Dec 9, 2015
As 2015 comes to a close, we want to share with our clients and friends our observations about what we believe to be some of the most significant legal developments affecting Canadian business over the past year and their implications for 2016 and beyond.
Recently elected governments at both the federal and provincial levels had a major impact on Canadian business in 2015, introducing a number of important new policies and legal initiatives.
With a view to generating revenue and improving service delivery, Premier Kathleen Wynne’s Ontario government sold a partial interest in Hydro One through the largest initial public offering in Canada in 15 years. The Ontario government also materially altered the model for retail distribution and sales of beer in Ontario, opening the delivery model to new private participants, while preserving the existing low cost delivery and public-revenue-generating features. Finally, Ontario renewed its modernization initiatives in the gaming sector, seeking to promote increased private sector involvement in the industry, while streamlining government oversight and maintaining government revenues.
The financing of public pension plans – and the need to improve pension coverage for all Canadians – was also top-of-mind for governments. The Ontario government announced the new Ontario Retirement Pension Plan (ORPP). Whether the new federal Liberal government will follow with an amendment to the Canada Pension Plan and how this will affect the ORPP remains to be seen.
In the energy sector, the new NDP government in Alberta announced a robust climate change leadership plan. Meanwhile, the new federal government promised to beef up the regulatory process for the approval of energy projects. The energy industry is also grappling with the implications of the U.S. refusal to authorize the Keystone XL Pipeline Project.
On the tax front, the new federal government has promised to increase taxes for high-earning individuals and to limit the tax benefits afforded to employee stock options. The latter measure may have unintended consequences in the cash-strapped tech start-up sector, where employee stock options are a key tool for attracting top talent.
This past year was more evolutionary than revolutionary in securities law. A number of initiatives continued to move forward — including the push to create a common securities regulator, as well as the CSA’s review of the systems and practices surrounding proxy solicitation. We also saw new crowdfunding rules and changes to the way in which prospectus-exempt financings are conducted across the country.
Significant proposed changes to the take-over bid regime were published in March 2015 that would result in a 120-day permitted bid regime. If these rules come into effect, the Alberta Securities Commission’s order that Canadian Oil Sands Limited’s shareholder rights plan be cease traded 91 days after Suncor Energy Inc. formally commenced its $4.3 billion hostile take-over bid may be the last “poison pill” hearing of its kind.
The wave of special purpose acquisition corporation (SPAC) offerings was arguably the biggest development in Canada’s capital markets. The first Canadian SPAC offering was completed in April 2015, rapidly followed by four others. Whether we will see more SPACs will likely depend on whether any of the existing SPACs completes a successful qualifying acquisition.
As for governance, board composition — particularly representation of women on boards and in executive officer positions — remained a focus. Executive compensation was also the subject of considerable attention in light of the loss of “say on pay” votes by three large Canadian issuers.
In its ongoing efforts to enforce insider trading laws, the Ontario Securities Commission (OSC) had a notable success in the Finkelstein case. The evidentiary standard applied in Finkelstein [PDF], together with the OSC’s proposed new Whistleblower Program and the ability to enter no-contest settlements, has added to the regulators’ enforcement toolkit.
In a landmark year for privacy and data security laws, the courts demonstrated an increased willingness to allow plaintiffs to use class proceedings as a vehicle for protecting their personal information. The federal government continued its enforcement of its anti-spam legislation and passed significant amendments to PIPEDA, including security breach notification requirements.
A number of appellate decisions – several involving privacy issues – grappled with whether and how Canadian courts should adjudicate on matters involving foreign elements. The multi-national operations of major companies, including internet-based businesses like Facebook and Google, challenged the Canadian courts to define the limits of their jurisdiction and their judicial resources.
In another important litigation development, the Québec Superior Court’s unprecedented award in two Québec class proceedings brought against tobacco manufacturers for smoking-related injuries has the potential to change the future course of class proceedings. The $15 billion award (which is currently under appeal) was made in the absence of any evidence from individual class members, raising important questions about the applicable evidentiary rules in the class actions context.
The past year also saw significant changes in international trade, foreign investment and anti-corruption measures.
Concluded in late 2015, the Trans-Pacific Partnership (TPP) is the largest and most far-reaching international trade agreement Canada has entered into in over 20 years. If ratified and implemented, the TPP (as well as the Canada-EU Comprehensive Economic Trade Agreement (CETA), entered into in late 2014) will address numerous subjects of paramount importance to Canadian business, including reduction of tariff and non-tariff barriers, intellectual property, electronic commerce, cybersecurity, anti-corruption and others.
Meanwhile, in relation to foreign in-bound investment, the Investment Canada Act “net benefit” review thresholds were amended. A higher monetary threshold, together with a change to “enterprise value” (as opposed to the former “book value”) as the calculation method, means that some transactions that were previously subject to review will no longer be. On the other hand, a number of other transactions will now be reviewable.
Canada’s efforts to fight corruption and improve transparency continued in 2015 with the laying of charges against SNC-Lavalin in relation to its overseas business activities and with the passage of the Extractive Measures Transparency Act (ESTMA). The ESTMA applies to businesses in the extractive sector, imposing new disclosure and transparency measures in relation to their dealings with both domestic and foreign governments.
In November 2015, Prime Minister Trudeau and the other G20 Leaders endorsed the OECD’s package of measures released as part of the base erosion and profit shifting (BEPS) project. The BEPS project is designed to address concerns about tax-planning strategies that exploit differences in domestic and international tax rules to shift profits to low tax jurisdictions. If the recommendations are adopted, they could have a significant impact on cross-border trade and the competitiveness of Canadian businesses.
As we monitor these and other legal developments in 2016, we would be happy to discuss them with you.