Canadian Lawyer InHouse

NOVEMBER 2016 20 INHOUSE acquisitions of Canadian energy sector companies. Jennifer Kennedy, a partner at Norton Rose Fulbright Canada LLP, explains that things tightened up in 2012 following the government's approval of two foreign bids: the Chinese National Offshore Oil Corporation's $15.1-billion acquisition of Nexen Inc. and the $5.2- billion acquisition of Progress Energy by Malaysian-owned Petronas. "Those particular transactions led to changes introduced with respect primarily to the Investment Canada Act, which really imposed limitations on the ability of state- owned enterprises to acquire specifi cally oilsands assets," she says. The revised Investment Canada guide- lines broadened the defi nitions of state- owned enterprises and said that acquisitions by SOEs would satisfy a critical "net benefi t" test only under exceptional circumstances. "The issue at hand was that the then- federal government viewed the oilsands as a strategic asset of Canada and wanted to impose limitations on the ability of foreign acquirers," says Kennedy. Political machinations can extend to the top level of government at the due diligence phase. When negotiating the Columbia deal, TransCanada was in the middle of federal court and NAFTA lawsuits with the White House, who had rejected its Keystone XL pipeline in November 2015 on the basis that it didn't serve the U.S. national interest. "It led to a number of interesting con- versations with Columbia's management on what if any impact this could have on a merger successfully closing, and in a timely manner," says Johnston. "They wanted to be sure that they were working with an ac- quirer that could get the deal done." U.S. government regulators acted professionally, as it turned out. ENVIRONMENTAL CONCERNS Lawyers typically fi nd themselves conduct- ing due diligence in other key areas to avoid unexpected hiccups. "There would be a lot of focus on the evaluation of the reserve, the land tenure, the licences, the royalties and the statuses of the joint ventures, permit- ting, environmental compliance and then the assessment of all the liabilities, wheth- er they're accrued or contingent," says Philippe Tardif, a business law partner in the Toronto offi ce of Borden Ladner Ger- vais LLP. "They're usually the hot buttons in terms of surprises." Of those, environmental issues can be one of the biggest surprises for acquirers of Canadian companies, says Vivek Warrier, partner and head of oil and gas at Bennett Jones LLP. "It's allocation of risk with respect to en- vironmental liabilities, particularly as it re- lates to asset transactions in the oilpatch," he says. Traditionally in Canada, purchasers in energy deals were assumed to take on all en- vironmental liabilities retroactively assum- ing that there was no misrepresentation on the part of the seller, says Warrier. "That's Check out in-house counsel's best networking tool! The 2016/17 Lexpert CCCA/ACCJE Directory & Yearbook online edition is a user-friendly, outstanding key resource for all in-house counsel. Along with immediate access to more than 4,100 listees at more than 1,500 organizations, you'll also find fresh editorial content, information on deals and links to important resources. Directory listees and CCCA members can also receive log-in credentials for access to detailed contact information to be able to connect with colleagues or research the in-house bar. ANYWHERE. ANYTIME. ANY DEVICE. CONNECT WITH IN-HOUSE COUNSEL COLLEAGUES AT LEXPERT.CA/CCCA Untitled-2 1 2016-10-04 2:31 PM

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