OTTAWA — The Liberal government’s flagship innovation fund is set to provide nearly $50 million to a U.S. defence contractor whose Canadian unit human rights activists have criticized for sales to Saudi Arabia, The Logic has learned.

General Dynamics will receive $49.9 million for a $145.4-million project in London, Ont., according to a page on the website of Innovation, Science and Economic Development Canada (ISED) that lists beneficiaries of the federal Strategic Innovation Fund (SIF). It says the award is set to be announced on Jan. 31.

Reston, Va.-headquartered General Dynamics is one of the largest U.S. defence contractors, with nearly US$38 billion in revenue in 2020. Its subsidiary General Dynamics Land Systems-Canada (GDLS-C) manufactures light- and medium-armoured vehicles in London. 

The government has signed an agreement to make a “non-repayable” contribution to GDLS-C, ISED spokesperson Alison Reilander confirmed, adding that “the investment will support local research and development.” GDLS-C directed questions to ISED and the SIF program. 

In September 2019, the federal government awarded the firm a sole-sourced contract worth up to $3 billion for 360 combat-support vehicles and support. However, the firm primarily manufactures for export. 

In February 2014, the then-Conservative government announced it had brokered a deal worth up to $14 billion for GDLS-C to sell light-armoured vehicles (LAVs) to the Saudi Arabian government. 

Following the October 2018 murder of the U.S.-based journalist Jamal Khashoggi, then-foreign affairs minister François-Philippe Champagne announced the department would pause issuing permits for arms exports to the kingdom, pending a review; some shipments continued. Champagne is now innovation minister, responsible for SIF.

That December, Prime Minister Justin Trudeau said his government was looking for “a way of no longer exporting these vehicles to Saudi Arabia.” In response, GDLS said any such move would cost it ”billions of dollars of liability.”

In April 2020, Global Affairs Canada concluded there was no “substantial risk” the Canadian-made LAVs were being used for “serious violations” of international humanitarian law in Yemen, where Saudi Arabia and its allies are conducting a bombing campaign and ground offensive.

Human rights groups have disputed those findings. In an August 2021 report, Amnesty International and Waterloo, Ont.-based Project Ploughshares said the federal government was “ignoring Canada’s obligations” under the international Arms Trade Treaty, citing reports of images showing weaponized GDLS-C LAVs in Yemen.

The Liberal government established the SIF in the March 2017 federal budget, incorporating four existing programs, including the military-focused Strategic Aerospace and Defence Initiative and Technology Demonstration Program. The new fund reimburses companies for expenses like labour and materials for R&D and expansion projects. General Dynamics is the first defence contractor directly awarded funding through the SIF, according to The Logic’s ongoing analysis; while recipient Bell Helicopter Textron makes military aircraft, its Mirabel, Que.-based Canadian operation focuses on commercial applications.

The SIF has funded Canadian scale-ups like robotics firms Kinova and Attabotics or applied- AI companies AbCellera and MindBridge; plant build-outs for manufacturers like Ford, Linamar and Toyota; and major industrial projects from multinationals like ArcelorMittal and  Gerdau Ameristeel.

General Dynamics will spend a total of $145.4 million on the London project backed by SIF, and maintain 1,440 jobs, according to the program site. Reilander said the funding was approved under a stream of the program designed to attract “large-scale investments to Canada.” The project “supports Canadian research and development, secures high quality research and manufacturing jobs in Canada, and will help train the industry’s future workforce through co-op opportunities and collaborations with local universities and colleges,” she said.

The firm has received other federal funding. In August 2019, then-defence minister Harjit Sajjan announced Ottawa would loan GDLS-C up to $650 million, after its parent company said the Saudi Arabian government had missed payments on its LAV order. The Canada Account, which finances export transactions of “national interest,” provided the funding.

General Dynamics’ ordnance and tactical-systems division also has facilities in Quebec, while its technology business line has operations in Ottawa.