Last year, we decided to shift our approach to our yearly legal overview. We wanted to move beyond a summary of the year’s most important developments and focus on providing greater guidance regarding the anticipated effects in the year ahead, based on our insights gained from the past year’s developments. This year, our Osler Legal Outlook once again pushes our authors to provide their insights on past developments and most importantly, to share their advice on how to navigate the year(s) ahead in light of these developments.
As we have said before, predicting the future, is, by its nature, a big ask for lawyers. This year was harder than ever. Once again, the world in 2024 was mired in economic and geopolitical uncertainties that affected dealmaking and the regulatory environment. We witnessed escalating geopolitical conflict, a challenging global economic environment, rapidly evolving technologies, heightening concerns regarding the environment and climate, and shifting political winds.
A number of these factors have continued to adversely impact transaction volumes globally. Nonetheless, there are signs of resurgence. Favourable developments in interest rates are likely to contribute to increasing deal activity. Further, the re-election of Donald Trump as U.S. President had an immediate positive reaction in the stock markets. Given the rapid pace of announcements in the weeks following the U.S. election, the implications of a new Trump administration, whether positive or negative, are sure to be felt across the globe quickly.
Against this backdrop, there have been numerous developments in the Canadian legal and transactional landscape and in many areas, there are inevitably more to come. As we move into 2025, there continues to be a sustained push towards energy transition and critical minerals driven by global demand for clean energy. Investors in Canada have maintained their interest in environmental, social and governance investment criteria, among others. Meanwhile, rapidly evolving technologies are posing new regulatory challenges, including heightened concerns about privacy, data management and responsible innovation. It remains to be seen how a Canadian federal election by October 2025 will affect regulatory priorities.
Climate and the environment continue to attract significant attention
For the past few years, many jurisdictions have focused on their critical minerals strategies and policies as part of their energy transition strategies. Canada is no different. The federal government and several provincial governments have adopted strategies and policies designed to encourage development of critical minerals deposits within national borders and to protect critical minerals ownership. Although a variety of funding programs and tax incentives exist to support the research and development of critical minerals projects and value chains, regulatory hurdles significantly hamper rapid development.
In particular, regulatory uncertainty regarding environmental approvals for projects persists under the revised federal Impact Assessment Act. Despite recent amendments, the statute maintains lengthy statutory deadlines and continues to layer potentially duplicative approval processes on top of provincial permitting oversight. As of the time of writing, this legislation is now once again the subject of a constitutional challenge.
Indigenous rights are another key factor that must increasingly be considered by project proponents. Partnering with local Indigenous communities is critical to successful project progression. Significant litigation and pending legislative change regarding mineral title signal the need to consult with affected Indigenous communities at even earlier stages of project exploration and development. These developments are occurring in key mining jurisdictions in Canada, confirming the importance of proactive engagement.
Meanwhile, energy transition continues apace. As 2035 rapidly approaches, the federal government’s mandate for 100% zero-emission vehicle sales is already facing a number of challenges. Among these is the predicted national shortage of public electric vehicle charging stations. With demand forecast to significantly exceed both current and planned capacity, the “charger gap” needs to be closed. While some piecemeal incentives may be available, a comprehensive plan for the development of charging infrastructure is needed to support Canada’s objectives for electric vehicle adoption.
Other changes are required to address climate change. One area of progress in this regard is the continued growth in carbon trading markets. Improvements may be needed to address the fragmented nature of emissions trading and inconsistency across voluntary and compliance markets. However, there are many opportunities for regulatory developments to support the use of carbon trading to drive emissions reduction objectives.
Around the world, standards for disclosure by public companies of a variety of climate change factors affecting the business have been progressing. These standards are now coming to Canada as the Canadian Securities Administrators look to global standards, a rule adoption by the United States Securities and Exchange Commission and proposals from the Canadian Sustainability Standards Board in designing Canada’s mandatory disclosure regime. Public companies should prepare to respond to rules that are likely to be finally proposed in the near future.
At the same time, all businesses need to be mindful of new “anti-greenwashing” measures adopted under the Competition Act. The new measures are designed to ensure that environmental representations are not misleading and that environmental claims — for example, that products are “environmentally sustainable” or “green” — are substantiated. When combined with new private rights of action taking effect in June 2025, businesses making environmental claims may face broader exposure to litigation. All organizations should take the opportunity to assess the nature and extent of their statements on climate-related and other environmental matters.
Keeping Canada competitive for business
The “greenwashing” provisions are part of a suite of other developments in competition and foreign investment law that continue to impact the Canadian landscape. Amendments to the Competition Act mean that abuse of dominance is now easier to establish and can be the subject of the new private right of action. Further, the efficiencies defence, a provision unique to Canadian competition law, has been repealed. Proposed changes to the national security regime under the Investment Canada Act are likely to be finalized in 2025. These changes are likely to enact a mandatory pre-closing national security review regime. Deal making and litigation in Canada are sure to be impacted by both competition and foreign investment changes as we move into 2025.
Canadian businesses will also be affected by international trade law developments. Increasing protectionist trade policy adoption around the world, including retaliatory responses from other jurisdictions, will have a direct effect on Canadian trade. Combined with increasing regulatory compliance burdens and expanding economic sanctions requirements, the effects are surely to be felt in 2025 and beyond. Modern slavery reporting and supply chain diligence will also increase the cost of doing business. The resulting increased risk and liability to Canadian businesses underscore the importance of developing comprehensive compliance policies that set baseline expectations throughout the supply chain.
Regulatory changes are also taking hold in the tax domain. Canadian businesses and their owners face significant international tax reform. The enactment of a global minimum tax and a digital services tax are certain to have financial and reporting implications for organizations. They have also resulted in threats of retaliatory measures or tariffs from the United States. These and other international tax developments compel attention and diligence from taxpayers, even as a lack of guidance on these measures perpetuates uncertainty. Uncertainty is further compounded for Canadian taxpayers by statutory measures and judicial decisions that alter the balance of power between the Canada Revenue Agency (CRA) and taxpayers. The CRA has gained certain key additional audit powers. At the same time, conflicting case law preserves ambiguity regarding the appropriate forum for taxpayers to challenge CRA determinations.
Meanwhile, jurisprudence in the employment sphere continues to create uncertainty for employers. Judicial hostility towards termination provisions persists in Ontario, although the approach of courts in other jurisdictions is less inflexible. Courts are also granting longer common law notice periods and avoiding termination clauses through findings that the employer has repudiated the employment contract. Employers must be thoughtful in their approach to terminations, seek advice on drafting the most effective termination clauses and be prepared for litigation.
The changing dynamics for public companies, investors and dealmakers
It has been a busy period for securities regulatory authorities as they referee disputes between targets and hostile bidders or activist shareholders. In a series of decisions, securities regulators have addressed private placements in the face of hostile bids, joint actor determinations and shareholder rights plans. Together, these decisions provide important new guideposts for market participants in planning corporate transactions that might involve acquisitions of control of public companies.
Public companies continue to face unresolved issues in three important corporate governance areas. There is a prolonged debate over the continued use of virtual-only shareholder meetings in the post-pandemic era, with certain investors and shareholder advisors seeking in-person or hybrid meeting formats. Opinions are also divided regarding the appointment and evaluation of long-tenured auditors. Finally, controversy is arising for public companies regarding their approach to diversity, equity and inclusion (DEI). Some believe greater disclosure of diversity practices is needed; at the other end of the spectrum, some are moving away from the prior focus on DEI programs.
Securities regulators are increasingly investigating and taking enforcement action against contraventions of securities laws and making use of new tools. New statutory powers in British Columbia authorize the imposition of penalties without a hearing for less serious violations. Other jurisdictions may follow suit. In 2024, the Supreme Court had several opportunities to provide judicial direction on oversight by securities regulators. In the new year, the Court will weigh in on a key element of Canadian securities laws — namely, the definition of a “material change”.
At the same time, the new, merged investment and mutual fund dealer self-regulatory organization is continuing to mature. The organization has been consolidating its rules and laying the groundwork for the future. Nearly two years after its formation, regulatory harmonization and enhanced enforcement efforts remain key priorities to be advanced in 2025.
Securities regulatory enforcement action is also ongoing in the crypto sphere as regulators expand their purview and target non-fungible tokens (NFTs). Further, crypto assets, trading platforms and investment funds considering crypto assets are now clearly within the claimed scope of securities regulators’ jurisdiction. Industry participants must prioritize staying informed about ongoing changes affecting the sector and be prepared to respond.
In the investment context, opportunities and challenges emerged for venture capital fundraising. As lower valuation multiples persist and fundraising difficulties continue across the technology sector, there were nevertheless positive signs in the form of notable fundraising successes by venture funds and issuers. As the market continues to develop, there is likely to be continued dealmaking activity in the venture space in 2025 and beyond, with private equity remaining a critical player.
Fund sponsors continue to look for ways to expand available investment funding. This has driven the search for structures that permit greater access to retail capital to fund their continued growth. The challenges of operating within the boundaries of the public investment fund framework have resulted in a variety of novel approaches.
Private equity firms also continue to play a significant role in Canadian M&A, particularly U.S. and foreign funds. Competitiveness of acquisition proposals remains crucial to succeed in obtaining sought-after assets. Providing equity rollovers to target company shareholders bridges a valuation gap by providing continued exposure to underlying assets. An exchangeable share structure can provide important tax deferrals for vendors selling to foreign buyers. While this structure can add complexity, its benefits are demonstrated by the structure’s recent popularity.
The pace of sector-specific regulatory reform continues
A number of specific sectors also experienced rapid regulatory change and are bracing themselves for more.
For financial services providers, the pace of regulatory change remains relentless. A variety of changes made in 2024 will affect these providers in 2025 and beyond. The implementation of the Retail Payment Activities Act is underway, supported by significant guidance from the Bank of Canada that expands the scope of participants subject to this legislation. The criminal rate of interest will, effective January 1, 2025, be lowered from an effective annual rate of 60% to an annual percentage rate of 35%, subject to certain exceptions for commercial loans that exceed specified thresholds. Amendments to the Code of Conduct for the Payment Card Industry in Canada came into effect earlier this year. Open banking, or consumer-directed banking, is gaining momentum with the passing of implementing legislation.
Further changes affecting anti-money laundering and anti-terrorist financing, including enhanced enforcement tools and investigative powers, require businesses to adapt their compliance programs to keep pace with these ongoing changes. A greater focus on this area is certainly on the horizon as government agencies press to shut down illicit activity.
Also affecting financial services providers are a series of implemented and proposed changes in Québec to consumer protection legislation, specifically those relating to credit contracts and long-term leases. These amendments also introduce strict requirements regarding a variety of consumer protection matters that will affect businesses operating in the province. They include enhancements of legal warranties and repair obligations. Recently introduced changes propose to affect food pricing and tipping practices. At the same time, the Québec government continues to overhaul French language requirements for commerce and business. Recently proposed amendments, due to come in force in the new year, are expected to soften some of the burdens initially imposed by the Charter of the French Language.
Québec is also moving forward with changes to its private sector privacy regime. Certain investigations that are currently underway will conclude in 2025. The outcomes should provide important guidance regarding the application of the potentially severe penalties for breach of the Québec legislation. Québec’s “data portability” right — the first of its kind under Canadian privacy laws — is now in force. Data portability requests may prove to be challenging to operationalize and costly to implement and businesses are well-advised to review their systems proactively. Québec has also introduced a new health privacy law. At the same time, privacy reform continues at the federal level, in other provinces and in specific sectors. Given the pace of change and the resulting exposure of businesses to significant legal, financial and reputational risk, businesses must ensure that their data management practices are sufficiently robust.
Meanwhile, artificial intelligence (AI) continues to evolve rapidly in parallel to the increasing recognition from users, governments and regulators that the use of AI poses risks that must be managed. The regulatory response is building. A variety of legislative changes, frameworks, standards and guidelines are being put forward. Businesses must pay attention to the regulatory response and adopt frameworks and policies to address AI risk and maximize the value of the opportunities offered by AI.
Significant opportunities are on the horizon for gaming operators, a number of which are fuelled by the demonstrable success of Ontario’s iGaming model. Operators are awaiting a decision from the Ontario Court of Appeal, likely to come in early 2025, in a reference case considering whether it is legal for players from Ontario to play against those outside of Canada within Ontario’s regulated market. The government of Alberta has announced its plans for a statutory framework to support an Alberta online gaming market, drawing from Ontario’s experience. Other provincial governments are likely to follow this course. Advertising limitations, responsible gaming and combatting illegal activity in the regulated market are likely to be a key focus as we move into 2025.
Affordable and accessible health care remains a key priority
Health reform is also underway in both Ontario and in Québec, albeit in different forms. Directed at addressing strains in the healthcare system that have left significant backlogs and short staffing, changes are being implemented to creatively facilitate access to health and wellness solutions. One major reform that has been enacted by the Canadian federal government is the framework for the development of a universal pharmacare program. The objective is to improve affordability and accessibility of prescription drugs.
Pharmaceutical drug costs are one of the most significant elements of healthcare spending nationally. Drug patents are directly linked to these costs. Incentivizing development spending through patent protection must be balanced against the need to provide greater accessibility through more affordable generic drugs. Recent developments in patent law have permitted effective patent extensions on the basis of dosage regimen changes for existing drugs. This has shifted the balance in favour of patent enforcement, resulting in further delay in market entry of generic alternatives. The Supreme Court of Canada will be considering dosage regimen patents in a case likely to be heard in late 2025.
Governments are also looking for ways to recover health care costs from the manufacturers or distributors of products that are seen to be harmful. Health care cost recovery legislation, initially enacted to recover health costs associated with tobacco and opioids, is now poised to extend to other products and services. This type of legislation removes traditional legal barriers to findings of liability and provides formulas to simplify damage calculations. At the same time, the more active regulatory environment will almost certainly fuel more consumer claims and class actions, particularly following product recalls. Businesses should be prepared for these developments, including by developing a product recall and communications strategy.
It is clear that significant developments have occurred in 2024 that will carry forward into 2025 and beyond. Many of the influences that have weighed on businesses in the recent past will continue to have implications for the foreseeable future. Geopolitical uncertainty will continue. The pending installation of President-elect Trump as second term President will no doubt drive significant change in the coming months. A Canadian federal election within the next year may lead to change on this side of the border. Economic uncertainties may be abating, but are likely to persist in some form. Together, these create important impediments, but also opportunities, for businesses in a variety of sectors. Adapting to developments quickly and efficiently will be important to mitigate risks and capitalize on those opportunities.
We hope you enjoy reading our new Osler Legal Outlook. As always, we would be pleased to discuss these developments and the implications for your business with you.
