As the current turmoil in the Middle-East shows, it’s an uncertain and volatile world.
This is demonstrated by many unsettling events in 2011, as Canada, in league with like-minded countries, has imposed an array of new economic sanctions against troubled and violent countries that have shown wanton disregard for basic freedoms and human rights.
Canadian businesses involved in these regions need to be aware of these sanctions. They entail criminal penalties for companies and individuals infringing them. They are a moving target and change as events unfold. Because they apply not only in Canada but in many cases to all Canadians outside the country, they involve dangerous pitfalls for the unwary.
United Nations Mandated Actions
The federal cabinet imposes sanctions under the United Nations Act to implement binding UN Security Council resolutions. The scope of these vary, depending on the content of the particular UN resolution. At present, Canada has imposed UN-mandated sanctions against Belarus, Côte d’Ivoire, North Korea, Congo, Eritrea, Iran, Iraq, Lebanon, Liberia, Libya, Rwanda, Sierra Leone, Somalia and Sudan. Canada also applies UN sanctions against Al-Qaida and international terrorist organizations.
These United Nations Act sanctions don’t always follow the same pattern and their scope and targets can differ. It’s important to look carefully at the wording of each. Some, like the sanctions against Iran and North Korea, are aimed mostly at prohibiting trade in nuclear-related materials. Others, like those against Côte d’Ivoire, Somalia and Sierra Leone, are aimed mostly at preventing arms and munitions trade.
One of the notable features of these UN-mandated sanctions is that they prohibit not only trade in specific types of goods but also dealings with “designated persons”, which tracks persons listed by the UN Security Council from time to time. These listings change continually, placing additional burdens on anyone doing business in or with these countries. It’s important to be aware of these.
Sanctions Outside the UN
Not only does Canada apply sanctions mandated by the UN Security Council – which can be changed, enlarged and modified by the UN –it also applies these in other difficult cases where the situation warrants, whether or not the UN has been involved.
This second grouping of sanctions falls under the Special Economic Measures Act (“SEMA”), which gives the government broad powers to implement sanctions agreed to by other organizations (like NATO, etc.) or to act unilaterally where the federal cabinet on its own determines that “a grave breach of international peace and security has occurred that has resulted or is likely to result in a serious international crisis.” This is totally separate from any UN resolutions.
The federal cabinet has used its authority under SEMA to make regulations prohibiting trade and business dealings with Burma, Zimbabwe and, most recently, with Syria.
While the scope of these SEMA regulations varies, they tend to be quite broad. Special care must be taken in regard to the wording here as well. For example, in the case of Burma, the regulations prohibit any “sale”, “export”, “supply” or “shipment” of “any goods” by anyone in Canada to any person in Burma or to any person, inside or outside of Burma that facilitates any business carried on there. In the case of Syria, in contrast, the regulations prohibit “dealings” in property held by or on behalf of “designated persons”. The words used in each case differ and this difference can be critical.
SEMA gives the federal cabinet virtually unrestricted authority to freeze all dealings in assets of named individuals, to order property of a foreign State seized or sequestered, to prohibit all persons inside or outside of Canada from dealing in property of that State, from shipping or supplying any kind of goods and technical data and from dealing in any manner with that State and its agencies, residents or nationals. In the case of Zimbabwe, the sanctions apply to arms and related material and to direct and indirect dealing in all property (including funds and bank accounts) of persons specifically designated in the regulations.
Again, because sanctions under SEMA are not tied to UN resolutions, they are applied as determined by the federal government in order to respond rapidly to changing foreign situations. This is exemplified by the SEMA sanctions imposed against Syria in response to the recent human rights violations in that country.
Asset Freezes – Another Concern
Closely related to these is a third statute, the Freezing Assets of Corrupt Foreign Officials Act, passed in March 2011 to deal with the situation in countries like Egypt and Tunisia, where there are grounds to believe senior officials have been corrupt and have secretly taken money or property out of the country. These persons are defined somewhat awkwardly as “politically exposed foreign persons.”
The statute permits the federal government to freeze the assets or restrain property of such persons at the request of a foreign government, where the cabinet has determined that there is a condition of turmoil or political uncertainty in that country, and where the making of an order or regulation is in the interest of international relations.
Simultaneous to its enactment, regulations were issued freezing the Canadian-held assets and prohibiting any Canadian person anywhere from dealing with assets of any kind of former government officials in Egypt and Tunisia, including the former presidents of those countries and their extended families.
Export Controls – Evolving
Operating in tandem with these is a totally separate regime of export controls, covering sensitive goods and technologies listed under the Export and Import Permits Act. All items on the Export Control List (such as arms, munitions, nuclear items and all goods of US origin) require an export permit to be exported from Canada. All goods and technology, whether listed or not, require a permit to be exported to any destinations on the Area Control List.
While export controls come under a different legal framework, they are allied to Canada’s system of sanctions. Many of the items covered by specific sets of sanctions – such as nuclear items and armaments – are also covered under the export permit regime.
Items falling under export control change in accordance with international agreements to which Canada belongs, such as the Nuclear Suppliers Group and other organizations. Because the list of controlled items – goods and related technology - constantly evolves and because of penalties where such items are exported without permit authorization, this is another statute of which exporting business and service providers need be cognisant.
This very brief description shows that the present international situation is extremely fluid. Canadian law gives wide-ranging authority for the federal government to apply economic and trade sanctions against rogue States and terrorist organizations identified in UN resolutions. As outlined, quite apart from UN and related initiatives, the Canadian government has the unilateral authority to apply sanctions, seize property and freeze assets where the international situation warrants.
Criminal penalties apply where these prohibitions are transgressed. Therefore, it is all the more important for any business engaged in international dealings in troubled areas or in trade in sensitive items to be aware of the general nature of Canada’s sanctions and export control regime. Given the unsettled international situation, Canadian laws change and those changes need to be carefully watched.
Finally, it is noted that there is a wealth of information on both Canada’s sanctions and export controls available on the website of the Department of Foreign Affairs and International Trade and readers are advised to consult that site at: www.international.gc.ca .