Canada updates national security review guidelines amid trade tensions

The Government of Canada has updated its Guidelines on the National Security Review of Investments under the Investment Canada Act, incorporating new considerations for assessing foreign investments that may pose national security risks. While these changes align with the statutory amendments made in September 2024, they also reflect broader geopolitical trends, including increasing trade frictions and a growing recognition that economic security forms an integral part of national security — most notably, growing trade tensions with the United States and an evolving understanding of economic security as national security.

The updated Guidelines, along with the newly released Sensitive Technology List, are part of a coordinated effort by the federal government to close perceived gaps in Canada’s foreign investment regime. These changes substantially raise the bar for foreign investors, particularly those in sensitive technology sectors or with ties to foreign governments.

Key updates to the national security review guidelines

Updates to the Guidelines expand the scope of national security review of certain foreign investments, particularly in sectors involving sensitive technology and critical infrastructure. The key revisions include:

• Inclusion of economic security considerations: the updated Guidelines explicitly recognize economic security as a basis for national security concerns. The concept of economic security remains purposefully flexible, allowing regulators to respond to evolving global risks without being constrained by a fixed definition. All foreign investments, which include both acquisitions of existing Canadian businesses and the establishment of new Canadian businesses, will now be assessed for their potential to create strategic dependencies on foreign-controlled entities, disrupt critical supply chains, or undermine Canadian control over key innovation sectors. This shift mirrors developments in allied jurisdictions, such as the U.S. outbound investment screening mechanisms for AI and semiconductors, and the EU’s tightening of FDI rules.


• Incorporation of the Sensitive Technology List: the Guidelines now reference Canada’s Sensitive Technology List, published on February 6, 2025, which identifies technology of strategic importance, such as artificial intelligence, quantum computing, and biotechnologies. Investments involving these technologies will face a presumption of risk and are highly likely to trigger a national security review.


• Enhanced risk factors for review: the updated framework outlines specific risk factors such as the geographic proximity of the investment to military or strategic assets, the investor’s ties to foreign governments (particularly those with records of cyberespionage or economic coercion), and risks to data sovereignty and cyber infrastructure.


• Alignment with international security frameworks: the Government reiterated its commitment to collaborating with Five Eyes and other allies to coordinate foreign investment review efforts, especially to address national security concerns in high-risk cross-border investments.

Expanded scope of the Sensitive Technology List

Concurrent with the updated Guidelines, Canada released a new Sensitive Technology List on February 6, 2025, which categorizes emerging and foundational technologies that could impact national security. The list includes, but is not limited to:

• advanced digital infrastructure technology;
• advanced energy technology;
• advanced materials and manufacturing;
• advanced sensing and surveillance;
• advanced weapons;
• aerospace, space and satellite technology;
• artificial intelligence and big data technology;
• human-machine integration;
• life science technology;
• quantum science and technology; and
• robotics and autonomous systems

The list will be specifically referenced when evaluating the potential impact of an investment on the transfer of sensitive technology. The expansion of the list reflects Canada’s heightened awareness of emerging threats in technological fields that could be exploited for economic coercion, cyber-espionage, and geopolitical leverage. Consequently, foreign investments in these areas will likely be subject to deeper scrutiny to ensure that they do not result in the loss of technological leadership, compromised intellectual property, or strategic dependencies on foreign entities.

The inclusion of artificial intelligence, quantum science, and advanced digital infrastructure into the Sensitive Technology List highlights Canada's focus on protecting technologies that are pivotal to both commercial and defense applications. AI and quantum computing, in particular, may present risks in areas such as encryption, cybersecurity, and autonomous warfare systems. The government’s increased vigilance signals its intention to prevent undue foreign influence in these sectors.

Economic security and foreign investment restrictions

The new economic security considerations introduce a broader evaluation of whether an investment could lead to dependency on a foreign-controlled entity for critical goods or services. This includes:

• Supply chain vulnerabilities: investments that could disrupt or concentrate supply chains in ways that expose Canada to economic coercion may trigger closer review.


• Intellectual property (IP) risks: the transfer of IP and proprietary technology through acquisitions or partnerships may now face greater scrutiny, especially in industries tied to innovation, critical infrastructure, and national defense.


• State-linked investments: foreign state-owned or state-influenced entities investing in Canadian businesses in sensitive sectors could face increased regulatory hurdles, particularly if their country of origin has a history of economic coercion or misappropriation of technology.

While these provisions align with Canada’s ongoing efforts to bolster economic resilience and reduce reliance on foreign-controlled entities in strategic sectors, the timing and tone of the updated Guidelines suggest a deeper motivation: rising geoeconomic friction, particularly with the U.S. administration's renewed protectionist stance.

By linking national security to economic resilience, Canada is positioning itself to prevent foreign influence over critical industries, discourage opportunistic takeovers, and ensure long-term technological sovereignty. It indicates that Canada will not allow its economic architecture to become a lever for foreign strategic advantage.

Regulatory framework and review process

The updated Guidelines are immediately applicable to any foreign investment subject to the ICA, regardless of whether the transaction was initiated prior to the issuance of the updated Guidelines

The ICA provides the Canadian government with broad authority to review and, where necessary, prohibit or impose conditions on foreign investments that could be injurious to national security. The national security review process involves several stages:

• Initial screening: all foreign investments are subject to a preliminary assessment to determine whether they may raise national security concerns.


• Extended review: if concerns are identified, the government may order a more detailed review, which can take up to 200 days or longer in complex cases. As a result of the recent amendments to the ICA, interim conditions may be imposed on the proposed investment pending the outcome of the national security review.


• Decision and remedies: the government may approve, impose conditions on, or block an investment if it is deemed to pose a risk to national security.

Implications for investors

The revised Guidelines reinforce the government’s focus on safeguarding critical sectors from potential threats posed by foreign investments, and it represents a significant recalibration of Canada’s foreign investment review regime. The government does not formally shield specific sectors or firms from foreign investment; rather, each transaction is evaluated on its unique merits and potential national security implications. Investors seeking to acquire or establish businesses in Canada should assess whether their investments involve sensitive technologies or infrastructure that could trigger a national security review.

In practical terms, investors should anticipate increased scrutiny if they are investing in any sectors listed on the Sensitive Technology List, or if the investment involves a state-owned enterprise — particularly when originating from jurisdictions with a history of economic coercion or IP theft. Heightened review is also likely if the transaction involves critical infrastructure, such as data centres, clean energy systems, or satellite communications, or if the deal could impact Canadian innovation ecosystems or expose IP to foreign access.

To mitigate risk, investors may be required to engage early in the transaction process to conduct a pre-closing national security risk assessment, and offer proactive mitigation measures, such as restricting access to sensitive data or implementing governance controls. Even where regulatory thresholds are not met, voluntary notifications may need to be considered to proactively address potential concerns from regulators. Investors may have to also maintain comprehensive documentation on ownership structures, sources of funding, and any affiliations with foreign states.

Investors may face potential delays if a national security review is triggered. The process may extend up to 200 days or longer in the case of complex transactions. In some instances, interim conditions may be imposed while the review is ongoing.

The federal government has emphasized that national security reviews are no longer confined to traditional defense-related matters. Foreign investors, especially those operating in advanced technology or critical infrastructure sectors, must approach Canadian investments with heightened caution, increased transparency, and strategic foresight.

Given the expanded scope of review and the broader geopolitical context, foreign acquirers may be required to re-evaluate their transaction timelines and enhance their due diligence protocols accordingly.

For more information on the ICA updates and developments, please contact any member of our Antitrust, Competition, and Regulatory & Government Affairs Group.