August 4, 2026

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Isabelle P. Mercure
Partner, Lawyer and Managing Partner (Sherbrooke office)
Sylvain Pierrard
Partner, Lawyer and Trademark Agent

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July 15, 2026

Canadian Lawyer –-The Family Law group is ranked in the “Top Family Law Firm Teams 2026” listing

Lavery is proud to announce that its Family Law Group has been recognized in Canadian Lawyer magazine’s Top Family Law Firm Teams 2026 ranking. This recognition stems from a rigorous selection process, based on nominations from readers, legal associations and editorial contributors, followed by an evaluation by an independent panel of seasoned family law practitioners from across Canada. This recognition belongs to the entire team. Congratulations to all members of the Family Law group: Victoria Cohene, Isabelle Duval, Caroline Harnois, Awatif Lakhdar, Elisabeth Pinard, Kassandra Roberge, Adnana Zbona, Gabrielle Dickins, Gabrielle Gallio and Aurélie Ouellet

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July 29, 2026

Imminent demise of non-compete clauses for federally regulated employers

On May 6, 2026, the Minister of Finance and National Revenue tabled Bill C-31, entitled A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025.1 Bill C-31 proposes significant amendments to the Canada Labour Code2 (the “Code”) to prohibit non-compete clauses, by an approach comparable to that adopted in Ontario. However, the federal legislator is going further than its Ontario counterpart by granting itself the authority to potentially prohibit other types of restrictive covenants—such as non-solicitation clauses—through regulations. Among the key measures enacted by the federal legislator is a prohibition against imposing non-compete clauses on federally regulated employees, subject to two categories of exceptions. The stated objective is to promote employee mobility, reduce certain forms of abuse associated with post-employment restrictions and stimulate competition in the labour market.3 This legislative approach aligns with current trends across the globe restricting non-compete clauses in the world of employment law. Definitions A “non-compete clause” means a term or condition of employment, or a clause in an agreement, that prohibits an employee from engaging in any business, work, occupation or trade, profession, project or other activity that is in competition with the employer’s federal work, undertaking or business after the employee ceases to be employed’4 This definition is broad and potentially encompasses non-compete clauses included in documents that are not employment contracts, such as a long-term incentive plan. The Bill also defines an “other employment-related restriction” as “a term or condition of employment, or a clause in an agreement, that is not a non-compete clause and is part of a class specified in the regulations.”5 Scope and proposed changes Division XI.1, slated to be incorporated into Part III of the Code through the Bill, prohibits an employer from entering into a non-compete clause with an employee or a union.6 It also prohibits imposing such a clause on an employee, in particular by inducing them to agree to one. The Bill also provides for the nullity of clauses subject to this prohibition.7 For now, the prohibitions imposed by the Bill only apply to non-compete clauses. The federal government may, however, through regulation, define “other employment-related restrictions” to make the prohibitions apply to them, further limiting the ability of employers to safeguard their legitimate interests, such as their goodwill. Exceptions The law provides for two main categories of exceptions. First, the prohibition would not apply to a person who, after leasing or transferring all or part of their work, undertaking or business to an employer, including by sale or merger, becomes an employee of that employer and agrees to a non-compete clause or employment-related restriction in that context, when the business is or becomes a federal enterprise as a result of the transaction.8 Second, it would not target the chief executive officer9 nor certain senior management employees reporting directly to the chief executive officer and holding the position or performing the functions of president, chief operating officer, chief financial officer, chief human resources officer, chief information officer, chief technology officer or chief legal officer. The exception for senior management employees is subject to two conditions: 1) The person reporting directly to the chief executive officer must be the only one to hold or perform the functions of the aforementioned positions, and 2) they must be a “manager” within the meaning of section 167(3) of the Code.10 The legislator also reserves the right to add excluded positions by regulation. Other provisions included in the Bill The Bill introduces a prohibition on retaliation, preventing an employer from reprimanding or penalizing an employee for refusing to agree to a non-compete clause.11 It also provides for a reversal of the burden of proof. The employer will have the burden of demonstrating that a condition of employment or stipulation does not constitute a non-compete clause or, if it does, that it is not null.12 The path to enactment13 Bill C-31 was tabled on May 6, 2026. On June 3, 2026, the second reading was passed in the House of Commons and the Bill was referred to the Standing Committee on Finance. It still needs to pass the third reading and the process in the Senate before royal assent. Coming into force is scheduled for a day to be fixed by order of the Governor in Council. Once the law comes into force, federally regulated employers will no longer be permitted to require employees to enter into non-compete clauses, subject to the exceptions provided in the Bill. Non-compete clauses existing at the time the law comes into force will remain valid for one year and will only become null after the grace period expires. Employers would be well advised to immediately begin developing alternative strategies to mitigate the upcoming prohibition of non-compete clauses for employees who are currently bound by such clauses. Practical recommendations Here are some practical recommendations to help federally regulated organizations both comply with this new legal framework and protect their legitimate interests: Review existing restrictive covenants within in your organization A comprehensive review of employment contracts and other relevant contractual documents is crucial to identify non-compete and other restrictive covenants currently in force within your organization. The review should not be limited to employment contracts alone—it should also extend to any other program, policy or document containing restrictive covenants, including short-term or long-term incentive plans, such as stock option plans. Any atypical non-compete clause, such as one providing for the cancellation of stock options or units if the participant joins a competing business, should also be listed, as it may fall within the scope of the law. Because we do not yet know how the new restrictions will be interpreted, a broader review is more prudent at this stage. Assess your organizational structure Given the well-defined exceptions provided for by the law, organizations would do well to review their organizational structure to identify the individuals who may be bound by a non-compete clause and ensure that the corresponding legislative requirements are met. Exercise increased caution in commercial transactions Greater caution is required in the context of commercial transactions to ensure that contractual documents are compatible with the exception established by the law. Identify alternative contractual strategies What many employers have done in Ontario is use non-solicitation clauses and confidentiality agreements. This could be a good option to proportionately protect the legitimate interests of a federally regulated organization while preserving employee mobility. However, the federal government may limit this contractual strategy by prohibiting other types of restrictive covenants through regulation. In certain circumstances, garden leave clauses, which we do not believe to be restrictive covenants under Quebec civil law,14 are certainly options to consider for some employees of federally regulated organizations. Monitor ongoing legislative updates We recommend implementing an internal or external monitoring strategy, through your legal counsel, to track the progress of the Bill and any regulations that the federal government may adopt under it. Our Labour and Employment Law group will closely follow all developments related to Bill C-31. We remain at your disposal to answer any questions you may have regarding these changes and provide innovative strategic advice to protect your legitimate interests under this new legal framework. A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025., Bill C-31 (first reading – May 6, 2026), 1st Session, 45th Legislature. Can., section 9. R.S.C. 1985, c. L.-2. Department of Finance Canada, Minister Champagne introduces second piece of legislation to implement Budget 2025: Canada Strong, online: Minister Champagne introduces second piece of legislation to implement Budget 2025: Canada Strong - Canada.ca. A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025, Supra, note 1, s. 237.1. Id. Id., s. 237.2(1). Id., s. 237.2(2). Id., s. 237.2(3)(a). Id., s. 237.2(3)(b). Id., s. 237.2(3)(c). Id., s. 237.3. Id., s. 237.4. Parliament of Canada, A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025, online: C-31 (45-1) - LEGISinfo - Parliament of Canada. Maude Grenier and Frédéric Desmarais, “Quand la clause de jardinage tombe dans le terrier du lapin civiliste : Alice est-elle au pays des merveilles ? Histoire d’une clause possiblement restrictive,” in Service de la qualité de la profession du Barreau du Québec, Développements récents en droit du travail (2020), Cowansville, Yvon Blais, 2020, p. 185.

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July 27, 2026

Our infrastructure contracts: from the ideal project to the bankable project

There is currently much debate about what is the “best” infrastructure project delivery method. Design-build-finance-maintain? Collaborative model? Alliancing? Another way? Even though the labels may change, one underlying reality remains: The structure best suited to financing, whether private or public, stands the best chance of success. After exploring the reasons why infrastructure financing needs to be modernized and reviewing emerging models, our series is finally getting to the heart of the matter: the contractual framework and risk allocation. This is where a project transitions from just a vision to reality. That is because, while risk allocation may be viewed differently by various stakeholders, the requirements of the financier or public authority are what ultimately dictate a project's success or failure. Stakeholders would therefore be well advised to keep this in mind right from the design phase. The bankability of a project, that is, whether it can actually be financed on acceptable terms, is a matter of contractual discipline aimed at stabilizing costs and revenues, making risks manageable and establishing a management structure that can deal with deviations without letting the project spiral out of control. Put another way, a project is financed risk by risk, each one (supply, construction, operation, or refinancing) must be assessed, mitigated and contractually assigned to the party best positioned to manage it. The same principles apply whether the goal is to secure bank financing or simply stay within a public budget. Given the length of this article, we can only provide a brief overview of these principles. Project financing in short: special purpose vehicle, financial model and off-balance-sheet The most common structure, especially in public-private partnerships (PPPs), is a special purpose vehicle (SPV), which, depending on the type of project, is an entity created to contract with the public authority, own the future infrastructure and carry the debt. This entity raises equity capital from developers, builders, operators and investment funds, and debt capital from banks, bond investors and development finance institutions. In limited-recourse project financing, the purpose of an SPV is the resulting compartmentalization: lenders are repaid from the project’s cash flows, without a security interest (or with a limited security interest) in the shareholders’ assets. The idea is not new. A famous predecessor is the Suez Canal Company, a joint-stock company founded in 1858 to carry out a single project by raising capital based solely on the project’s potential.1 What has changed is the financial model underpinning the transaction: It has become far more sophisticated. It is now a complex labyrinth of Excel sheets, with a continuous thread of cash flows under the firm control of the lenders, with all project documentation bringing the model to fruition within a coherent, “closed system.” The model thus dictates how rigorously due diligence is conducted, how cash flow allocation is prioritized (operations, reserves, debt service and distributions), and how strictly dividends are capped as long as safety margins are not met. This financing structure is not the only possible option. For example, for smaller projects or less liquid markets, we often see full-recourse corporate financing. Here, SPVs backed by corporate guarantees facilitate closing when pure non-recourse financing is out of reach, but the result is that project compartmentalization is reduced and shareholders face more exposure. No matter which model is available or chosen, the project owner and developer must be as disciplined as a lender, even if no financier needs to be brought on board. A project carried out and paid for with public funds must be just as thorough as a private one: A budget must be kept and value for money achieved through the same assessment of risks and the same search for the party best placed to assume them.2 Even when no funds are sought from a bank, a banker’s perspective is still indispensable. Bankable income The risk differential is considerable between a model with contractually secured or regulated revenues and one left to the mercy of fluctuations in demand, prices or government decisions. A project’s risk profile will ultimately dictate interest rates, acceptable debt levels and even whether the project can achieve financial close. The solutions depend on the type of project. Examples include pricing regulated by a credible regulator for a transport project; long-term purchase agreements at a fixed price or a price linked to raw materials in the energy or petrochemical sectors; or availability payments in PPPs, where compensation is based on the provision of services under the contract rather than on the number of users. Of course, much civil infrastructure generates no income from users, instead, the public authority compensates the operator for availability. In all cases, the cash flow must be predictable and viable, but the payment mechanism must be enforceable and within the financial capacity of the final paying party. While availability payments in a PPP shift demand risk, they also concentrate revenues with a single public authority, and that authority’s creditworthiness will dictate whether other guarantees, such as budgetary safeguards and dedicated payment mechanisms, are required. A toll project is bankable if traffic assumptions are conservative, toll rates are adjustable and social acceptability is addressed in advance. In addition, predictable revenues at a rate that covers debt service open the door to signing a credible—and therefore bankable—operating contract. In an industrial project, a solid offtake agreement must substantiate the financial model’s projections, and when a cost cannot be fixed in advance, it must be linked to the revenues it drives, through indexation or cost pass-through, so that the two vary in tandem rather than in opposite directions. Assessing, mitigating and allocating risks The essential preliminary step before drafting any contract is to identify risks, evaluate their probability and impact, and determine appropriate mitigation measures for each. Only then can the contractual framework be established, allocating each residual risk to the party best suited to assume it. Debt financing is only available for risks that have been identified, quantified, and allocated. This is why lenders demand consistency: If the SPV guarantees a service standard to the public authority, it must be able to “procure” this exact standard from its contractors. Otherwise, the SPV will retain the risk and the project will become difficult to finance. Construction provides the most compelling illustration of this principle. To establish the price of a project, a market-tested cost estimate is conducted (ideally through real bids), and then a fixed-price, fixed-deadline turnkey EPC contract is concluded. Lenders favour this specific structure precisely because it establishes the cost of completion. The contractor includes a margin for its own contingencies, which represents the price of certainty. Any residual default risks are covered by performance bonds to ensure project completion if the contractor falters, letters of credit guaranteeing the reimbursement of advance payments, payment holdbacks and late penalties. These mechanisms ensure that, whatever happens, the project will be delivered on budget, in compliance with the financial model. However, even though we prefer fixed-price EPCs, they are not used across the board. In Quebec and Ontario, more flexible procurement is often used, such as EPCM, alliancing and progressive design-build, where the contractor is engaged early in the process but the price is not locked in from the outset. A target price is established during the draft-design phase, featuring a risk-and-reward sharing mechanism for overruns and savings, typically capped, to align interests without placing the entire risk burden on one party.3 However, the golden rule of finance still holds true: the less certain the price, the greater the uncertainty, leading the lender to require higher equity, completion guarantees or shareholder support—driving up financing costs to account for the risk. The contract must be structured for the long term, as infrastructure projects are financed over decades in a changing world. Legislative changes, superior force, climate and geotechnical hazards must all be anticipated to prevent an external event from triggering a default. In addition, lenders are often granted step-in rights through direct agreements with the public authority, allowing them to take back control should the contractor default on its obligations, thereby avoiding termination and ensuring service continuity. When they are well-designed and have precise triggers and realistic remediation deadlines, such mechanisms also serve the public interest by providing a window for corrective action before the government has to step in. Capitalization and leverage The level of financial leverage and the quality of the SPV’s capitalization are direct determinants of bankability. Shareholders often have an interest in maximizing debt, as it is generally less expensive than equity and increases returns. The lenders, for their part, want an SPV that is sufficiently capitalized to absorb shocks and maintain incentive alignment. If the equity portion is marginal, financial close is often more difficult and contractual protection requirements may increase. Should the economic balance deteriorate, an operator with limited financial exposure may prefer to withdraw rather than incur prolonged losses, leaving the public authority facing a forced renegotiation. Minimum equity requirements, combined with restrictions on the sale of shares prior to commissioning and a stabilization period, are specifically designed to avoid such misalignment. Lastly, when a public authority awards a contract before financing is fully committed, the interval between the award and financial close exposes it to renegotiation pressure, because lenders will impose conditions precedent as they finalize their due diligence. To mitigate this risk, the public authority will adopt a banker’s perspective by including credibility requirements for the financing plan right from the tender stage. Where appropriate, it will also incorporate incentive or disciplinary mechanisms, such as bid bonds, more advanced financing commitments, optional pre-arranged financing. Over time, bankability requires that the contract cover the allocation of refinancing risk and the allocation of refinancing gains, if any, so as to avoid difficult future negotiations on value for money. The mechanics of public intervention Public intervention is compatible with the market, provided that it is intended to remove specific barriers rather than replacing the market. A public subsidy or loan can fill a viability gap, offset the lack of long-term maturities or mitigate an excessive risk premium. Partial guarantees and credit enhancement, which allow an institutional guarantor to cover a portion of the default risk, help to make private commercial debt available at a lower cost. Other financing structures can go even further. The public authority can waive most of its defences against the lenders once the work has been completed and accepted. This is called “debt assignment,” a typical example being forfaiting, a well-known mechanism used in European PPPs. The public authority’s debt thereby becomes almost unconditional and can be transferred to the banks, which no longer carry project risk, but instead take on direct exposure to the public authority. This drives financing costs down. Of course, the intent is never to use public funds to serve private interests or to manage them any less rigorously. Ultimately, any commitment of public funds calls for the exact same discipline in risk management and contractual structuring. Conclusion We can all dream of a better world, but we need to give ourselves the means to build it. Private financing comes at a cost, and that cost justifies the discipline it forces on a project. A non-recourse lender only signs off on what they have assessed, quantified and mitigated, and such an exacting approach benefits the entire project. Whether a banker is involved or not, structuring contracts in this way is the best guarantee of success. Sir William Cornelius Van Horne, who directed the construction of the Canadian Pacific Transcontinental Railway, completed in 1885 in less than half the planned time, is quoted as saying “It has always been a profound belief of mine that the things which people regard as next to impossible are the easiest things to do”.4 Yet the man was anything but a dreamer. He knew that the subsidies, in money and land, would only be paid as railway sections were completed, inspected and commissioned, and he was known for his iron discipline in payment sequencing and the choice of contracting partners. Still today, such a rigorous approach is what turns a project that exists only on paper into one that is actually built. Encyclopædia Britannica, “Suez Canal”, https://www.britannica.com/topic/Suez-Canal OECD, 2012, Recommendation of the Council on Principles for Public Governance of Public-Private Partnerships, https://legalinstruments.oecd.org/public/doc/275/275.en.pdf; and World Bank, 2017, Public-Private Partnerships Reference Guide (Version 3), https://ppp.worldbank.org/sites/default/files/2024-08/PPP%20Reference%20Guide%20Version%203.pdf Gouvernement du Québec (2024), Stratégie québécoise en infrastructures publiques — Des infrastructures de qualité, réalisées plus rapidement et à meilleur coût, https://cdn-contenu.quebec.ca/cdn-contenu/adm/org/sous-secretariat-infrastructures-publiques/publications/strategie/strategie_infrastructures.pdf ; Infrastructure Ontario, Choosing the Right Model for Each Project, https://www.infrastructureontario.ca/en/what-we-do/major-projects/model-selection/ Red River North Heritage, Creating a Legacy: The Van Horne Farm part I, https://redrivernorthheritage.com/creating-a-legacy/; Dictionary of Canadian Biography (1998), Van Horne, Sir William Cornelius, https://www.biographi.ca/en/bio/van_horne_william_cornelius_14E.html Source used throughout the article: World Bank, 2025, Infrastructure Monitor 2024 , https://openknowledge.worldbank.org/server/api/core/bitstreams/de04d2f1-f59f-499d-9aa1-2bf052d74eb3/content

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July 22, 2026

Supreme Court of Canada Maintains Dosing-Regimen Patent and Clarifies Patentability of Therapeutic Methods

On July 17, 2026, the Supreme Court of Canada (SCC) issued its decision in Pharmascience Inc. v. Janssen Inc., (2026 SCC 26), dismissing Pharmascience’s invalidity challenge to Janssen’s paliperidone palmitate dosing-regimen patent. While the majority of the SCC confirmed that a doctrine still exists in Canadian patent law under which a method of a medical treatment (MMT) is non-patentable subject matter, they affirmed the analysis and conclusions of the lower Courts that the claims of Janssen’s patent are not directed to a non-patentable MMT. Background Treatment of Schizophrenia entails lifelong management with antipsychotic medications, and the effectiveness of such treatment relies significantly on adherence to treatment regimens. A successful approach to improve treatment adherence has been the development of long-acting formulations, known as “depot formulations” or “long-acting injectables”, which gradually release the medication from the injection site and thus entail less frequent administration. Janssen developed such a long-acting injectable type of dosing regimen for the drug paliperidone palmitate for the treatment of Schizophrenia, marketed under INVEGA SUSTENNA. Janssen’s Canadian Patent No. 2,665,335 (the ‘335 Patent) relates to such a dosing regimen, under which the drug is administered as follows: Day 1: A first dose via deltoid injection; Day 8 ± 2 days: A second dose via deltoid injection; Monthly ± 7 days thereafter: Maintenance doses via deltoid or gluteal injection; Two regimens are defined depending on renal impairment status, with specified mg-eq doses. Pharmascience sought to invalidate the patent, arguing that the claims were invalid as impermissible methods of medical treatment. Procedural History Federal Court Pharmascience sought to obtain marketing approval or a “Notice of Compliance” to market a generic version of INVEGA SUSTENNA. Under Canada’s pharmaceutical patent linkage regime, this led to proceedings before the Federal Court in which Pharmascience alleged invalidity of the patent. In its decision of August 23, 2022 (2022 FC 1218), the Federal Court (FC) upheld the validity of the ‘335 Patent. Federal Court of Appeal On February 1, 2024 (2024 FCA 23), the Federal Court of Appeal (FCA) affirmed the FC’s decision and again upheld the validity of the ‘335 Patent. In its analysis, the FCA established that in order to determine whether a claim is directed to an unpatentable MMT, the key inquiry is whether practising the invention calls for the exercise of professional skill and judgment. The FCA drew a distinction between: skill and judgment applied in deciding how to use a treatment, which points to an unpatentable MMT; and skill and judgment applied in deciding whether to use a treatment, which does not, on its own, indicate an unpatentable MMT. Each case turns on its specific facts and the onus remains on the party attacking the patent to establish that the claim encompasses an unpatentable MMT. Pharmascience then sought leave to appeal to the SCC, where the sole issue being assessed was patentable subject matter - whether the claims impermissibly claim a MMT and do not comply with section 2 (definition of “invention”) of the Patent Act. Supreme Court The SCC maintained that a doctrine still exists in Canadian patent law under which MMTs are non-patentable subject matter. This doctrine is primarily attributable to the 1972 decision of the SCC in the Tennessee Eastman1 case, at which time it was only possible to patent a drug based on its method of manufacture, not as a pharmaceutical substance per se, as per former section 41(1) of the Patent Act. Following the repeal of former section 41(1), it has been argued that the rationale of Tennessee Eastman hinged on this repealed section and therefore the principles established in Tennessee Eastman should no longer apply. The majority of the SCC now confirms that the rule against patenting MMTs does not rest on former section 41(1) alone and continues to apply, grounded in the long-standing broader principle that “professional skills” are not patentable. The SCC also affirmed that the ‘335 Patent’s dosing regimen claims do not monopolize professional medical skill and judgment in their implementation and thus do not relate to an unpatentable MMT. The appeal was therefore dismissed and the patent upheld on this ground. The majority’s test: when does a claim cross the line into an MMT? A patent impermissibly claims an MMT only if it seeks to monopolize professional medical skill and judgment - i.e., if it “fences in” an area of medical treatment. The analysis is purposive and substance-over-form; it turns on the claims and the evidentiary record. The majority offered three non-exhaustive guideposts: Focus on the claimed subject matter, not on the fact that doctors exercise judgment in choosing whether to use it for a particular patient. Clinical judgment in selecting/monitoring treatment generally does not make the invention unpatentable. Individualization increases risk: the more the claim requires tailoring to individual patient characteristics, the more likely it is an MMT. Ordinary-course professional development: the more the claimed subject matter is the kind of thing physicians would be expected to develop/improve as part of practice (without patent incentives), the more likely it is an MMT. Fixed vs. variable dosage is not dispositive. While past Court decisions focused on fixed vs. variable dosages or timing of administration to be determinative factors, the SCC rejected such a categorical bright line; at most, variability may be an evidentiary proxy tied to the central “skill and judgment” question. Application to Janssen’s dosing regimens The majority affirmed the lower Courts’ key findings that: Once the regimen is selected, no professional skill/judgment is required to implement it as claimed. The renal-impairment split reflects an objective distinction and does not meaningfully constrain professional judgment. The ± dosing windows and alternate injection sites were supported by evidence as clinically interchangeable / operational flexibility without clinical implications. Result: the claims were not framed (in substance) as fencing in physicians’ clinical decision-making; they were treated as patentable subject matter. Concurring reasons While all of the Justices agreed on the result, two of the Justices disagreed on the doctrine and would have gone further. They: Disagreed that MMTs are inherently non-patentable subject matter; Would re-examine/overrule Tennessee Eastman and assess MMT claims like any other invention as defined in the Patent Act, with many failing instead under utility/operability/reproducibility/control concepts (rather than under a subject-matter exclusion). Despite that doctrinal divergence, they agreed that the ‘335 Patent is valid. Practical Takeaways MMT exclusion remains the majority rule: claims that effectively fence in clinical decision-making remain vulnerable on subject-matter grounds. Dosing regimen patents remain viable: evidentiary record and claim substance will be critical - particularly around whether implementation requires individualized clinical judgment. No bright-line “fixed vs. range” rule: Rather, the actual role of medical skill/judgment in practicing the claimed regimen is key. Overall, the SCC’s decision appears to fall in a middle ground between the positions advanced by the parties: confirming a doctrine of non-patentability of MMTs while at the same time confirming the patentability of dosing-regimen-based inventions depending on the facts of a given case, and as a result upholding the validity of the ‘335 Patent. Tennessee Eastman Co. et al. v. Commissioner of Patents, [1974] SCR 111.

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July 8, 2026

Generous Federal Investment Tax Credits for Clean Energy Projects

In 2021, the federal government introduced a series of refundable investment tax credits (the “ITCs”) to accelerate the transition to a low-carbon economy, stimulate economic growth, and support innovation. The Spring Economic Update 2026 confirms the growing importance of these measures. In particular, it announces that the Canada Revenue Agency (the “CRA”) will give increased priority to requests for advance rulings regarding eligible clean energy projects. In this regard, the CRA plans to increase its capacity to process these applications by more than 4.5 times by July 2026. In this context, two measures are of particular note: the Clean Technology ITC and the Clean Electricity ITC. 1. The Clean Technology ITC The Clean Technology ITC generally applies to certain capital investments in equipment and systems that contribute to the production of clean energy, the improvement of energy efficiency, and the reduction of greenhouse gas emissions, provided that such assets are acquired and used in Canada in accordance with the applicable criteria. This refundable credit can reach up to 30% of the capital cost of eligible property. It thus serves as a significant financial lever, helping to strengthen liquidity and improve project profitability, particularly during the early years. In practice, the analysis required to apply for this credit focuses primarily on the following elements: the entity’s eligibility (including its status as a taxable Canadian corporation); the property’s qualification (eligible category, function, and use); the timeline (dates of acquisition, installation, and commissioning); the impact of labour requirements, which may influence the applicable rate; interaction with other tax credits. The application period covers property acquired and that becomes available for use between March 28, 2023, and December 31, 2034. 2. The Clean Electricity ITC The Clean Electricity ITC is another measure that is gaining importance. It is of particular interest in structures where the investor (or certain investors) is tax-exempt or belongs to categories of entities for which several clean economy ITCs have historically been less accessible. Indeed, this credit is designed to be accessible to a broader range of entities, including notably (according to the proposed definitions) certain eligible trusts, designated provincial or territorial Crown corporations, corporations principally owned by municipalities, as well as entities affiliated with Aboriginal governments. At this stage, the government has published legislative proposals accompanied by explanatory notes, and the CRA has recently consolidated the relevant information on this subject on its website. Notably, it appears that: the credit would provide a base rate of 15% of the capital cost of eligible clean electricity-related property; eligibility would apply to property used primarily to generate, store, or transmit electricity, subject to technical and environmental criteria; the rate could be reduced in the event of non-compliance with certain labour requirements; the proposed application period would cover investments made from April 2024 and that becomes available for use on or before December 31, 2034. 3. Structuring: Corporation or Limited Partnership Beyond the technical eligibility of the property, the legal structure chosen for a project will have a decisive impact on the ability to claim ITCs and pass on their economic value to investors. In some cases, a taxable corporation is simpler to administer and more easily meets the eligibility criteria. Conversely, a limited partnership (“LP”), while useful for certain financing objectives, presents several disadvantages in the context of ITCs: 3.1 Constraints Related to Investors’ Tax Status Certain tax credits—particularly the Clean Technology ITC, often considered one of the most advantageous—are naturally better suited for taxable investors. When an LP has non-taxable members, converting the tax benefit into economic value may be less optimal, depending on how the credit is allocated and used. 3.2 Allocation of Credits and Limits for Limited Partners The rules governing credits within a partnership generally require that the allocation to each partner be reasonable, taking into account, in particular, their capital investment and contribution. Furthermore, for a limited partner, the share of the credit may be limited by “at-risk” rules, which cap certain tax benefits based on actual economic exposure. In practice, this can reduce the amount of credit available and limit allocation flexibility. 3.3 Increased Complexity of Monitoring and Compliance An LP generally entails heavier administrative obligations: calculating at-risk amounts, tracking allocations, documenting contributions and distributions, and ensuring consistency between the partnership agreement, financing agreements, and tax positions. This complexity can become a significant issue in the event of a tax audit. Conclusion Federal ITCs represent a major financial incentive for clean energy projects. However, their application depends on technical, tax, and structuring criteria that must be rigorously analysed and documented. Furthermore, the legislative framework governing these credits is constantly evolving (implementing regulations, administrative guidelines, and technical requirements), making a case-by-case analysis essential to confirm eligibility and optimize a project’s structure. We invite you to contact our tax team. We would be happy to assist you in successfully bringing your project to completion. Key Takeaways A Major Administrative Acceleration by July 2026 The CRA is making clean energy a priority: its capacity to process advance tax ruling requests will increase by more than 4.5 times by July 2026. For proponents, now is the time to act to secure early tax certainty. Two Powerful Financial Levers with Distinct Criteria Clean Technology: A major refundable credit of up to 30% of capital costs, primarily targeting taxable Canadian corporations. Clean Electricity: A refundable credit of up to 15% of capital costs structured to include entities that were historically restricted, such as Crown corporations, municipalities, and Indigenous organizations. Legal Structuring Can Make or Break Your ITCs Choosing the right legal vehicle is just as critical as technical asset eligibility. While popular for financing, LPs introduce significant complexity due to "at-risk" rules, the involvement of non-taxable partners, and a heavy compliance burden during tax audits.

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