following: inventory, good will, a name, customers, suppliers, accounts receivable, accounts payable, and so on.

The government cannot, however, exempt leasehold interests for two reasons. First, a company could go into the business of acquiring businesses and leasing them to non-eligible persons. This would be a clear circumvention of the act. Secondly, circumvention would be possible in another way. Company A buys good will, inventory, etc. from Company B. Company B sells its buildings and machinery to a leasing company. Company A then leases this plant and equipment back from the dealer. He could avoid the act by saying that he has not acquired all or substantially all of the property used in a business. The act must cover the potential splitting of a business.

The conclusion is that taking a leasehold interest in a certain property, a piece of equipment, for example, would in itself rarely constitute taking a leasehold interest in a business. It would be an interest in part of the property used in carrying on a business, and consequently it would not be screened. But if leasing means de facto acquisition of a business, then it would be screened. I put that on the record hopefully for the benefit of those people who have been writing to the hon. member for Halifax-East Hants.

Foreign Takeovers Review Act

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
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PC

Marcel Joseph Aimé Lambert

Progressive Conservative

Hon. Marcel Lambert (Edmonton West):

Mr. Speaker, I think the minister has indicated that there is an ambiguity in the bill. I am sure he realizes that the people who put forward suggestions for these amendments are cognizant of certain features of the equipment leasing business that may have escaped himself and his advisers. It must be remembered that the forms of transactions possible are legion, and one cannot say that a leased business must be of a stereotyped nature, making it easy for the minister to determine from the beginning that the transaction should not be one to come under the legislation.

On the other hand, as one can readily understand, there is the need for non-eligible financial institutions, of which we have a great number in Canada, to acquire goods from Canadian companies for the purpose of leasing them to Canadian businesses. Because of the wording of the legislation, the minister knows that a subsidiary, or a participant in a syndicate with a non-eligible person, causes the whole group to become non-eligible. For instance, let us look at the equipment leasing organizations that provide equipment leasing facilities for a number of the chartered banks. They are in competition with Citibank of New York, through Mercantile, but the Mercantile Bank is able through its affiliates-not its subsidiaries-owned by Citibank of New York and operating in Montreal, to engage in very extensive equipment leasing operations. And remember that the transactions between Citibank and its affiliates in Montreal are not subject to screening by the minister, but on the other hand transactions engaged in for the Canadian banks, in the Canadian context, could be subject to screening.

The acquisition of the equipment from Canadian companies-and in a road-building firm, say, this is the whole of their business-would be a transaction that would be subject to the screen. The minister says no, but I am willing to put a nickel on it that this will be the type of practice that would go through the screen. This is what concerns me, Mr. Speaker, that the actual practice will not be what the minister says it is going to be, but a lot tougher. What is done is to make Canadian business operations competitive with foreign business operations so that Canadians will not have to go and lease in the United States.

What about our Canadian multinationals, our oil drilling companies? They are going to go abroad. They have to buy equipment and finance it. I would not be surprised if it became to the advantage of our Canadian multinational corporations operating abroad to acquire their equipment abroad because of these requirements. I have always tried to point out that Canadian companies operating offshore will find it to their advantage to enter into transactions in other countries instead of acquiring Canadian machinery. This will now not be subject to any screen or control. I am concerned that by creating difficulties in Canada we are making it much more difficult for Canadian business to operate.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
?

Some hon. Members:

Hear, hear!

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
PC

Marcel Joseph Aimé Lambert

Progressive Conservative

Mr. Lambert (Edmonton West):

The minister can shake his head, but I want him to get out and talk to business-

July 4, 1972

Foreign Takeovers Review Act

men who engage in these practices. The minister should be the first one to encourage Canadian business to operate abroad. He should be the first one to hit his colleague, the Minister of Finance (Mr. Turner), over the head so that Canadian companies operating abroad are not at a tax disadvantage with American companies. This is all part of the package. It is not only for taxation that you can discourage Canadian operations-

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
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LIB

Jean-Luc Pepin (Minister of Industry, Trade and Commerce)

Liberal

Mr. Pepin:

The answer I gave is very clear.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
PC

Marcel Joseph Aimé Lambert

Progressive Conservative

Mr. Lambert (Edmonton West):

The point is that in his explanation the minister cannot guarantee this. If there is a dispute, the court will have to decide what the law is. A court cannot consider anything that the minister says in this House. I think the legislation should be amended in order to make sure that the court could make the appropriate interpretation.

I am sure the amendment put forward by my friend, the hon. member for Halifax-East Hants (Mr. McCleave), is not one that conceals any traps. It is a sensible amendment as suggested by counsel, put forward for the sales finance companies on behalf of the efficacy of Canadian business. It is not trying to circumvent Canadian legislation for some ulterior purpose.

I hope that these amendments will receive real consideration from the minister and his officials and that perhaps tomorrow, if we are going to be back on this legislation, they can tell us that they have looked at it again and are prepared to reconsider it. The minister showed an example this afternoon by looking at the amendment of my colleague, the hon. member for Fundy-Royal (Mr. Fair-weather), and coming back with a modified version which in some ways met part of our desires. That is what I suggest he should do now. On that basis perhaps we could call it ten o'clock.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
NDP

Stanley Howard Knowles (N.D.P. House Leader; Whip of the N.D.P.)

New Democratic Party

Mr. Knowles (Winnipeg North Centre):

Mr. Speaker, before we call it ten o'clock I wonder if I might raise a point of order with respect to the grouping of some of the motions that are ahead of us which Your Honour announced a short while ago. You will recall that it was suggested that motions Nos. 13, 14 15 and 16 should be grouped for debate. You did indicate that there could be separate votes on 13 and 14 and that then a vote on 15 that would cover 16.

The point I wish to make is that the substance of motion No. 14 goes in the opposite direction from some of the others in that group. For the same reason, this afternoon the Chair was willing to separate No. 5 on the one hand from Nos. 6, 7, 8 and 9 on the other. I should like to ask that motion No. 14 stand by itself both for debate and for the vote.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
LIB

Russell Clayton Honey (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

Mr. Deputy Speaker:

Hon. members have heard the hon. member for Winnipeg North Centre (Mr. Knowles). Of course, the suggestions which I made earlier were only suggestions and were for the comment of hon. members. If hon. members agree, the Chair will be prepared to make a group as the hon. member for Winnipeg North Centre has suggested or, alternatively, put the matter over to give hon. members an opportunity to consider his remarks.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
PC

Marcel Joseph Aimé Lambert

Progressive Conservative

Mr. Lambert (Edmonton West):

Mr. Speaker, I would certainly agree that No. 14 should not be in the group of Nos. 13 to 16 inclusive. As a matter of fact, the spirit of No. 13 is quite different from that contained in Nos. 15 and 16. The context shows that No. 13 would exclude from the operations of this act a provincial government as specifically exempted by order in council of the provincial cabinet. I quite agree, and would propose to Your Honour, that Nos. 13 and 14 could be handled separately both for debate and votes. Nos. 15 and 16, which are twins, could be considered as one for debate and for votes or decisions.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
NDP

Stanley Howard Knowles (N.D.P. House Leader; Whip of the N.D.P.)

New Democratic Party

Mr. Knowles (Winnipeg North Centre):

Mr. Speaker, this meets our point.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
LIB

Russell Clayton Honey (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

Mr. Deputy Speaker:

As the Chair understands, motion No. 13 would be considered and disposed of separately; motion No. 14 would be considered and disposed of separately; motions Nos. 15 and 16 would be considered together, and a vote on No. 15 would dispose of No. 16. Is that agreed?

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
?

Some hon. Members:

Agreed.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
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PC

Maclyn (Mac) Thomas McCutcheon (Deputy House Leader of the Official Opposition)

Progressive Conservative

Mr. McCutcheon:

A further point of order, Mr. Speaker. I wonder if I could ask the government House leader, or whoever is in charge, what the order of business would be tomorrow supposing that this legislation would be concluded. Do we assume that we go back to this tomorrow?

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
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LIB

Otto Emil Lang (Minister of Justice and Attorney General of Canada; Minister responsible for the Canadian Wheat Board)

Liberal

Mr. Lang:

Mr. Speaker, I think we can assume that we will continue tomorrow with the bill we are discussing.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
PC

Maclyn (Mac) Thomas McCutcheon (Deputy House Leader of the Official Opposition)

Progressive Conservative

Mr. McCutcheon:

Mr. Speaker, may I ask what else is on the agenda? It would be nice to know.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
LIB

Otto Emil Lang (Minister of Justice and Attorney General of Canada; Minister responsible for the Canadian Wheat Board)

Liberal

Mr. Lang:

Mr. Speaker, I believe the agenda is subject to a number of uncertainties. The available items have been listed before and they will be selected as seems fit. The FISP bill is obviously near the top of the list. Some think that wiretapping and election expenses might be considered in the forenoon, if the House agreed to sit then.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
NDP

Stanley Howard Knowles (N.D.P. House Leader; Whip of the N.D.P.)

New Democratic Party

Mr. Knowles (Winnipeg North Centre):

Mr. Speaker, has the minister found a sophisticated way of saying he does not know?

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
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PROCEEDINGS ON ADJOURNMENT MOTION

July 4, 1972