Advisory Board

  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Peter Clarke
  • Barry Diller
  • IAC/InterActiveCorp
  • Fu Chengyu
  • China National Petrochemical Corporation (Sinopec Group)
  • Richard J. Gnodde
  • Goldman Sachs International
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V.
  • Jiang Jianqing
  • Industrial and Commercial Bank of China, Ltd. (ICBC)
  • Handel Lee
  • King & Wood Mallesons
  • Richard Li
  • PCCW Limited
  • Pacific Century Group
  • Liew Mun Leong
  • CapitaLand Limited
  • Martin Lipton
  • New York University
  • Wachtell, Lipton, Rosen & Katz
  • Liu Mingkang
  • China Banking Regulatory Commission (CBRC)
  • Dinesh C. Paliwal
  • Harman International Industries
  • Leon Pasternak
  • Bank of America Merrill Lynch
  • Tim Payne
  • Brunswick Group
  • Joseph R. Perella
  • Perella Weinberg Partners
  • Baron David de Rothschild
  • N M Rothschild & Sons Limited
  • Dilhan Pillay Sandrasegara
  • Temasek Holdings
  • Shao Ning
  • State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC)
  • John W. Snow
  • Cerberus Capital Management, L.P.
  • Former U.S. Secretary of Treasury
  • Bharat Vasani
  • Tata Group
  • Wang Junfeng
  • King & Wood Mallesons
  • Wang Kejin
  • China Banking Regulatory Commission (CBRC)
  • Wei Jiafu
  • China Ocean Shipping Group Company (COSCO)
  • Yang Chao
  • China Life Insurance Co. Ltd.
  • Zhu Min
  • International Monetary Fund

Legal Roundtable

  • Dimitry Afanasiev
  • Egorov Puginsky Afanasiev and Partners (Moscow)
  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Johan Aalto
  • Hannes Snellman Attorneys Ltd (Finland)
  • Nigel P. G. Boardman
  • Slaughter and May (London)
  • Willem J.L. Calkoen
  • NautaDutilh N.V. (Rotterdam)
  • Peter Callens
  • Loyens & Loeff (Brussels)
  • Bertrand Cardi
  • Darrois Villey Maillot & Brochier (Paris)
  • Santiago Carregal
  • Marval, O’Farrell & Mairal (Buenos Aires)
  • Martín Carrizosa
  • Philippi Prietocarrizosa & Uría (Bogotá)
  • Carlos G. Cordero G.
  • Aleman, Cordero, Galindo & Lee (Panama)
  • Ewen Crouch
  • Allens (Sydney)
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Rachel Eng
  • WongPartnership (Singapore)
  • Sergio Erede
  • BonelliErede (Milan)
  • Kenichi Fujinawa
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Manuel Galicia Romero
  • Galicia Abogados (Mexico City)
  • Danny Gilbert
  • Gilbert + Tobin (Sydney)
  • Vladimíra Glatzová
  • Glatzová & Co. (Prague)
  • Juan Miguel Goenechea
  • Uría Menéndez (Madrid)
  • Andrey A. Goltsblat
  • Goltsblat BLP (Moscow)
  • Juan Francisco Gutiérrez I.
  • Philippi Prietocarrizosa & Uría (Santiago)
  • Fang He
  • Jun He Law Offices (Beijing)
  • Christian Herbst
  • Schönherr (Vienna)
  • Lodewijk Hijmans van den Bergh
  • Royal Ahold (Amsterdam)
  • Hein Hooghoudt
  • NautaDutilh N.V. (Amsterdam)
  • Sameer Huda
  • Hadef & Partners (Dubai)
  • Masakazu Iwakura
  • Nishimura & Asahi (Tokyo)
  • Christof Jäckle
  • Hengeler Mueller (Frankfurt)
  • Michael Mervyn Katz
  • Edward Nathan Sonnenbergs (Johannesburg)
  • Handel Lee
  • King & Wood Mallesons (Beijing)
  • Martin Lipton
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Alain Maillot
  • Darrois Villey Maillot Brochier (Paris)
  • Antônio Corrêa Meyer
  • Machado, Meyer, Sendacz e Opice (São Paulo)
  • Sergio Michelsen Jaramillo
  • Brigard & Urrutia (Bogotá)
  • Zia Mody
  • AZB & Partners (Mumbai)
  • Christopher Murray
  • Osler (Toronto)
  • Francisco Antunes Maciel Müssnich
  • Barbosa, Müssnich & Aragão (Rio de Janeiro)
  • I. Berl Nadler
  • Davies Ward Phillips & Vineberg LLP (Toronto)
  • Umberto Nicodano
  • BonelliErede (Milan)
  • Brian O'Gorman
  • Arthur Cox (Dublin)
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Sang-Yeol Park
  • Park & Partners (Seoul)
  • José Antonio Payet Puccio
  • Payet Rey Cauvi (Lima)
  • Kees Peijster
  • COFRA Holding AG (Zug)
  • Juan Martín Perrotto
  • Uría & Menéndez (Madrid/Beijing)
  • Philip Podzebenko
  • Herbert Smith Freehills (Sydney)
  • Geert Potjewijd
  • De Brauw Blackstone Westbroek (Amsterdam/Beijing)
  • Qi Adam Li
  • Jun He Law Offices (Shanghai)
  • Biörn Riese
  • Mannheimer Swartling (Stockholm)
  • Mark Rigotti
  • Herbert Smith Freehills (Sydney)
  • Rafael Robles Miaja
  • Robles Miaja (Mexico City)
  • Alberto Saravalle
  • BonelliErede (Milan)
  • Maximilian Schiessl
  • Hengeler Mueller (Düsseldorf)
  • Cyril S. Shroff
  • Cyril Amarchand Mangaldas (Mumbai)
  • Shardul S. Shroff
  • Shardul Amarchand Mangaldas & Co.(New Delhi)
  • Klaus Søgaard
  • Gorrissen Federspiel (Denmark)
  • Ezekiel Solomon
  • Allens (Sydney)
  • Emanuel P. Strehle
  • Hengeler Mueller (Munich)
  • David E. Tadmor
  • Tadmor & Co. (Tel Aviv)
  • Kevin J. Thomson
  • Barrick Gold Corporation (Toronto)
  • Yu Wakae
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Wang Junfeng
  • King & Wood Mallesons (Beijing)
  • Tomasz Wardynski
  • Wardynski & Partners (Warsaw)
  • Rolf Watter
  • Bär & Karrer AG (Zürich)
  • Xiao Wei
  • Jun He Law Offices (Beijing)
  • Xu Ping
  • King & Wood Mallesons (Beijing)
  • Shuji Yanase
  • OK Corporation (Tokyo)
  • Alvin Yeo
  • WongPartnership LLP (Singapore)

Founding Directors

  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz
  • Nigel P.G. Boardman
  • Slaughter and May
  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz
  • Peter Williamson
  • Cambridge Judge Business School
  • Franny Yao
  • Ernst & Young


CANADIAN UPDATE – If Pills Are Out, Are Private Placements In?

Editors’ Note: This article was co-authored by Poonam Puri, a professor of law at Osgoode Hall Law School, an affiliated scholar at Davies Ward Phillips & Vineberg LLP and a respected adviser on issues of corporate governance, corporate law and securities laws, and by Patricia Olasker a senior partner at Davies in the M&A, capital markets and mining practices. It was submitted to XBMA by Davies partner Berl Nadler who is a member of XBMA’s Legal Roundtable.

Executive Summary: Canada’s new takeover bid regime got its first serious test with Hecla Mining’s attempted hostile takeover of Dolly Varden Silver. Under the new takeover bid rules, poison pills as a bid defence may soon be a thing of the past, to be replaced by private placements as the defensive tactic of choice for many targets. The joint decision of the Ontario and British Columbia securities commissions in Hecla v Dolly Varden articulates the definitive code for determining when a target company’s private placement will be deemed an illegal defensive tactic.

Our article recently published in Listed magazine explains the four-stage analysis for determining whether your private placement will survive regulatory scrutiny and, more importantly, how to structure your private placement in a way that will protect it from a Dolly-Varden-type challenge.

Main Article:

A version of this article originally appeared in Listed Magazine.

Consider this: a cash-strapped junior resource company listed on the TSX Venture Exchange is looking for ways to continue its exploration program for the coming year. With only $200,000 in its bank account, a $2-million loan from a significant shareholder that’s coming due, and an expected burn of $4 to $5 million for its drilling plans for the next year, financing is top of the agenda for both the board and management. Sound familiar?

The company considers extending the existing loan, but the lender refuses to commit to an extension until closer to renewal. Wanting certainty, the company decides to pursue a $6-million private placement, which it plans to use to pay off the existing loan and continue drilling. However, immediately after talks break down with the lender over loan amendments, the lender announces its intention to launch a hostile bid at a 55% premium over the market price. A week later, the company announces a private placement that would dilute existing equity by 43%, and the lender runs to the securities regulators demanding that they intervene by cease-trading the private placement. Should the securities commissions intervene?

This is exactly what happened in Hecla Mining’s unsolicited takeover bid for Dolly Varden Silver Corp. (TSX-V:DV) in July 2016. The Ontario and B.C. securities commissions refused to intervene and in October released a rare joint decision, explaining why. Simply put, they found that the company made the private placement for non-defensive business purposes. They noted that the company was contemplating an equity financing well before the offer was announced, the size of the private placement was reasonable, and it had not changed in size or scope after the bid surfaced. The commissions also explicitly recognized the market reality in Canada that junior listed companies often have to engage in dilutive equity transactions for legitimate business purposes.

Dolly Varden was the first contested transaction since Canada’s new takeover bid regime came into effect in Canada in May 2016. Different from the principles underlying takeover legislation in the  United  States,  where  boards  can  “just  say  no,”  Canada’s  takeover  bid  framework  is premised on the principle that shareholders should ultimately decide whether to accept or reject a takeover bid. The new rules change the balance of power between target boards and target shareholders, and between target boards and hostile bidders. Here, we’ve compiled a list of six implications of the new takeover code and the new approach to the regulation of defensive tactics in the post-poison-pill era.

  1. Hostile bids will be more difficult to complete successfully. The 105-day time period that a bid must now remain open means that a hostile bidder will incur greater costs and uncertainty. It will bear the risk of changed market conditions, volatility in underlying prices and changes to the target’s business. Other competing bidders might step in, and the initial bidder’s efforts in uncovering the opportunity may be all for nothing. This will, no doubt, make some potential bidders pause and think twice about bidding at all.
  2. Target boards have more time. Target boards now have more time to evaluate a bid, look for white knights, pursue alternatives and/or make a strong case to shareholders to reject the bid. A target board and its advisers can establish a strategic process with some greater certainty on timing (as opposed to the shorter, more variable periods that securities commissions have historically allowed for poison pills).
  3. Target boards have more leverage. Interested bidders are more likely to negotiate directly with target boards. Bidders who negotiate a friendly deal directly with the target’s board can have the target reduce the 105-day bid period to 35 days. This clearly gives the target’s board some negotiating leverage.
  4. Bids cannot succeed without the support of a majority of shareholders. The new requirement for a 50% minimum tender means that shareholders won’t be able to tender their shares to the bidder if the bid isn’t supported by a majority of the target’s shareholders. Under the old regime, bidders would often reserve the right to waive their own self-imposed minimum tender condition. This meant that even if a bidder was unsuccessful in achieving a majority of the target’s shares, it might have seized the opportunity to become a significant minority shareholder (e.g., 30% owner) by waiving its minimum tender condition and achieving a blocking position. Not possible anymore.
  1. Poison pills as a bid defence will be a thing of the past. The new regime is silent on shareholder rights plans but, given the significant extension of the minimum bid period and the codification of the minimum tender condition and 10-day bid extension typically required by rights plans, we see fewer companies adopting rights plans. And we don’t expect that regulators will allow issuers to use rights plans to further postpone takeup by hostile bidders beyond the 105 days.

That said, depending on their circumstances, some issuers may want to maintain rights plans so that they can have some protection against “creeping bids.” Creeping bids involve the practice of assembling positions over time greater than 20% of a company’s outstanding shares through acquisitions (like private placements and market purchases) that are exempt from the takeover bid rules.

  1. Other defence tactics will emerge and be scrutinized by regulators. Although poison pills (and the usual pill hearings at which they were challenged as an  illegal  defensive  tactic)  are likely a thing of the past, target boards are going to  be  more  carefully scrutinized  on  other defensive tactics, including private placements. This is where the fine print of the commissions’ decision in Dolly Varden is important.

Here’s their analysis in four simple stages (see accompanying diagram).

A: Threshold Question. Can the bidder show that the private placement has a material impact on the bid? For example, is there significant dilution?  Or  will  it  make  it  impossible  for  the bidder to satisfy the mandatory 50% tender condition?  If  yes,  then  go  to  stage  B.  If  the answer is no, the commission won’t intervene.

B: Preliminary Analysis. Can the target board show that the private placement was not a defensive tactic designed to alter the dynamics of the bid process? This question looks at intention and purpose, not effect. At this step, the target is responsible to provide evidence of the following:

  • it had a serious and immediate need for the financing;
  • it had a bona fide business strategy involving equity financing by way of private placement;
  • the private placement was not planned or modified in response to, or in anticipation of, a bid.

If the answer is yes, then the commission won’t intervene. If the answer is no or maybe, then go to the next stage.

C: Full-Blown Analysis. If the private placement is (or might be) a defensive tactic, then securities commissions must do a more extensive analysis to decide if they should intervene, focusing on their investor protection mandate but taking into account that corporate law defers to a large extent to board decision-making. In addition to the factors set out in the previous step, they’ll also consider the following:

  • Does the private placement benefit shareholders by, for example, allowing the target to continue its operations through the term of the bid? Or in allowing the board to engage in an auction process without unduly impairing the bid?
  • To what extent does the private placement alter the preexisting bid dynamics, for example, by depriving shareholders of the ability to tender to the bid?
  • Are investors in the private placement related parties to the target? Or is there other evidence that some or all of them will act in such a way as to enable the target’s board to “just say no” to the bid or a competing bid?
  • Is there is any information available that indicates the views of the target shareholders with respect to the takeover bid and/or the private placement?
  • Did the target’s board appropriately consider the interplay between the private placement and the bid, including the effect of the resulting dilution on the bid and the need for financing?

D: Final Stage. Is there any other policy reason to interfere with the private placement under the commissions’ public interest power?

In the 105 days it will now take to consummate a hostile bid, target boards will likely struggle more with how to meet their financing needs during that lengthy period. This will be especially true for junior resource companies whose only source of financing is typically equity. Hostile bidders can be expected to heavily scrutinize these financing transactions and challenge them routinely.

Takeaways: For companies contemplating a financing and wanting to protect it from a Dolly- Varden-like challenge, here are some things to think about:

  • Make sure you document in board minutes your earliest considerations of a possible financing, plus the need for and the intended use of proceeds, so that the record establishes that your plan was under consideration before any bid was announced.
  • Make sure the private placement is “right-sized,” i.e., no bigger than necessary to meet the demonstrable financing need.
  • Don’t increase or otherwise tinker with a private placement in the face of or in anticipation of a bid.
  • Make sure board minutes reflect the board’s consideration of the impact of the private placement on the bid.
  • Ensure that some of your key shareholders are supportive of the private placement in case you need their support at a defensive tactics hearing.
  • Avoid placing the securities in the hands of related parties or others known to be supportive of the target and likely opposed to the bid.
  • Consider offering the bidder the opportunity to participate in the private placement.
  • Avoid structuring the private placement so that the bidder’s failure to meet the required 50% minimum condition is inevitable.
  • Consider pre-emptively applying to the securities commission for an order excluding the newly issued securities from the required minimum tender condition.
The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

CANADIAN UPDATE – Significant changes in proposed amendments to Canada Business Corporations Act

Editors’ Note: This article was contributed by Christopher Murray, a partner of Osler and leader of the Osler Asia-Pacific initiative whose practice focuses on public company M&A as well as corporate finance principally involving REIT Income Funds, mining and energy businesses.  This article was authored by Osler partners Andrew MacDougall and Robert M. Yalden and associates Justin Dharamdial and John M. Valley in the Osler Corporate group.

Executive Summary/Highlights: 

On September 28, 2016, the Canadian federal government introduced Bill C-25: An Act to amend the Canada Business Corporations Act et al. The proposed amendments are the culmination of the first substantive review of the Canada Business Corporations Act (the CBCA) in 15 years and are the result of a consultation process initiated in 2013. The stated objectives of the proposed amendments are to, among other things:

  • reform the process for electing directors of certain corporations;
  • modernize communications between corporations and their shareholders; and
  • require disclosure of information respecting diversity among directors and senior management.

Click here to see the full article.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

CANADIAN UPDATE – Shareholder Activism and Proxy Contests: Issues and Trends

Editors’ Note:  This article was produced by partners Patricia L. Olasker, J. Alexander Moore and Jennifer F. Longhurst of Davies Ward Phillips & Vineberg LLP. It was submitted to XBMA by Davies partner Berl Nadler who is a member of XBMA’s Legal Roundtable.

Executive Summary: The year 2015 was significant for proxy contests in Canada, with a total of 55 contests, exceeding the previous record high of 43 contests set in 2009. Although the spike in the number of contests in 2015 may have been exceptional, coinciding with a period of economic downturn in Canada and continued deterioration in commodity markets, the number of activist contests has shown a relatively steady trend upward, from single digit occurrences in the early-to-mid 2000s to 30, 32 and 30 contests in 2012, 2013 and 2014, respectively. Backed by these numbers, a consensus has formed that shareholder activism has established itself as a permanent feature in the landscape of Canadian corporate governance.

The number of proxy contests alone is not the full measure of the extent of shareholder activism. Past public successes by activists have motivated boards of public companies to engage with activists privately and to implement changes where a convincing case is made by the activist without the dispute ever entering the public arena. In addition, the influence of activists, coupled with the increased focus of regulators, investors and other market participants on corporate governance and shareholder democracy, has prompted many public companies to be proactive in addressing perceived problems in their governance or performance in an effort to ward off activist overtures even before they emerge.

This article discusses activism trends in Canada and some of the principal issues and challenges faced by both activists and target companies. It also highlights notable differences between Canadian and U.S. activist campaigns and the legal environment in which activists operate. Topics include the following:

  • The Right to Requisition a Shareholders’ Meeting
  • Stake-Building and Beneficial Ownership Reporting
  • Competition/Antitrust Legislation
  • Group Formation: Insider Trading and Joint Actor Characterization
  • Poison Pills
  • Selective Disclosure
  • Voting Shares Acquired After the Record Date
  • Empty Voting
  • Classified Boards
  • Short Slate Proposals
  • Limited Private Proxy Solicitation and Advance Notice Bylaws
  • Public Proxy Solicitation and the Broadcast Exemption
  • Compensation Arrangements for Director Nominees
  • Proxy Access: Nominations for Directors Through Shareholder Proposals
  • Universal Proxy
  • Vote Buying: Soliciting Dealer Fees in Proxy Contests
  • Regulatory Developments with Respect to Proxy Advisory Firms

Click here to read the article.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

CANADIAN UPDATE – Top Competition and Foreign Investment Review Trends and Issues for 2016

Editors’ Note:  This memo was produced by partners George Addy, John Bodrug, Charles Tingley and Jim Dinning, and associate Alysha Manji-Knight, of Davies Ward Phillips & Vineberg LLP’s Competition & Foreign Investment Review practice.  It was submitted to XBMA by Davies partner Berl Nadler who is a member of XBMA’s Legal Roundtable.

Main Article

In our annual forecast of the year ahead for Canadian competition and foreign investment review law, we evaluate how developments in 2015 will influence these areas of the law in 2016. Our top issues and trends to watch for this year include the following:

  • The impact of the new federal government. Although foreign investors can generally expect “business as usual” under the new Liberal government, incremental reforms to the Investment Canada Act are likely – in particular, a clarification of the net benefit test. With regard to competition legislation proposed by the previous government, it remains to be seen whether the Liberal government will resuscitate the much-criticized Price Transparency Act or move ahead with non-controversial technical amendments to clarify the Competition Act.
  • An increasing focus on the digital economy and other innovative industries by the Competition Bureau. The Commissioner of Competition recently commented that the impact of innovation should be the “predominant concern in some industries.” Signs of this focus were already evident in late 2015 and can be expected to increase in the new year.
  • A focus by the Bureau on market studies: Are formal powers required? The Bureau has identified market studies as a key tool to inform policy makers about unnecessary obstacles to competition. There has been some criticism that the Bureau lacks the jurisdiction to carry out these studies, which the Bureau may seek to address by asking for amendments to the Competition Act that would provide it with the necessary formal powers.
  • The Competition Tribunal’s forthcoming abuse of dominance decision. Expected to be released early this year, the Competition Tribunal’s decision in the Commissioner of Competition’s abuse of dominance litigation against the Toronto Real Estate Board will set the stage for future enforcement in this area.
  • A possible reassessment of Competition Bureau decision-making. Given the number of significant defeats the Bureau has suffered in recent years, including in two major criminal cases in 2015, it may revisit its investigatory and decision-making processes in high-profile matters.
  • Contested mergers and hold separate orders. In light of the Competition Tribunal’s May 2015 injunction decision in the contested merger between two major gasoline retailers, we expect that the Bureau will increase its efforts to obtain economic evidence from merging parties during its reviews of transactions that it is considering challenging. It’s also likely that the Bureau will continue to use applications under section 104 of the Competition Act as a tool in future contested merger proceedings.
  1. Canada’s new government and the Investment Canada Act

This past October, Canadians elected a Liberal-majority federal government to replace the almost decade-long rule of the Conservative Party. Generally, we believe that foreign investors can expect “business as usual” under the new Liberal government. Indeed, the new government has emphasized its commitment to continued foreign investment. However, the new government has also emphasized transparent decision-making and noted that investment by non-Canadians must occur in a manner “that respects and defends Canadian interests”. In light of these policy goals, the Liberal government may well propose incremental reforms to the Investment Canada Act (ICA) or to the manner in which it is administered in the next year.

Such reforms could include providing more clarity to investors about the test for approval under the ICA. Currently, where applicable thresholds under the ICA are exceeded, a foreign investor must establish that its proposed acquisition of a Canadian business is likely to be of “net benefit” to Canada in order to obtain ministerial approval for the transaction to proceed. This “net benefit” test has been the subject of criticism on the basis that it is an uncertain standard potentially subject to the whims of the government. The new government has recognized that the net benefit test needs to be clarified to provide more certainty to foreign investors and to Canadians about the circumstances in which investments will be approved under the ICA. Prime Minister Trudeau has specifically commented that foreign investors need clearer rules around takeovers and that “decisions on a political basis rather [than] on a level of clarity [account for] why quite frankly [Canada is] seeing global investment hesitant to engage.”

Further, given the Liberal government’s policy agenda, its sensitivity to regional interests and Canada’s middle class, and its commitment to increased transparency and consultation, we expect that increased focus will be placed on employment, climate, regional economic growth and innovation issues during the “net benefit” review process. This may result in more stringent undertakings to the government in these areas being required in order to obtain “net benefit” approval.

In addition to the above, we also note that, if implemented, the Trans-Pacific Partnership (TPP) would increase the thresholds for “net benefit” reviews under the ICA applicable to most acquisitions of Canadian businesses by investors from TPP-member countries to $1.5 billion in “enterprise value” of the Canadian business’s assets. (Currently, the review threshold is $600 million in enterprise value of the Canadian business’s assets. Lower thresholds apply, and will continue to apply, to acquisitions by state-owned enterprises and acquisitions of “cultural businesses”.) However, the implementation of these higher thresholds depends upon ratification of the broader TPP, which is highly uncertain and subject to significant public debate.

  1. Innovation and the digital economy

As the Canadian digital economy continues to develop, we expect it and other innovative industries to be increasing areas of focus for the Competition Bureau in 2016 and in the years ahead. The Commissioner of Competition recently commented that “technological innovation is the main driver of economic growth” and “while…market inefficiencies…will continue to be the primary area of inquiry for the Bureau in most industries, an argument can be made that the impact to innovation, whether positive or negative, should be the predominant concern in some industries.” Indeed, signs of this focus are already evident. In late 2015, the Competition Bureau released a white paper calling on regulators to modernize taxi industry regulations in light of the explosive growth of digital ride sharing services, such as Uber. Additionally, the Bureau also recently completed a review of the broadcasting agreement between Rogers and the National Hockey League and has recently taken enforcement action against Bell Canada in relation to online reviews.

Similarly, the importance of innovation and the digital economy has been echoed by the new government, which has recognized that innovation and new technologies will create jobs and growth for the Canadian economy. In particular, in his mandate letter to the Minister of Innovation, Science and Economic Development, the Prime Minister identified the following as some of the top initiatives for the digital economy:  (i) increasing high-speed broadband coverage and work to support competition, choice and availability of such services; (ii) fostering a strong investment environment for telecommunications services to keep Canada at the leading edge of the digital economy; and (iii) reviewing existing measures to protect Canadians and Canada’s critical infrastructure from cyberthreats. These initiatives will undoubtedly be on the Commissioner of Competition’s mind as he sets his priorities for 2016.

  1. Does the Competition Bureau need formal powers to conduct sector studies?

The Competition Bureau has renewed its focus on advocacy efforts under its current Commissioner, John Pecman, and this focus is likely to continue in 2016. Specifically, the Bureau has identified sector or market studies as a key tool to inform policy makers about unnecessary obstacles to competition and to assist in the development of solutions to apparent competitiveness issues.

In recent years, the Bureau has published market studies looking at self-regulated professions (e.g., accountants and lawyers), the generic drug sector and the beer industries in Ontario and Quebec. The outcomes of these studies varied from motivating direct government action to persuading other stakeholders to voluntarily modify certain practices. The Bureau believes that these studies have also provided it with insights to make better enforcement decisions in the sectors studied.

However, there has been criticism that the Bureau does not have the jurisdiction under the Competition Act to carry out these market studies. Further, even if the Bureau undertakes such initiatives, it must rely on information voluntarily provided by market participants in conducting its studies. Unlike Canada, several jurisdictions, including the United States, Europe, Mexico and the United Kingdom, have formal authority to engage in such studies and compel the production of information from industry participants.

The Bureau may seek to address these issues by asking for amendments to the Competition Act that would provide it with formal powers (similar to those granted to regulators in other jurisdictions) to conduct market studies. While the government has not commented on the possibility of introducing any such amendments, we expect it to remain a high priority of the Commissioner in 2016. At a minimum, we expect the Bureau to continue its focus on market studies using the tools and resources currently available to it. In fact, the Bureau has stated that it intends to complete at least two market studies every year in regulated sectors that are of particular importance to the Canadian economy.

  1. Testing the Federal Court of Appeal’s abuse of dominance principle

In our last annual forecast we discussed the potential impact of the Federal Court of Appeal’s decision in the Commissioner of Competition’s abuse of dominance litigation against the Toronto Real Estate Board (TREB), which arguably expanded the reach of the Competition Act’s abuse of dominance provisions to include conduct that affects a market in which the allegedly dominant entity does not itself compete. In the case at issue, the Commissioner alleged that TREB, a trade association comprising most of the Realtors® in the Greater Toronto Area, controls, and is abusing a dominant position in, the residential real estate brokerage services market even though TREB does not itself compete in that market. Specifically, the Commissioner alleged that a TREB rule restricting its members from posting certain historical data on virtual office websites substantially lessens or prevents competition in the market for residential real estate brokerage services.

The Supreme Court of Canada denied TREB’s application seeking leave to appeal in July 2014, and the case was sent back to the Competition Tribunal for reconsideration. (See our discussions of the case following the Federal Court of Appeal and Supreme Court decisions.) In late 2015, the Tribunal reheard the case, and its decision is expected to be released in early 2016.

The Tribunal’s forthcoming decision will be significant as it will be the first to consider the abuse of dominance provisions in light of the Federal Court of Appeal’s decision and will set the stage for future enforcement in the abuse of dominance arena. Dominant companies and trade associations will be well-advised to consider their conduct in light of this upcoming decision.

  1. Competition Bureau decision-making in 2016: Time for reassessment?

In recent years, the Competition Bureau has suffered a number of significant defeats, including two major criminal cases in 2015.

Chocolate price-fixing

In 2007, the Competition Bureau initiated an investigation into alleged price-fixing by Canadian manufacturers of chocolate, including executing search warrants on a number of manufacturers. The matter came to the attention of the Bureau after Cadbury, one of Canada’s largest chocolate manufacturers, provided details of the alleged conspiracy under the Bureau’s Immunity Program. Following a six-year investigation, price-fixing charges were brought in 2013 against a number of manufacturers and certain of their executives, and one wholesaler. Shortly thereafter, one manufacturer, Hershey, pleaded guilty and agreed to pay a fine of $4 million. However, prior to commencement of the trial against the remaining accused parties, in late 2015, the Crown stayed proceedings, effectively terminating the case. While the Crown did not provide reasons for the stay of proceedings, it can be reasonably inferred that the Crown considered there to be no reasonable prospect of conviction.

Bid-rigging of IT service contracts

In 2006, the Competition Bureau initiated a criminal inquiry into bid-rigging allegations against 14 individuals and seven companies relating to IT service contracts with the Canadian federal government. Like the Bureau’s chocolate industry investigation, this investigation also arose out of an application under the Bureau’s Immunity Program.

Following an almost 10-year-long investigation (which included a number of guilty pleas), a seven-month trial and the expenditure of significant resources (likely in excess of $5 million), the six individuals and three companies that elected to be tried by a jury were acquitted of all 60 bid-rigging charges in April 2015. Following the jury’s not-guilty verdicts, the Commissioner of Competition stated that “the Bureau and the Public Prosecution Service of Canada will take the time necessary to consider next steps, including whether to appeal the verdicts”; ultimately they decided not to appeal.

Given these recent high-profile losses, the Bureau may revisit its investigatory and decision-making processes in such high-profile matters, including its immunity and leniency programs, especially given the high costs to companies and taxpayers of lengthy and ultimately unsuccessful investigations. However, despite the outcomes of these recent cases, the Commissioner has stated his belief that the Bureau’s immunity and leniency policies are still effective programs.

  1. Contested mergers and hold separate orders

In April 2015, the Commissioner of Competition filed an application challenging a proposed merger between two major gasoline retailers, Parkland Fuel Corp. and Pioneer Energy, seeking to prohibit acquisition of (or require the post-closing divestiture of) retail gas stations and related supply agreements in 14 local markets (representing less than 10% of the overall transaction). The Commissioner also brought an application under section 104 of the Competition Act seeking an injunction preventing the merging parties from implementing the transaction in those 14 markets pending the outcome of the Commissioner’s challenge. This marked the first time that the Competition Tribunal considered a contested case in respect of an injunction that would be in place pending a full hearing on a contested merger.

In May 2015, the Tribunal issued its injunction decision, ordering Parkland and Pioneer to hold separate retail gas stations and supply agreements in six of the 14 markets, pending resolution of the Commissioner’s challenge by the Tribunal. Notably, the Tribunal confirmed that the test for an interim injunction under section 104 is based on the standard for injunctions used in courts. Specifically, the Commissioner must (i) demonstrate there is a serious issue to be tried; (ii) provide “clear and non-speculative” evidence that irreparable harm will result if the injunction is not granted; and (iii) establish that the balance of convenience supports the granting of relief. The Bureau failed to obtain injunctions in the eight other markets because it did not provide sufficient “non-speculative” evidence demonstrating irreparable harm:  i.e., that consumers in those markets would face higher prices were the stations to consolidate. (The outcome of the full case is still pending and the hearing has been scheduled for May 2016.)

The decision, including the legal test set by the Tribunal, illustrates the need for both the Competition Bureau and merging parties to develop ample economic evidence during the course of merger planning and review where the merger may raise significant competition issues. Going forward, we expect that the Bureau will increase its efforts to obtain such evidence from merging parties during the course of its reviews of transactions that it is considering challenging. Further, we expect that section 104 applications will continue to be used as a tool by the Bureau in future contested merger proceedings.

  1. Will the Price Transparency Act be passed under the new government?

The previous Canadian government identified what it viewed as an unjustified gap between American and Canadian prices on certain products, in particular where companies with market power charged higher prices in Canada than in the United States and where those higher prices were not reflective of “legitimate” higher costs of operating in Canada. The previous government attempted to address this concern through Bill C‑49, the Price Transparency Act. The Bill would have amended the Competition Act to authorize the Commissioner of Competition to investigate geographic price discrimination and report publicly on his findings, thus shedding light on any unjustified differences. The amendments would have effectively granted the Commissioner authority to compel companies to provide documents to justify their pricing. However, the Commissioner would not have been given authority to prohibit or impose penalties for price differentials.

Bill C‑49 met with considerable opposition, based on concerns that analyzing cross-border price differences would require in-depth investigations that would be impractical, costly and disruptive, and that the Competition Bureau is not qualified to assume such a regulatory role and make complex determinations relating to differentials in price.

Although the new Liberal government has yet to comment on the prospect of resuscitating the Price Transparency Act, given the current weak Canadian dollar, coupled with the significant costs and burdens that could result from such a law, it is unlikely that cross-border price discrimination will be a priority for the government in 2016.

  1. Technical amendments to the Competition Act

Agreements and transactions between “affiliates” under common control are, for good reason, exempt from a number of provisions of the Competition Act, including the conspiracy, price maintenance and merger notification provisions. It is generally accepted that agreements or transactions between entities under common control should not be subject to prohibitions under the Competition Act because such entities are not expected to compete with one another. Rather, the expectation is that they will coordinate their activities as efficiently as possible.

However, although the current definition of affiliate under the Competition Act addresses corporations under common control, it does not, for example, apply at all to trusts and does not apply fully to partnerships. Although Competition Bureau guidelines state that the Bureau will consider whether other types of entities are under common control in deciding whether to refer an agreement for prosecution, the guidelines are not binding on the Bureau or a court. Further, such guidelines are inapplicable to a determination of whether a merger notification is required under the Competition Act.

As part of Bill C-49, the prior Conservative government proposed a number of helpful technical amendments to the Competition Act, including modifications to the definition of “affiliate”, in order to promote consistency between how corporate and non-corporate entities are treated under the Competition Act. In the coming year, we hope to see the Liberal government move forward on these non-controversial technical amendments to help clarify the application of the Competition Act.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

CANADIAN UPDATE – Supreme Court of Canada Extends its Jurisdiction

Editors’ Note:  This update was authored by Poonam Puri, a Professor of Law and former Associate Dean at Osgoode Hall Law School, and an affiliated scholar with the Canadian law firm, Davies Ward Phillips & Vineberg LLP (“Davies”), and Davies partners Sarah V. Powell,  who practices in the areas of environmental, aboriginal and energy law, and litigation partners Luis Sarabia and George J. Pollack. It was submitted to XBMA by Davies partner Berl Nadler who is a member of XBMA’s Legal Roundtable.


  • On September 4, 2015, the Supreme Court of Canada held that the Ontario court has jurisdiction to hear an action brought by Ecuadorian plaintiffs seeking the recognition and enforcement in Ontario of an Ecuadorian judgment against the U.S. multinational corporation Chevron (Chevron US) and its Canadian subsidiary (Chevron Canada) even where Chevron US had no connection to and no assets in Ontario and Chevron Canada was a stranger to the underlying judgment in Ecuador.
  • The Supreme Court’s decision also opens the door for judgment creditors to argue that a subsidiary corporation’s assets should be available to satisfy a judgment against a parent corporation.
  • The ruling, however, leaves in place the substantive defences available under Canadian law to rebut such claims.

Main Article

On September 4, 2015, the Supreme Court of Canada unanimously held in Chevron Corp v. Yaiguaje that the Ontario court has jurisdiction to hear an action brought by Ecuadorian plaintiffs seeking the recognition and enforcement in Ontario of a US$9.51-billion Ecuadorian judgment for environmental damage against the U.S. multinational corporation Chevron (Chevron US) and its Canadian subsidiary (Chevron Canada). Remarkably, Chevron US had no connection to and no assets in Ontario and Chevron Canada was a stranger to the underlying judgment in Ecuador for which recognition and enforcement is being sought in the Ontario court.

The Supreme Court’s decision should be of interest both to Canadian multinational corporations with foreign operations and to foreign entities with operations or assets in Canada because it reduces the procedural obstacles to recognizing and enforcing foreign judgments in Canada. Significantly, however, the ruling leaves in place the substantive defences available under Canadian law to rebut such claims. The Supreme Court’s ruling means that the case will now return to an Ontario court to determine whether the Ecuadorian judgment can be properly recognized and enforced in Ontario.


In 2012, Ecuadorian plaintiffs commenced a recognition and enforcement action in Ontario against both Chevron US and Chevron Canada. Chevron US is a Delaware corporation with its head office in California. Chevron Canada is a wholly owned, seventh-level subsidiary of Chevron US, with its head office registered in Alberta. The plaintiffs served Chevron US in California and Chevron Canada in Mississauga, Ontario, where it maintains an office.

Chevron US and Chevron Canada moved before the Ontario court, seeking, inter alia, (i) a declaration that the Ontario court lacked the jurisdiction to hear the plaintiffs’ recognition and enforcement action, and (ii) an order dismissing, or permanently staying, that action.

The Ontario Superior Court of Justice held that the Ontario court has jurisdiction over both Chevron US and Chevron Canada. Nonetheless, the motion judge stayed the recognition and enforcement action on his own initiative because the judge held that Chevron US did not itself possess any assets in Ontario and that the plaintiffs had “no hope of success” in piercing the “corporate veil” in order to make the assets of Chevron Canada exigible to satisfy the judgment against its ultimate parent, Chevron US.

On appeal, the Ontario Court of Appeal agreed that the Ontario court has jurisdiction over both Chevron US and Chevron Canada, but held that the motion judge had erred in granting a discretionary stay of the action.

The Supreme Court unanimously upheld the decision of the Ontario Court of Appeal noting that different principles are engaged when considering actions in the first instance and actions for recognition and enforcement of foreign judgments. The purpose of the latter is to allow a pre-existing obligation to be fulfilled, which involves facilitating the collection of a debt already owed by a judgment debtor. The court’s role in enforcement proceedings is less invasive than an action in the first instance, militating in favour of generous and liberal enforcement rules for foreign judgments.

No Real and Substantial Connection to Ontario Is Required

The Supreme Court held that there is a low threshold for foreign judgment creditors to commence recognition and enforcement actions of foreign judgments in Ontario. The Court unambiguously held that there is no requirement to find a “real and substantial connection” between the enforcing Canadian court and the foreign action or judgment debtor.

The test for an Ontario court to recognize and enforce a foreign judgment is whether the foreign court validly assumed jurisdiction in the first instance; the foreign court must have had a real and substantial connection with the litigants or the subject matter of the dispute. This will be satisfied if the defendants submitted to the jurisdiction of the foreign court.

In addition, for the Ontario court to assume jurisdiction over the recognition and enforcement action, the defendant must have been properly served – either inside or outside Ontario – under the province’s Rules of Civil Procedure (Rules).

Defendant Is Not Required to Have Assets in Ontario

The Supreme Court held that it is not necessary for foreign debtors to possess assets in Ontario in order for the Ontario court to take jurisdiction in a recognition and enforcement action. The Court noted that in today’s globalized world and electronic age, to require that a judgment creditor wait until the foreign debtor is present or has assets in the province before a court can find that it has jurisdiction in recognition and enforcement proceedings would be to turn a blind eye to current economic reality. The Court stated that there is nothing improper with allowing foreign judgment creditors to choose where they wish to enforce their judgments and to assess where their debtor’s assets could be found or may end up being located one day.

Veil Piercing of a Subsidiary to Satisfy a Parent Corporation’s Debt

The Supreme Court explicitly stated that the Ontario court’s jurisdiction over Chevron US and Chevron Canada did not prejudice future arguments regarding their distinct corporate personalities; nor did it settle the question whether Chevron Canada’s assets should be available to satisfy Chevron US’s debt.

Nonetheless, the Supreme Court’s decision opens the door for judgment creditors to argue that a subsidiary corporation’s assets should be available to satisfy a judgment against a parent corporation.

Existence Versus Exercise of Jurisdiction

The Supreme Court draws a clear distinction between the existence of jurisdiction and the court’s exercise of jurisdiction. Once parties move past the jurisdictional phase, it may still be open to a judgment debtor/defendant to argue the following:

  • The proper use of Ontario judicial resources justifies a stay under the circumstances.
  • The Ontario courts should decline to exercise jurisdiction on the basis of forum non conveniens.
  • One of the available defences to the recognition and enforcement of a foreign judgment (i.e., fraud, denial of natural justice in the foreign proceeding or public policy in Canada) should be accepted in the circumstances.
  • A motion should be brought for summary judgment or for determination of an issue before trial under the Rules.


The plaintiffs in Chevron Corp. v. Yaiguaje may ultimately not succeed on the merits of their recognition and enforcement action in Ontario. And they may be unsuccessful in collecting damages in Ontario from either Chevron US or Chevron Canada. Nonetheless, the Supreme Court’s decision has implications for the transnational litigation strategies pursued by Canadian multinational corporations and by non-Canadian entities with operations or assets in Canada. Subsequent developments in this litigation may also provide valuable lessons in parent-subsidiary governance.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

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