In order to implement its commitments under the 2008 international Convention on Cluster Munitions, the federal government enacted the Prohibiting Cluster Munitions Act (the “Act”), which came into force in March 2015. The Act prohibits the use, development, production, acquisition, possession, importation or exportation of cluster munitions, explosive submunitions and explosive bomblets (collectively, “cluster munitions”). The Act also prohibits attempting to commit, or aiding, abetting, counselling or conspiring to commit, such a prohibited action or providing assistance after a prohibited action.

While federal government representatives have previously asserted that direct and intentional investments in entities that engage in an action prohibited by the Act would be caught under the Act’s aiding or abetting prohibitions, the Act does not, in its current form, explicitly prohibit financial investments in cluster munitions. However, amendments to the Act have been proposed which, if enacted, would explicitly prohibit individuals and organizations from providing financing or acquiring, whether as a shareholder or partner or otherwise, any pecuniary interest in an organization that has committed, or that has aided or abetted in the commission of, any act towards the development, production, acquisition, possession, importation or exportation of cluster munitions.

The bill containing the proposed amendments passed its third reading in the House of Commons earlier this year and, after passing its second reading in the Senate, was referred to the Senate’s Standing Committee on Foreign Affairs and International Trade. We will continue to monitor and report on the proposed amendments to the Act. In the interim, we encourage all of our portfolio and fund manager clients to assess whether any potential investments on their horizon may be impacted by the proposed amendments.