John Ivison: Ottawa lets a key Arctic defence-tech company slip into foreign hands

International Submarine Engineering founder James McFarlane with one of his submarines at the company's Port Coquitlam, B.C., facility in January 2012. Photo by Ward Perrin/PNG/Postmedia

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Last week, the Israeli defence giant Elbit Systems announced that it had completed the purchase of International Submarine Engineering, an autonomous underwater vehicle (AUV) company based in Port Coquitlam, B.C.

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The sale of the underwater-drone maker was greeted with dismay by those familiar with ISE’s storied 50-year history. The company was founded by Jim McFarlane, a former lieutenant commander in the Royal Canadian Navy who had been involved in the design and construction of the Oberon-class of diesel electric submarines.

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In 1982, the Canadian Hydrographic Service identified the need to perform hydrographic surveys in Canada’s Arctic, and ISE was awarded the contract to design and build an underwater vehicle. The result was the Autonomous Remote-Controlled Submersible (ARCS), Canada’s first AUV, which proved to be a world leader in technology that allowed the vessel to navigate a pre-programmed course, while avoiding obstacles.

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The ARCS was followed by the DOLPHIN and then the Theseus AUV, which was designed to monitor ice-covered waters for Soviet submarines and to lay fibre-optic communications cables in the sea north of Ellesmere Island.

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In 2008, ISE was contracted by the Canadian government to develop the Explorer class of AUV, to help map northern waters.

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Over the years, various federal agencies have invested millions of taxpayers’ dollars into ISE, said Bruce Butler, an engineer who worked at the company for 14 years and wrote a book about the development of Theseus. “The return on this investment has been many-fold, including the creation of several spin-off companies,” he said. (Former ISE engineer Eric Jackson founded Cellula Robotics, based in British Columbia and now a world leader in large AUVs.)

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Butler said he is disappointed that the Canadian government has allowed the sale of ISE to a foreign military technology company. “The sale is an insult to the memory of Jim McFarlane (who died in 2022) and ISE’s former and current employees, who pushed technological boundaries to make Canada a world leader in subsea engineering,” he said.

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The company’s glory days may be behind it, and it has been operating with much reduced staff numbers.

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But the disquiet at the sale is not just based on nostalgia.

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There was clearly enough value left in ISE to attract the interest of Elbit.

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Yet the sale apparently went through without a national security review. The Department of Innovation, Science and Economic Development issued a statement that said it is aware of the transaction but could not comment on it specifically because of confidentiality concerns.

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Elbit’s press release said the acquisition has been completed and did not refer to any pending regulatory review.

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Yet there was interest in those assets from Canadian companies, including Dominion Dynamics, which is building the new “autonomy stack” of sensors to monitor the Arctic.