The Canadian government is in the midst of creating a secure communications network, but the decision means that any firm which is considered a security threat can be excluded from the project without violating international trade obligations.
No specific companies have been directly excluded -- however speculation suggests that Chinese firm Huawei may have been the catalyst for such a decision.
Canadian Prime Minister Stephen Harper's spokesman Andrew MacDougall told a news conference:
"The government's going to be choosing carefully in the construction of this network, and it has invoked the national security exception for the building of this network. I'll leave it to you if you think ... Huawei should be a part of a Canadian government security system."
The secure government network, if exposed to a security threat, could be breached in order to collect and steal sensitive information from data centers, emails or telephone calls. However, the "national security exception" permits the government to prevent firms from building the network -- but as Huawei's spokesman Scott Bradley told Reuters, this may not cause the firm any issues. Bradley said:
"The national security exception only applies to foreign companies. Huawei is fully incorporated in Canada, and operates as a subsidiary Canadian company. This alone effectively enables us to bid on any potential procurement opportunities."
The decision comes after Huawei's links to the Chinese military were questioned, something the firm has denied.
On Monday, a congressional committee recommend that Huawei and Chinese telecom equipment manufacturer ZTE should not be allowed to do business with U.S. government contractors, and urged American firms to follow suit.
Huawei is considered a security threat to America, whereas an FBI investigation is underway concerning ZTE's alleged practice of selling telecoms equipment to embargoed countries including Iran. According to reports, these potential links have caused Cisco to end its partnership with ZTE.
Huawei is one of the largest telecom firms in the world, producing networking equipment and distributing in almost 150 countries. The firm employs 300 people at its Canadian head office in Ontario, and 130 engineers are stationed at its research facility in Ottawa.
More: Don't trust Huawei and ZTE, US congressional committee warns | Cisco ends ZTE partnership over Iran probe | Huawei eyes India's tier-1 telcos for growth | Can Huawei crack the U.S. data center market? |