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TORONTO — The Canadian government recently blocked an American firm’s offer to buy a Canadian space and technology business, prompting speculations in the Canadian legal community about whether the decision will indicate a tougher climate for foreign takeovers. Canada’s Minister of Industry recently said he rejected the planned sale of the space and technology division of Vancouver, British Columbia’s MacDonald, Dettwiler and Associates to Alliant Techsystems, an aerospace and defense company based in Minneapolis. The proposal was estimated at $1.3 billion Canadian dollars. Jim Prentice, the minister of industry, has indicated he was not satisfied the investment would be “of net benefit to Canada,” as required under the act. Alliant Techsystems could restructure its proposal and the decision may be reversed. But it is significant because it is the first time the Canadian government has not approved a review since the Investment Canada Act came into effect in 1985. Several Canadian law firms have issued client updates following the decision, speculating that it may lead to a tougher enforcement climate for foreign investors, particularly if matters of national security are involved. The Canadian foreign investment law doesn’t specifically have a national security test for foreign investments, although the issue has been on the government’s mind, according to a client update issued by Gowling Lafleur Henderson, a Canadian national firm, following the decision. The update pointed out that other governments have already increased scrutiny regarding foreign investments. In the United States, for example, that occurred after an attempt by DP World, a marine terminal operator based in the United Arab Emirates, to acquire interest in several American ports. An update issued by Toronto’s Osler, Hoskin & Harcourt, another Canadian national firm, said the case demonstrates that national security concerns may arise when the investor is not based in Canada.

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