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Bulletin

Significant Expansion of Government Powers Under Canada’s Sanctions Laws

Fasken
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Overview

International Trade & Customs Law Bulletin

On April 28, 2022, the government introduced Bill C-191, which contains significant changes to two of Canada’s sanctions laws: the Special Economic Measures Act (“SEMA”) and the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law). The amendments, if passed, would grant the Minister of Foreign Affairs (the “Minister”) exceptional new powers.

The proposed amendments, which are broadly similar between the two acts, appear to be direct responses to Russia’s invasion of Ukraine and Canada’s commitment, as announced in a Ministerial Joint Statement, to work with its allies to take steps to “find, restrain, freeze, seize, and, where appropriate, confiscate or forfeit the assets” of persons who have been sanctioned in connection with the invasion. 

As Canada uses the SEMA as its primary law to impose its own sanctions, this bulletin examines three key changes to the SEMA and their implications.

1. Expanded Definition of Property

The amendments would broaden the definition of property, currently defined simply as “real and personal property”, to “any type of property, whether real or personal or immovable or movable, or tangible or intangible or corporeal or incorporeal, and includes money, funds, currency, digital assets and virtual currency”. This new definition will apply both to seizures and forfeitures, as discussed below, as well as to the existing prohibitions related to dealings in or facilitating transactions in property and the obligations to disclose information to the RCMP or CSIS related to such property or transactions.

2. New Powers to Seize and Seek the Forfeiture of Property

At present, the SEMA allows the Governor in Council to make an order seizing, freezing, or sequestrating any property that is “held by or on behalf of” a foreign state, any person in that foreign state, or a national of that foreign state who does not ordinarily reside in Canada. The proposed amendments clarify the scope of property that can be seized by applying these powers to property “that is owned – or that is held or controlled, directly or indirectly” by a foreign state, any person in that state, or a national of that state who does not ordinarily reside in Canada. 

When read alongside additional new provisions authorizing the Minister to compel any person to provide information relevant to making an order, as well as new provisions authorizing information collection by, and sharing between, the Minister and persons such as the Superintendent of Financial Institutions, this suggests the intention to identify and target property that may have previously evaded sanctions laws.  

Further still, the proposed amendments would introduce a mechanism for the Minister to seek the forfeiture of seized property upon application to a superior court, though the amendments do not specify the criteria to be used by the Minister to determine when forfeiture will be sought. So long as a judge determines, based on the evidence presented, that the property is the subject of an order seizing or restraining the property and that it is owned, held or controlled directly or indirectly by the person referred to in that order, the judge must order the forfeiture. Before making any forfeiture order, the court will require notice to be given to, and may hear from, any person who, in the court’s opinion, appears to have an interest in or right to the property. 

Once forfeited, the Minister may then dispose of the property and use the proceeds only for:  

(a) the reconstruction of a foreign state adversely affected by a grave breach of international peace and security; 

(b) the restoration of international peace and security; and, 

(c) the compensation of victims of a grave breach international peace and security, gross and systematic human rights violations or acts of significant corruption.

The Minister may also enter into agreements with the government of any foreign state enabling that state to use the funds for the purposes above.  

3. Ability to Issue General Permits

The SEMA currently empowers the Minister to issue permits on application to individuals authorizing specific activities or transactions that would otherwise be prohibited. The amendments would enable the Minister to also issue general permits, authorizing any person in Canada or Canadian abroad to carry out a specified activity or transaction, or class of activity or transaction, that is otherwise prohibited without the need to file such application. 

This amendment will align Canada’s sanctions regime with the USA and the UK, who currently authorize their sanctions agencies to issue general permits. 

Conclusion

If passed later this summer, as is expected, the proposed amendments would mark a significant development in Canada’s sanctions regime and would, according to the Minister, make Canada the first country among its G7 peers to allow the forfeiture and sale of sanctioned persons’ property. Given the increasing complexity of Canada’s sanctions laws, the frequency with which new persons are sanctioned, and the severe reputational and legal consequences for violations, Canadian businesses should closely monitor the latest developments.

1Bill C-19: An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures.

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