Business relations between Canada and the UAE are being further tested after it emerged a Canadian provincial finance minister is poised to block the proposed tie up of the London Stock Exchange (LSE) and the Toronto stock exchange operator TMX because Middle East investors own large stakes in the UK operator.
Borse Dubai, the parent company of Dubai Financial Market and Nasdaq Dubai, owns 20.6 per cent of the LSE. If the US$3.2 billion (Dh11.75bn) merger with the Canadian company goes ahead the Dubai group will own a significant stake in the newly formed global markets operator.
Dubai would end up with an 11.3 per cent stake in the combined entity, the largest single holding and enough to trigger strict Canadian laws on foreign ownership, which state any stake over 10 per cent must get approval from the Canadian federal government.
The Qatar Investment Authority, meanwhile, owns a 15 per cent stake in the LSE, meaning its eventual stake in the combined company would be 7 per cent
Dwight Duncan, Ontario's finance minister, said he would not be happy to see a "strategic" asset such as the Toronto exchange operator even partially owned by a foreign entity such as Borse Dubai.
"We do business with the Middle East, I am just not sure I want them owning our stock exchange," Mr Duncan said.
"I am just not going to be one of those that says 'OK, go ahead,' " he told Canada's The Globe and Mail newspaper.
Under Canadian law, the province of Ontario can block the stock exchange deal if it deems it to be not in the public interest.
Mr Duncan's comments are the latest in a long-running diplomatic spat between the UAE and Canada, sparked by the North American country's refusal to grant landing rights to UAE carriers Etihad Airways and Emirates Airline.
The Toronto Stock Exchange was floated in 2002 when the Investment Canada Act and the Competition Act, which govern the amount foreign shareholders can hold, came into play.
But industry insiders have questioned the merit of Mr Duncan's comments.
"Particularly in a business which is highly regulated, it's a view I'm surprised to hear," said a senior banker from Barclays Capital, one of the LSE's corporate brokers, alongside Morgan Stanley.
"It just seems to be a general reaction without taking consideration of the detail," said the banker, who did not want to be named.
The Canadian government turned down BHP Billiton's hostile takeover bid for PotashCorp last year as it was not seen as being in the Canadian public interest.
"In Canada, our natural resources are an important economic driver," said Tony Clement, Canada's industry minister, at the time. "I have come to the conclusion that BHP Billiton does not present a likely net benefit to Canada."
Borse Dubai's 20 per cent stake in LSE gained more than $25 million on news of the proposed merger.
The proposed deal is intended to create a primary exchange for international commodities and energy firms. If the merger is successful, shares in listed firms would grow volume and private companies would regard the new bourse as an attractive exchange on which to float shares.
Last month, in a bid to give itself breathing space to repay outstanding debt, the company raised $1.1bn through two separate transactions - one in which it sold more than half of its shares in Nasdaq OMX and another in which it secured a new three-year loan.