O-Net Communications has filed an application for judicial review in Federal Court, calling on the court to quash a July 9 order in council, which gave it 180 days to divest its interest in ITF Technologies, a St. Laurent firm specializing in fiber components and modules.
In its application, O-Net says Industry Minister James Moore initiated the review of the purchase because he was concerned O-Net’s purchase of ITF Technologies would be “injurious to national security.”
However, O-Net argues that the company had been in foreign hands for several years before it bought ITF in January and doesn’t have any technology not readily available in the marketplace. It says forcing it to divest could jeopardize 200 jobs in Montreal and discourage investment in Canada.
“If O-Net Communications is required to divest itself of the investment, it would discourage investment in Canada, negatively impact employment opportunities in Canada, jeopardize the future success of ITF Technologies and jeopardize the employment of ITF Technologies employees,” the company wrote in its application for judicial review.
In order to reverse the sale, the Harper government resorted to a rarely used provision to keep the order in council secret and unpublished. The July 9 order in council is in addition to 25 other secret orders in council adopted by the Harper government since it came to power, bringing the total to 26.
Between 1998 and 2005, the previous Liberal government only adopted three secret orders in council – in 2004 and 2005.
The decision to reverse the sale of ITF Technologies came three weeks after Moore announced he would not run for re-election but would serve out his mandate as industry minister. It also came less than a month before Harper launched a federal election campaign.
The government is being tight lipped about its reasons for ordering O-Net to divest its shares.
“The strict confidentiality provisions of the Investment Canada Act do not permit comment on a specific case,” responded Industry Canada spokesman Omar Sayarh.
Moore’s constituency office referred a request for an interview with Moore to Conservative Party headquarters. Moore’s ministerial office did not return phone calls from iPolitics.
The government has signalled to the court that it plans to fight to avoid revealing more information about why exactly it ordered O-Net to divest, rejecting a request from O-Net’s lawyers for “the complete record of all materials and information that was before the Governor in Council that is not in the applicant’s possession.”
“Pursuant to Rule 318(2) of the Federal Court Rules, we inform you that the requested material are confidences of the Queen’s Privy Council for Canada and as such, cannot be disclosed,” wrote Jurica Capkun, assistant clerk of the Privy Council, in a letter to the Federal Court Aug. 26.
After issuing a statement about the order in council on July 15 under the rules of the Stock Exchange of Hong Kong, O-Net is now keeping a lower profile. Brad Elberg, one of the lawyers representing O-Net, said the company does not want to comment on the case while it is before the courts.
According to the federal government’s lobbyist register, O-Net and its lawyers at Miller Thomson appear to have received some indication something was up at least a week before the government’s decision.
On July 3, Eric Dufour, a partner in Miller Thomson, hired veteran Hill & Knowlton lobbyist Elizabeth Roscoe to lobby on O-Net’s behalf. The registry lists two contacts that same day between Roscoe and Paul Halucha, an associate assistant deputy minister with Industry Canada’s Strategic Policy Sector.
The registry shows a third communication between Roscoe and Halucha on July 10, a day after the secret order in council was adopted.
The application for judicial review was filed a month later on Aug. 10. The justice department responded swiftly a day later, saying it will fight O-Net’s application.
The Harper government’s secret order in council centres on ITF Technologies, a small firm located in an industrial park in suburban St. Laurent north of Montreal. The company, which used to also be known as Avensys Inc, said in a release in June that it specializes in areas like fiber Bragg gratings (FBG’s) for pump diodes and fiber lasers and was evolving to work on high efficiency fiber laser engines. Among the markets it lists on its website for its products are cable television, industrial, medical, scientific, telecom and defence and security.
In its application for judicial review, O-Net argues that the purchase of ITF doesn’t pose a security risk for Canada.
“ITF Technologies does not own any technologies that could be transferred to O-Net Communications that are not readily available in the marketplace and ITF does not provide any products to its clients that its main competitors are not capable of providing,” the company wrote.
“ITF Technologies has been under non-Canadian control since 2005 and in 2014 was owned by a French company named 3S Photonics S.A.S.”
3S Photonics went bankrupt and O-Net picked up ITF Technologies through the auction of its assets.
“There were no Canadian investors or investors from anywhere in North America that were willing to invest in ITF Technologies,” the company wrote.
For O-Net, the investment expanded its product portfolio and increased its control over its supply chain.
The sale concluded in January, O-Net integrated ITF onto its books and by July it was announcing increased profits as a result of its new acquisition.
O-Net says the government gave it little detail of the basis for its decision and the company did not have “a meaningful” chance to respond to what it believes is “incorrect information.”
“O-Net Communications’ rights to procedural fairness were breached when the Minister of Industry referred the Investment to the Governor in Council and when the Order was made without providing O-Net Communications with any consequential details or insight concerning the Minister’s concerns or providing O-Net Communications with the basis upon which the investment would be injurious to national security and giving O-Net Communications a meaningful opportunity to respond in that regard,” the application for review contends.
ITF Technologies complies with the federal government’s Controlled Goods Program, it added.
Since O-Net bought ITF Technologies, the company has created almost 50 new engineering and manufacturing positions, bringing the total number of employees to more than 200, and brought in an employee pension plan, the company argued.
Gordon Houlden, director of the University of Alberta’s China Institute which tracks Chinese investment in Canada, said he doesn’t know why the Harper government decided to order O-Net to divest, but communications equipment and equipment that can also be used for military or space applications can sometimes trigger the national security provisions of the Investment Canada Act.
“To me, that is the thing that would have most likely triggered a no.”
John Manley, head of the Canadian Council of Chief Executives and a former Liberal industry minister, said he signed hundreds of orders in council during his time in government but had never heard of cabinet adopting secret orders in council.
Manley, who says he never blocked a foreign investment deal during his time as industry minister, said using secret orders in council to block foreign investment could discourage investors.
“Canada, by and large, has a reputation of being welcoming and open to foreign investment. When we take a prolonged period of time to decide, where there is a lot of uncertainty, where it turns political or unpredictable — that’s a discouraging factor for potential investors.”
Original Article
Source: ipolitics.ca/
Author: Elizabeth Thompson
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