In a recently released departmental briefing note, Global Affairs Canada (“GAC”) reported on its assessment of Canadian defence exports and transfers to Saudi Arabia following a new “rigorous process for assessing whether there is a substantial risk that the proposed export would result in human rights or humanitarian law violations.”
In a determination likely to stir controversy, GAC found no “credible evidence linking Canadian exports of military equipment or other controlled items to any human rights or humanitarian law violations committed by the Saudi government”.
The following is brief note providing background and context to this latest development in Canadian-Saudi trade relations.
New Substantial Risk Test for Exports and Brokering
On September 1, 2019, amendments to the Export and Import Permits Act came into force requiring the Minister of Foreign Affairs to perform a mandatory substantial risk test analysis in deciding whether to issue a permit to transfer or broker defence items. Further details on these amendments are included in our previous blog post.
This substantial risk test requires the Minister to consider a broad set of factors, including whether the goods or technology would undermine peace and security, or could be used to commit or facilitate a violation of international humanitarian or international human rights law, offences related to terrorism or transnational organized crime, acts of gender-based violence or violence against women and children. The Minister is prohibited from issuing a permit if he or she determines that there is a substantial risk that export, transfer or brokering of the goods or technology would result in any of these negative consequences.
In addition to its impact on Saudi-Canadian trade relations, the GAC Report is also significant as an example of how these risk assessments will be conducted for defence-related trade with other countries.
Most recent trade tensions between Canada and Saudi Arabia began with a tweet by Canada’s Minister of Foreign Affairs in the summer of 2018 raising concerns over the arrest of Samar Badawi, a human rights activist and sister of blogger Raif Badawi who has been imprisoned in Saudi Arabia since 2015.
The reaction of the Saudi government was swift and severe, and included the recall of their ambassador in Canada, the expulsion of Canada’s ambassador, the sell-off of Canadian assets held by the Saudis and the imposition of trade and investment restrictions on Canada.
In November 2018, Canada’s Minister of Foreign Affairs announced that GAC would conduct a review of arms exports to Saudi Arabia and an effective moratorium on the issuance of new permits pending the completion of this review. According to governmental estimates, this moratorium on new permits has affected approximately $2 billion in Canadian export trade since August 2018. Even though GAC has not suspended or cancelled any valid permits to Saudi Arabia, a number of Canadian exporters have suspended their business development operations in the Gulf region.
Global Affairs Canada’s Findings
GAC’s conclusion that there is “no credible evidence’ between Canadian exports of military equipment or other controlled items to any Saudi violations of human rights or humanitarian law” is bound to cause further controversy.
The Saudi Arabia assessment shed some light on an important aspect of analysis, notably, the link between the supply of defence items in question and humanitarian situation in the region. In its briefing note GAC has stressed several times that domestic human rights situation in Saudi Arabia, as well as its involvement in the war in Yemen, remains problematic. These concerns, however, could not serve as a ground for a permit refusal in the absence of evidence that Canadian exports of military equipment could - and would - contribute to human rights or humanitarian law violations.
Prospects for Future Trade and Investment
Over the period of its review, GAC assessed and processed 48 permit applications relating to the transfer of controlled items to Saudi Arabia. GAC noted that there are no “existing permits or pending applications that would be of concern under the standard robust risk assessment framework”. These 48 permit applications related to Saudi Arabia are ready for review and approval by GAC officials and consideration by the Minister of Foreign Affairs. It is not clear how quickly a decision will be made on these as Chrystia Freeland was just replaced by Francois-Philippe Champagne in a cabinet shuffle for Canada’s new minority government on November 20, 2019. The new Minister has plenty on his plate to deal with, including ongoing tensions with China.
Despite these latest developments, other potential obstacles to trade and investment between the two nations remain. On November 29, 2018, 17 foreign nationals from Saudi Arabia were added to Canada’s Magnitsky sanctions list as a result of the Canadian government’s review of their role in gross violations of internationally-recognized human rights, and specifically the torture and extrajudicial killing of Saudi journalist Jamal Khashoggi. Canadians are now generally prohibited from engaging in any dealings involving these blacklisted persons.
Further, the trade and investment restrictions against Canada as announced by Saudi Arabia in 2018 remain in force. The GAC departmental briefing as well as our latest discussions with Canadian embassy officials in Riyadh indicate that these restrictions have continued in sectors where the Saudis have been able to source effective substitutes for Canadian products and expertise, while in other areas business continues to proceed. Accordingly, Canadian businesses will need to asses the opportunities in Saudi Arabia on a case-by-case basis.