Skip to main content

PLEASE NOTE: For everyone’s safety, Fasken recommends anyone on-site at our Canadian offices be familiar with the COVID-19 recommendations in place which may include one or more of the following: social distancing, hand sanitizing, wearing a mask in common areas and proof of full vaccination. These measures apply to lawyers, staff, clients, service providers and other visitors.

Bulletin

Canada’s Response to Russia and Ukraine: New Sanctions and Export Controls

Fasken
Reading Time 4 minute read
Subscribe

Overview

International Trade & Customs Law Bulletin

The Government of Canada, in concert with its Western allies, imposed new economic sanctions on Russia under the Special Economic Measures Act (“SEMA”) and announced changes to Canada’s export controls regime as it relates to Russia. New sanctions were first introduced on February 22, 2022 in response to Russia’s recognition of the independence of two breakaway regions in Eastern Ukraine. Following Russia’s invasion of Ukraine, Canada announced further sanctions on February 24 and February 25, 2022. 

The new sanctions are broad and complex. Moreover, Canada continues to add to the list of sanctioned persons, and to prohibitions as they relate to transacting with these sanctioned persons. It is imperative for Canadian businesses to understand the new sanctions, as any violations carry severe reputational and legal consequences.

New Sanctions Under SEMA

Canada imposed new sanctions via amendments to the Special Economic Measures (Ukraine) Regulations (the “Ukraine Sanctions”) and the Special Economic Measures (Russia) Regulations (the “Russia Sanctions”), created pursuant to SEMA.

(i) What is prohibited under the Sanctions?

The Russia and Ukraine Sanctions operate with reference to “schedules” that list individuals or entities (collectively, “persons”) with whom particular transactions are prohibited:

  • Schedule 1 of both the Ukraine Sanctions and the Russia Sanctions lists persons upon whom the regulations impose asset freeze and dealings prohibitions on any person in Canada or any Canadian outside Canada (collectively “Canadian businesses”). For example, under the Sanctions, Canadian businesses cannot transact in property owned by these sanctioned persons or those acting on their behalf, or facilitate or enter into such transactions. Furthermore, Canadian businesses cannot make any goods available to, or provide any financial or related services to or for the benefit of these sanctioned persons.
  • Schedule 2 of the Russia Sanctions lists those persons with whom Canadian businesses are prohibited from transacting in new debt of longer than 30 days’ maturity or dealing in new securities.
  • Schedule 3 of the Russia Sanctions lists those persons with whom Canadian businesses are prohibited from transacting in new debt of longer than 90 days’ maturity.
  • A new Schedule 3.1 added to the Russia Sanctions lists persons with whom Canadian businesses are prohibited from purchasing sovereign debt or transacting in new debt without maturity.
  • The Sanctions also prohibit Canadian businesses to knowingly do anything that causes, facilitates or assists in, or is intended to cause, facilitate or assist in any of these prohibited activities.

(ii) What are the recent amendments to the Sanctions?

Canada introduced the following amendments to the Russia and Ukraine Sanctions: 

  • The Ukraine Sanctions were amended to add four individuals to Schedule 1, and further amended to prohibit certain activities with respect to two regions in Eastern Ukraine: the so-called Donetsk People’s Republic (“DNR”) and the so-called Luhansk People’s Republic (“LNR”). For example, Canadian businesses cannot make investments in any property in these regions; purchase or acquire goods from these regions; or provide technical assistance or financial or other services to these regions or any persons in these regions. These prohibitions mirror existing sanctions Canada has imposed in relation to Crimea, as detailed in our previous bulletin titled Canada Trade Law Update: Canada’s Response to Russia and Ukraine
  • The Russia Sanctions were amended in response to Russia’s recognition of the independence of the two regions, DNR and LNR. These amendments add 351 members of the State Duma (the lower house of Russia’s legislature) to Schedule 1, three entities – including major Russian banks – to the new Schedule 3.1, and two entities to Schedule 1.
  • The Russia Sanctions were further amended in response to Russia’s invasion of Ukraine by adding 31 new individuals and 19 new entities to Schedule 1, moving five entities from Schedule 2 to Schedule 1, and moving three entities from Schedule 3 to Schedule 1, resulting in the broader imposition of prohibitions on these entities.
  • Canada announced that it would impose sanctions directly on Russian President Vladimir Putin, his top advisors, and other aides in the coming days.

New Export Controls

In addition to imposing economic sanctions, as of February 24, 2022, Canada cancelled existing permits for the export or brokering of goods and technology to Russia and announced that it would no longer issue new permits. However, permits for exports related to specific end-uses such as medical supply and humanitarian needs may be considered on a case-by-case basis.

Implications For Canadian Businesses

The new sanctions and export controls impose additional compliance obligations on, and require a heightened level of due diligence from, Canadian businesses. As the situation in Ukraine continues to evolve, businesses should also be prepared for additional sanctions. At the time of this bulletin, the Canadian government has announced that, in coordination with the US, the EU and the UK, effective immediately, all Canadian financial institutions are prohibited from engaging in any transaction with the Russian Central Bank. In addition, Canada is imposing an asset freeze and a dealings prohibition on Russian sovereign wealth funds. Other sanctions may potentially target Russia’s oil and gas exports. Fasken will be monitoring and analyzing the continually evolving Russia Sanctions and will issue updates concerning significant developments.

Authors

    Subscribe

    Receive email updates from our team

    Subscribe