Investment Canada Act Undertakings and Stelco

Investment Canada Act undertakings are written commitments a foreign investor gives the federal government to win approval in a net benefit review. Examples include keeping jobs, a head office or capital spending in Canada for a set period. They are enforceable: the Minister can issue a demand and, if it is ignored, apply to a superior court.

For most of their history, Investment Canada Act undertakings drew little public attention. That changed in the fall of 2026, when Stelco, the Hamilton steelmaker owned by Cleveland-Cliffs since 2024, announced layoffs. The federal government said it was prepared to go to court over the commitments Cleveland-Cliffs gave when it bought the company. Stelco and Cleveland-Cliffs deny any breach. This guide explains how undertakings are negotiated, monitored and enforced, what a breach can cost today, and what the dispute means for foreign buyers and Canadian sellers.

Nassira El Hadri, founder of Hadri Law, discussed the Stelco dispute with CBC News on October 10, 2026 and the Toronto Star on October 11, 2026.

Current as of October 2026. References are to the consolidated Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.), current to September 21, 2026. The Stelco dispute is ongoing, and the facts below are as publicly reported on the date shown.

What Are Investment Canada Act Undertakings?

Some acquisitions of control of a Canadian business are subject to a net benefit review, and the Minister must be satisfied that the investment is "likely to be of net benefit to Canada". The buyer, which the Act calls a "non-Canadian," supports that finding with a plan for the Canadian business. Undertakings turn key parts of that plan into binding promises to the Crown.

This post does not repeat the review thresholds. For those, see when an investment triggers review under the Investment Canada Act. For an overview of the firm's work in this area, see our Investment Canada Act lawyers page.

Typical subject matter

Net benefit undertakings commonly address:

employment levels at the Canadian business;
keeping a head office, or key decision-making, in Canada;
production levels or the continued operation of particular facilities;
capital expenditures and research and development spending;
Canadian participation in senior management or the board; and
in some cases, environmental commitments, as the Stelco package shows.

National security undertakings are a separate category arising under a different part of the Act, addressing matters such as access to sensitive technology, data or facilities. This post focuses on net benefit undertakings.

Are undertakings public?

Usually only in summary. The government may publish a statement describing the commitments in general terms, but the full text is generally kept confidential. Without the actual wording, no one outside government and the investor can say whether a particular decision breaches an undertaking.

What Stelco and Cleveland-Cliffs Agreed To

On October 30, 2024, the federal government published a ministerial statement on the Investment Canada Act review of Cleveland-Cliffs' acquisition of Stelco. The statement, from then Industry Minister François-Philippe Champagne, described the approval as resting on "a significant package of binding, five-year-long undertakings." According to the public summary, Cleveland-Cliffs committed to:

operate under the name "Stelco, a Cleveland-Cliffs Company";
maintain Stelco's head office in Hamilton, with responsibility for day-to-day operations;
continue to employ at least the same number of unionized employees, and the vast majority of non-unionized employees, as were employed when the transaction was announced;
honour all existing collective bargaining agreements and Stelco's employee benefit and pension commitments;
make significant capital and research and development expenditures in support of Stelco's operations; and
ensure that Stelco's Scope 1 and Scope 2 greenhouse gas emission intensity does not increase and continues to be at least 25 percent below the global average for integrated steel mills.

Some news coverage describes the non-unionized employment commitment as covering "the majority" of employees. The ministerial statement says "the vast majority." Either way, this is a summary, and the full undertakings have not been made public.

These operations have been here before. Undertakings given when U.S. Steel acquired the business in 2007 led to a court case, discussed below.

The 2026 dispute, as reported

The following timeline reflects public reporting as of October 13, 2026:

Date (2026)	Reported event
September 28	Stelco told customers that cold-rolled and coated operations at Hamilton Works would be idled indefinitely from October 9, and announced layoffs of up to 500 workers at Hamilton and Nanticoke, citing U.S. tariffs. The union put Hamilton layoffs at about 350.
September 29	Prime Minister Mark Carney said Ottawa was "very disappointed" by the decision and that the workers and their families had been "betrayed by the company."
October 5	Industry Minister Mélanie Joly wrote to Stelco asking for a compliance plan within five business days and said the government was prepared to apply to a superior court.
October 9	Stelco and Cleveland-Cliffs responded. According to reports, Stelco's letter denied any breach. It stated that the undertakings do not expressly prohibit layoffs or require a particular headcount every day, and it pointed to U.S. tariffs and to the federal guidelines. It also pointed to its November 2025 annual report as confirming compliance.
October 10	Minister Joly's office said the government expects Stelco to meet its legally binding commitments and that all options are on the table while government lawyers review the response.

Cleveland-Cliffs' chief executive has reportedly described the cuts as market-driven and temporary and said the company would defend its position in court.

In short, the government's position is that the layoffs raise compliance concerns with binding commitments. The companies' position is that the undertakings, properly read, do not prohibit the cuts, which they attribute to external trade conditions. As of the date above, no court application had been reported, and no court has made any finding.

Negotiating Investment Canada Act Undertakings: Drafting for the Real World

Undertakings are negotiated with government officials during the review, and the Stelco dispute shows how much can turn on the drafting.

Precision cuts both ways

The federal Investment Canada Act guidelines state that "Investors are encouraged to put as much detail and precision into their plans for the Canadian business as is possible." Detail can help an investor obtain approval, but it also creates measurable obligations. Vague wording leaves room for later argument about what was promised, as in the reported debate over whether Stelco's employment commitment works as a fixed floor.

Employment commitments

Headcount undertakings raise several drafting questions:

Baseline: which date sets the starting number (signing, announcement or closing)?
What counts: headcount or full-time equivalents; employees only, or contractors too?
Categories: unionized and non-unionized staff, and whether each is measured separately.
Temporary changes: how temporary layoffs with recall rights, attrition and unfilled vacancies are treated.
Measurement: a point-in-time number, an annual average, or a test applied at the end of each reporting period.

Duration and spending commitments

Undertakings run for a defined period. Stelco's run for five years. The commitments in the U.S. Steel matter ran to 2015. Capital and research spending commitments may be expressed as a total over the period, as annual minimums, or as amounts tied to particular projects.

Market conditions and factors beyond the investor's control

The federal guidelines on monitoring use the phrase "clearly the result of factors beyond the control of the investor." The phrase describes how the government assesses performance against plans and undertakings. It is not a general force majeure clause and does not automatically excuse non-compliance. An investor that wants protection for downturns, tariffs or supply shocks may try to negotiate express wording in the undertakings, though officials may resist broad carve-outs that dilute the net benefit case.

Reporting and records

Undertakings usually come with reporting obligations. A compliance report can support an investor's position, as Stelco says its November 2025 report does, but it can also become evidence.

After Closing: Monitoring, Reporting and Variation

Monitoring

Under the federal guidelines, "an evaluation of performance will ordinarily be made 18 months after the implementation of the investment." Follow-up after that point depends on whether implementation has been substantially consistent with the plans and undertakings, and on whether major commitments remain outstanding.

Changing undertakings after approval

The Act provides a visible route. Under section 39.1, the Minister may accept a new undertaking from a non-Canadian who has failed to comply with an earlier one. The government's Mediation Guideline adds that officials and the investor may discuss compliance concerns, that the Minister may accept new undertakings under section 39.1 "at any time," and that third-party mediation is available if both sides agree. The guideline notes that "a resolution achieved through discussion may be preferable to potentially lengthy and costly legal proceedings."

The government has published an administrative note on amending or releasing national security undertakings. It does not govern net benefit undertakings, and we are not aware of an equivalent published procedure for net benefit variations. Section 39.1 and the Mediation Guideline are the published framework.

How Investment Canada Act Undertakings Are Enforced

The Act sets out an enforcement ladder. Each step depends on the one before it.

Step 1: A ministerial demand (section 39)

Under paragraph 39(1)(e), if the Minister believes a non-Canadian "has failed to comply with a written undertaking given to Her Majesty in right of Canada" relating to an approved investment, the Minister may send a demand.

The demand may require the non-Canadian, "forthwith or within such period as is specified," to "cease the contravention, to remedy the default, to show cause why there is no contravention of the Act or regulations or, in the case of undertakings, to justify any non-compliance therewith." Under subsection 39(3), the demand must indicate the nature of the proceedings that may be taken if it is not complied with.

Public reports describe Minister Joly's October 5 letter as asking for a compliance plan. The government has not publicly called it a formal section 39 demand.

Step 2: An application to a superior court (section 40(1))

If a demand is not complied with, the Minister can have an application made to a superior court for an order under subsection 40(2). Subsection 40(6) defines "superior court" by reference to the Interpretation Act, which includes the Federal Court, but excludes the Supreme Court of Canada, the Federal Court of Appeal and the Tax Court of Canada. The 2009 U.S. Steel proceedings were brought in the Federal Court.

Step 3: Court orders (section 40(2))

If the court decides that the Minister was justified in sending the demand and that the demand was not complied with, it "may make any order or orders as, in its opinion, the circumstances require." The listed options include orders:

(a) requiring the non-Canadian to divest itself of control of the Canadian business;
(b) preventing steps that could prejudice a later divestiture order;
(c) directing compliance with the undertaking (paragraph (c.1) covers undertakings tied to a national security order);
(d) imposing a penalty;
(e) revoking or suspending voting rights;
(f) directing the disposition of voting interests or assets; and
(g) directing that information be provided.

Penalties are a debt due to the Crown (subsection 40(3)), and disobeying a court order can be punished as contempt (subsection 40(4)). Ordinary appeal rights apply (subsection 40(5)), and section 41 lets the court vest assets or interests held outside Canada in a trustee if a disposition order is ignored. Section 43 sets a two-year limit, but it applies to summary conviction proceedings for offences under the Act. Section 40 contains no limitation period of its own, and a section 40 application is not an offence prosecution.

Penalties for Breaching Investment Canada Act Undertakings

For a non-Canadian that breaches a net benefit undertaking and then fails to comply with a section 39 demand, the penalty currently in force is the one in paragraph 40(2)(d): up to $10,000 for each day of the contravention.

Bill C-34 (S.C. 2024, c. 4) would replace that paragraph with a higher daily maximum, but that change is listed under Amendments Not in Force in the consolidated Act current to September 21, 2026. The $25,000-per-day figure that does apply today, in subsection 40(2.1), is limited to demands under subsection 39(2), which concern national security information requests, national security undertakings and national security orders. It does not apply to net benefit undertakings. For the wider penalty changes made by the 2024 amendments, see our post on Bill C-34 and the future of the Investment Canada Act.

For a large acquisition, daily penalties at the current level may be modest compared with the value of the deal. The heavier remedies for a breach of undertakings are structural: divestiture of control, disposition of assets or voting interests, and suspension of voting rights.

The U.S. Steel Precedent (2009 to 2011)

The only widely reported court case over net benefit undertakings involved the same steel operations.

U.S. Steel acquired Stelco Inc. in 2007 after a net benefit approval supported by undertakings that included employment and production commitments at the Hamilton and Lake Erie works. After production was cut during the 2008 and 2009 downturn, the federal government brought an application under section 40 in the Federal Court in July 2009. U.S. Steel's reported position was that the reductions resulted from factors beyond its control. The company also challenged the constitutionality of the enforcement scheme. The Federal Court rejected that challenge in 2010 (2010 FC 642), and the Federal Court of Appeal dismissed the appeal in 2011 (2011 FCA 176).

The case never produced a ruling on whether the undertakings had been breached. In December 2011, then Industry Minister Christian Paradis announced an out-of-court settlement. The government accepted new commitments and discontinued the proceedings. According to the government's announcement, the commitments included continuing to produce steel in Canada and operate the Hamilton and Lake Erie plants until 2015. They also included at least $50 million in additional capital investment by December 2015 and $3 million for community and education programs in Hamilton and Nanticoke.

The lesson: court enforcement is possible, but it can take years (here, roughly two and a half from filing to settlement) and may end in new undertakings under section 39.1 rather than a finding on the merits.

What Stelco Means for Foreign Buyers, Sellers and Deal Documents

Treat undertakings as contract-grade promises

Undertakings are commitments to the federal government, enforceable through the courts, and deserve the same drafting care as the key terms of the purchase agreement.

Purchase agreement allocation

In a reviewable deal, Investment Canada Act approval is typically a closing condition. After closing, the undertakings bind the non-Canadian investor, so the compliance risk generally sits with the buyer. A seller's exposure usually arises only through continuing links to the business, such as an earnout, a retained interest, or indemnities tied to employment or operational outcomes. Our guide to cross-border M&A considerations for U.S. buyers acquiring Canadian companies covers the wider deal context.

Group structure and financing

Undertakings are given by the investor, often with parent involvement. Parent guarantees, intercompany arrangements and lender covenants should be read against them, since a financing covenant or restructuring plan that assumes facility closures or headcount cuts may sit uneasily with commitments to Ottawa.

Post-closing compliance

Investors typically benefit from naming an internal owner for the undertakings and recording the reasons for major operational decisions.

Other laws still apply

Undertakings operate alongside collective agreements and provincial employment standards, and a layoff can raise questions under each separately.

A Practical Checklist for Investment Canada Act Undertakings

Define baselines: fix the measurement date, the categories of employees and the counting method.
Choose a measurement test: point in time, average or end-of-period, and state it expressly.
Address market change: decide whether to seek specific wording for downturns or trade measures, rather than relying on general guidance.
Build a compliance calendar: track reporting dates, spending milestones and end dates.
Test restructurings first: check any layoff, closure or relocation against the undertakings before it is announced.
Engage officials early: raise significant changes with government before acting, and consider section 39.1 if a commitment cannot be met.
Keep records: document external conditions and business reasons as decisions are made.
Revisit on change: review the undertakings when ownership, structure or financing changes.

Frequently Asked Questions

What happens if a company breaches Investment Canada Act undertakings?

The Minister may send a demand under section 39 requiring the investor to remedy the default or justify the non-compliance. If it is ignored, the government may apply to a superior court, which can order compliance, impose a penalty, suspend voting rights or order divestiture. New undertakings can also be accepted under section 39.1.

How long do Investment Canada Act undertakings last?

There is no fixed term in the Act. Duration is negotiated in each review, and commitments in one package can end on different dates. Stelco's undertakings, given in 2024, run for five years. The commitments in the 2011 U.S. Steel settlement ran to 2015.

Who monitors compliance with Investment Canada Act undertakings?

Officials at Innovation, Science and Economic Development Canada monitor net benefit undertakings on the Minister's behalf. Under the federal guidelines, a performance evaluation is ordinarily made 18 months after implementation, with further follow-up depending on progress and outstanding commitments.

Can Ottawa take Cleveland-Cliffs to court over the Stelco layoffs?

In principle, yes. The Act lets the government apply to a superior court if a section 39 demand is not complied with, and Ottawa has said it is prepared to. Stelco and Cleveland-Cliffs deny any breach. The full undertakings are confidential, so the outcome would turn on non-public wording. No application had been reported by mid-October 2026.

Has Canada ever taken a company to court over undertakings?

Yes. In 2009, the federal government applied to the Federal Court against U.S. Steel over undertakings it gave when it bought Stelco in 2007. The proceedings settled in December 2011 on new commitments, without a final finding on breach.

Sources & Official Resources

Federal Statutes and Government Sources Cited

This article provides general information about Canadian law and is not legal advice. The Stelco dispute is ongoing and the facts described are as publicly reported. Every situation is different. Speak with a lawyer about your specific circumstances.

Contact Hadri Law

If you are acquiring a Canadian business, negotiating undertakings, or have received a ministerial inquiry about compliance, understanding how the rules apply to you is an important first step. Hadri Law, founded by Nassira El Hadri, an M&A, corporate and commercial lawyer called to the Law Society of Ontario, advises foreign investors and Canadian sellers on Investment Canada Act matters and cross-border transactions from our office at First Canadian Place in Toronto.

Call +1 (437) 974-2374 for a free consultation. We serve clients in English, French, Spanish and Catalan.