Key Takeaways:
- Canada’s approach to sovereign AI policy prioritizes location over authority, focusing on where tech is located rather than who controls it.
- This approach can lead to Canadian companies deferring governance decisions and defaulting to foreign-owned infrastructure, compromising control over critical systems.
- Building with Canadian sovereignty in mind requires considering authority, data storage, and legal governance, rather than just location.
- Companies that prioritize authority and control are better positioned for long-term success and can anchor intellectual property and operational expertise domestically.
- Canada’s policy framework should distinguish between participation and authority, and consistently reflect this distinction in policy and procurement decisions.
Introduction to Sovereign Tech Policies
Sovereign tech policies in Canada are being shaped by a series of policy decisions, rather than a single, formal definition of "sovereign AI." Recent announcements surrounding federal funding for data-centre expansions, support for domestic cloud partnerships, and assurances around data residency have been presented as evidence of sovereignty in action. However, these moves demonstrate that sovereignty is being applied unevenly, with different initiatives meeting different standards for what qualifies as sovereign. This inconsistent approach has consequences for Canadian founders, who must navigate a complex landscape of policy and procurement decisions.
The Narrow Criteria for Sovereignty
Federal officials have framed the rise of AI as a structural inflection point, likening it to a Gutenberg-scale shift in how power, knowledge, and economic value are organized. In practice, the label of "sovereignty" is being applied to AI through a narrow set of criteria, focusing on infrastructure located in Canada, domestic hiring, and local capital investment. Questions of authority, such as who controls administrative access, who holds encryption keys, and which legal regime ultimately governs the operators of critical systems, are largely left unaddressed. This means that ensuring data is located in Canada is currently being treated as sufficient to qualify as sovereign, while designing systems to retain technical and legal control falls outside what policy currently evaluates or incentivizes.
The Consequences of Prioritizing Location over Authority
The practical threshold for what currently "counts" as sovereignty in Canada is shaping how companies are built. When sovereignty is assessed through footprint rather than authority, speed and integration become the dominant advantages. For founders, the rational response is to deploy quickly on established global platforms, localize operations, and meet residency and hiring requirements that are easy for funders and procurement bodies to verify. However, this approach can lead to Canadian companies deferring governance decisions and defaulting to foreign-owned infrastructure, compromising control over critical systems. The architectural consequences of this incentive structure are less visible, but no less significant, as control over encryption keys, administrative privileges, incident-response authority, and legal exposure defaults to the infrastructure provider, rather than being designed into the company itself.
The Importance of Authority and Control
Building with Canadian sovereignty in mind means choosing where a company’s data is stored and processed, who operates the underlying infrastructure, and which legal system governs it. On foreign-governed platforms, those choices are made for you, and the trade-off is slower, less visible progress early on, but a decisive advantage once expectations around control and trust take hold. Companies that prioritize authority and control are better positioned for long-term success and can anchor intellectual property and operational expertise domestically. The contrast is not theoretical, as illustrated by Canada’s investment in Cohere under the sovereign AI compute strategy, which demonstrates the trade-off between meeting the sovereignty threshold and retaining operational authority inside Canada.
Cultural and Jurisdictional Implications
As companies scale, the choices made around sovereignty and authority compound. Expansion into the United States often brings new legal obligations, operational dependencies, and administrative access pathways. A firm can remain culturally Canadian while critical system functions become governed by foreign legal processes. Without separation designed early, growth itself can narrow the set of customers a company can credibly serve, including Canadian public-sector and regulated buyers in health, government, and critical infrastructure, where continuity, accountability, and jurisdictional control are non-negotiable. The distinction between participation and authority matters at a national level, as it determines where strategic decisions are made and where economic value compounds.
Conclusion and Recommendations
Canada does not need to eliminate foreign participation in its technology sector, but it must distinguish clearly between participation and authority, and consistently reflect this distinction in policy and procurement decisions. The country will get more of whatever it chooses to reward, so if sovereignty continues to be measured through presence alone, companies will optimize for quick deployment. If control becomes part of the standard, a different kind of ecosystem will follow, one built to last. By prioritizing authority and control, Canada can create a sovereign tech sector that anchors intellectual property and operational expertise domestically, and shapes how critical AI systems are governed over time.
