Canada’s “Unilateral” Sanctions Regime Under Review: Extraterritoriality, Human Rights, Due Process, and Enforcement in Canada’s Special Economic Measures Act
Michael Nesbitt
In the Fall of 2016, the House of Com- Au cours de l’automne 2016, le Comité mons Standing Committee on Foreign permanent des affaires étrangères et Affairs and International Development du développement international de began a critical review of Canada’s la Chambre des communes a entamé “unilateral” sanctions legislation, the un examen critique de la législation Special Economic Measures Act (SEMA), imposant des sanctions « unilatérales », which culminated in the Justice for intitulée Loi sur les mesures économiques Victims of Corrupt Foreign Officials Act spéciales (LMES), lequel a abouti à la
(Sergei Magnitsky Law). This resulted in Loi sur la justice pour les victimes de 2017 CanLIIDocs 119 the first legislative amendment toSEMA dirigeants étrangers corrompus (loi since 1992 when the legislation was first de Sergueï Magnitski). Cet examen a passed. While the impetus for the legis- entraîné la première modification légis- lation’s re-evaluation was rightfully the lative à la LMES depuis 1992, soit l’année debate around the so-called Sergei Mag- où la loi a été adoptée pour la première nitsky Laws — amendments that allow for fois. Bien que soit le débat entourant ce the sanctioning of human rights abusers qu’on nomme les lois Magnitski, soit les abroad particularly in Russia — Parlia- modifications qui autorisent la puni- ment should now go much further with tion des responsables d’atteintes aux regards to SEMA. It is time not only to droits humains à l’étranger, et particu- amend SEMA to clarify that sanctions lièrement en Russie, qui ait déclenché can be promulgated where gross human cette réévaluation, le Parlement devrait rights abuses are taking place abroad, maintenant aller beaucoup plus loin en but also to allow for “double” extraterri- ce qui a trait à la LMES. Il est temps de torial sanctions against covert “sanc- modifier laLMES , non seulement en vue tions-busters.” That is, future legislative de préciser que des sanctions peuvent amendments should take account of être imposées lorsque des violations modern business practice, recognize manifestes des droits de la personne ont that Canada is a hub for sanctions-bust- lieu à l’étranger, mais également de per- ing, and close the loophole that currently mettre des sanctions extraterritoriales exists in SEMA, preventing Canada « doubles » à l’encontre des « briseurs from targeting companies in non-sanc- de sanctions » clandestins. Cela dit, tioned countries in the business of les modifications législatives futures transshipping goods between Canada devraient en outre tenir compte des pra- and sanctioned countries. Moreover, the tiques commerciales modernes, recon- Parliamentary attention to economic naître que le Canada est une plaque sanctions is an opportunity to take a tournante pour les briseurs de sanctions broader look at SEMA and particularly et colmater la brèche qui, dans la LMES,
509 the practice of enacting and enforcing empêche actuellement le Canada de new sanctions. This paper recommends cibler des entreprises qui, dans des a sanctions coordination unit to ensure pays non frappés de sanctions, font le proper interdepartmental security commerce du transbordement de mar- cooperation on the SEMA sanctions chandises entre le Canada et les pays file, coupled with proper governmental sanctionnés. Qui plus est, l’attention oversight or review, and statutorily- que le Parlement accorde aux sanctions mandated review of all sanctions listings économiques est une occasion d’exami- every two years. It is time to bring ner de plus près la LMES et, en particu- SEMA into the twenty-first century, and lier, la pratique consistant à adopter et with it, government practice imple- appliquer de nouvelles sanctions. Dans menting and enforcing the legislation. cet article, on recommande la formation This will require some changes to the d’une unité responsable de coordonner legislation, but also a myriad of changes les sanctions afin d’assurer une coopé- to government practice on the file. ration interministérielle adéquate en matière de sécurité à l’égard des sanc- tions prévues par la LMES, combinée à 2017 CanLIIDocs 119 un mécanisme adéquat de surveillance ou d’examen gouvernemental, et à un examen prévu par la loi, tous les deux ans, de toutes les listes de sanctions. Le temps est venu de faire entrer la LMES au 21e siècle de même que les pratiques gouvernementales de mise en œuvre et d’application de la loi. Il faudra, pour ce faire, apporter certaines modifications à la loi, en plus d’une myriade de change- ments aux pratiques gouvernementales en cette matière.
510 CONTENTS
Canada’s “Unilateral” Sanctions Regime Under Review: Extraterritoriality, Human Rights, Due Process, and Enforcement in Canada’s Special Economic Measures Act Michael Nesbitt
Introduction 513
I. The Path Ahead: The Focus and Scope of this Paper 515
II. An Introduction to Canadian Sanctions, SEMA, its Purposes, and its Scope 517
A. What Are SEMA Sanctions and When Are they Used? 517 2017 CanLIIDocs 119 B. Justifications forSEMA : What Good Are Canada’s Economic Sanctions? 518 C. When Has Canada Traditionally Been Authorized to Enact Sanctions under SEMA? 521 D. SEMA: Who Might Be Listed and Why? 526 E. Enforcing SEMA: Powers and Punishments 527
III. Canada’s Legal Enforcement of SEMA Regulations: The Lee Specialties Case Study 529
IV. Section 4(1) of SEMA and its Territorial Limitations 535 A. Legislative History and SEMA’s Territorial Limitations: Sovereignty, Territoriality, and (Double) Extraterritoriality 535 B. Parliamentary Review: Time for a Different Decision on Extraterritoriality 541 C. The First Three Justifications for Double-Extraterritoriality: Why the Predominate Justifications for Excluding Double‑Extraterritorial Power Hold Little Water 542 1. Double-Extraterritorial Sanctions and the Unilateral/ Multilateral Implementation Debate 542 2. International Law Surrounding Sovereignty Does Not Prohibit Double‑Extraterritoriality 544 3. Manageable Political Risk to Double-Extraterritoriality 546 D. The Fourth Justification for Double-Extraterritoriality: WhySEMA Should be Amended to Include such an Authority 551
511 V. A Further Jurisdictional Limitation: SEMA and the Sanctioning of Human Rights Abusers 555 A. SEMA Section 4(1): The Power to Target Human Rights Abusers and the Indeterminate (Existing) Threshold for Resorting to Sanctions 555 B. Why the Government Was Right to Clarify the Situation 561
VI. Some Remaining Considerations for Parliament: Due Process, Enforcement, and the Substance of SEMA Regulations 569 A. The Process of Listing Entities under SEMA 570 B. Government Silos and SEMA: Enforcement and Oversight 572
Conclusions 575 2017 CanLIIDocs 119
512 Canada’s “Unilateral” Sanctions Regime Under Review: Extraterritoriality, Human Rights, Due Process, and Enforcement in Canada’s Special Economic Measures Act
Michael Nesbitt*
INTRODUCTION 2017 CanLIIDocs 119 The House of Commons Standing Committee on Foreign Affairs and International Development (Standing Committee) announced on June 9, 2016, that they would immediately undertake an evaluation of Canada’s sanctions legislation, and specifically the Special Economic Measures Act (SEMA).1 True to their word, the Standing Committee heard testimony on possible amendments to SEMA throughout the fall of 2016 and into 2017. This work helped usher in the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) (Magnisky Law),2 which inter alia makes amend- ments to SEMA. It received Royal Assent on 18 October 2017.3
* Dr. Michael Nesbitt, Assistant Professor of Law with the University of Calgary, Faculty of Law, and a Fellow with the Centre for Military, Security and Strategic Studies. I would like to thank Meagan Potier for truly exceptional research assistance. This paper benefited greatly from all of her insight, positivity, attention to detail, and diligence. Thanks are also due to the three anonymous reviewers as well as the editorial board of the Ottawa Law Review. Finally, I would like to thank the University of Calgary, Faculty of Law for the finan- cial assistance that made the completion of this project possible. All errors and omissions are, of course, solely those of the author. 1 See Special Economic Measures Act, SC 1992, c 17 [SEMA]. Note that the Standing Committee also reviewed the Corruption of Foreign Public Officials Act, SC 1998, c 34, though for the purposes of this paper, the focus will remain on the broadest sanctioning authority, SEMA. 2 Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law), SC 2017, c 21 [Mag- nitsky Law]. 3 The Magnitsky Law passed through the House by a vote of 277–0 on 4 October 2017. (See Bill S-226, An Act to provide for the taking of restrictive measures in respect of foreign nationals responsible for gross violations of internationally recognized human rights and to make related amendments to the Special Economic Measures Act and the Immigration and Refugee Protection Act, 1st Sess, 42nd Parl, 2017 (assented to 18 October 2017).
513 514 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 Such a review and update of SEMA was both long overdue and particu- larly salient. In the past decade, Canada has been increasingly turning to international sanctions as a foreign policy tool. Economic sanctions have been employed against rogue governments in Iran, Syria, Russia, Burma, and elsewhere. Sanctions have become the stick in the diplomatic toolkit, a sharp contrast to the usual carrots or negotiated deals employed by Can- ada’s Foreign Service. Canada’s international economic sanctions against Iran and others are also increasingly being debated in diplomatic and cor- porate halls, and recently have made their way into the public conscious- ness, for example, when Canadian and American sanctions on Iran were eased in January 2016, in response to a nuclear accord with that nation. The so-called Magnitsky Law, which now allows Canada to target human rights abusers, particularly those in Russia, with economic sanctions for the first time under SEMA, has helped bring all of this to a head.4
According to Parliament, the crux of the issue with respect to SEMA 2017 CanLIIDocs 119 has been whether Canada should be empowered to levy economic sanc- tions on human rights abusers in foreign countries. But much more not considered in the Magnitsky Law must be done to improve SEMA. Times have changed since SEMA was first introduced in 1992, and the legislation has been far from a success, at least as measured by its ability to sustain prosecutions in Canada. Yet, this is the first governmental review of SEMA, despite increasing pressure from Canada’s allies to get with the times and improve the legislation and, particularly, its enforcement. Unfortunately, the lack of governmental attention has been mirrored by a lack of serious academic attention: there is precious little academic research — particularly legal research — available to help it analyze SEMA and its effectiveness. This paper seeks, at the very least, to shed some light on the historical debates around SEMA, the prosecutorial actions taken under the legislation to date, and how the more salient — and controver- sial — aspects of SEMA have been legally interpreted. It provides some suggestions for amendment and study that include, but go well beyond, SEMA’s application to human rights abusers. In particular, this paper
4 The Magnitsky Act has the goal of seeing countries punish violators of international human rights norms through sanctions, particularly in Russia in the case of Sergei Magnitsky (see supra note 2). For background, see e.g. Irwin Cotler, “Canada Needs a ‘Magnitsky’ Law to Take on Human-Rights Violators”, The Globe and Mail (10 June 2015), online:
argues that it was the right course of action to amend SEMA to allow Can- ada to enact Magnitsky Law sanctions where serious violations of human rights have taken place. But it is now also time to go beyond these reforms and to target extraterritorially, that is, to allow for the targeting of enti- ties or individuals in third-party states engaged in the deliberate circum- vention of Canadian sanctions. The government should also seize the opportunity provided by its review of SEMA to ensure that the listing of individuals and entities affords proper due process protections, including an amendment to provide for a review of all listings two years after they come into force, and every two years hence. A statutorily-mandated inter- departmental sanctions coordination unit should also be inaugurated, both to ensure proper due process in the listing procedures, and effective investigative and enforcement action. Finally, a review or oversight body should be considered, as there is currently no independent oversight of
Canada’s sanctions procedures. If these suggestions are not eventually 2017 CanLIIDocs 119 accepted by Parliament, hopefully, the discussion herein can, at the very least, bring some of the potential issues with SEMA to light and, perhaps, provide some grist for future debate.
I. THE PATH AHEAD: THE FOCUS AND SCOPE OF THIS PAPER An overview of Canada’s sanctions “system,” which includes import and export controls, country-specific sanctions, sanctions on corrupt for- eign officials, and even terrorist listing regimes, is a worthy though major undertaking,5 and beyond the scope of this paper. Instead, I propose to focus specifically on those most commonly used sanctions, those that tar- get specific countries and the people and entities therein, rather than sanc- tions targeting only a particular terrorist group6 or banning the import or export of potentially dangerous goods regardless of origin or destination.7 Moreover, I will limit my discussion to what I call “unilateral sanctions”
5 Canada has a number of tools to prevent trade with foreign countries or the listing of indi- viduals See e.g. Export and Import Permits Act, SC 1985, c E-19, s 3; the terrorist listing pro- visions including the listing regime under the Criminal Code, RSC 1985, c C-46, s 83.05(9); United Nations Al-Qaida and Taliban Regulations, SOR/99-444 [Al-Qaida Regulations]; Regula- tions Implementing the United Nations Resolutions on the Suppression of Terrorism, SOR/2001- 360 [Suppression of Terrorism Regulations]. 6 For an example of these “sanctions,” see the Al-Qaida Regulations, supra note 5. 7 See e.g. Export and Import Permits Act, supra note 5. With the passage of the Magnitsky Law, supra note 2, during the final edits of this paper, much analyses of that particular legis- lation will likewise be left for a later date. 516 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 under SEMA, that is, those sanctions imposed by Canada not in fulfillment of an international obligation, but because Canada has taken a strategic decision to limit transactions with a specific country.8 This is to say that I will limit my discussion to sanctions promulgated under the authority of SEMA. I do so for four reasons. First, and arguably a sufficient reason on its own, shortly before publication of this article, Can- ada passed the Magnitsky Law, which included amendments to SEMA to allow it to target “gross and systemic violations” of international human rights for the first time. Yet, there is a sparse independent, academic rec- ord of materials — that is to say, materials produced outside of govern- ment — on which Parliament was able to draw to evaluate the merits of this legislative amendment. This paper strives to remedy this, at least in small measure, and to clarify that from a legal perspective, this amendment was long overdue. Second, in the past several years, when the media run stories
on international sanctions, they generally refer to country-specific, unilat- 2017 CanLIIDocs 119 eral restrictions promulgated under the authority of SEMA. For example, when the Magnitsky Act to punish human rights abusers in Russia was in the media in 2016 and 2017,9 or the Syria sanctions came into effect, or concern arose over what to do about Canada’s sanctions on Iran when the United States (US) lifted some of its sanctions under its commitments to an Iran nuclear deal,10 SEMA was implicated first and foremost, and that will continue to be the case moving forward. Third, while there has been extensive academic discussion of the merits and demerits of terrorist list- ing regimes, most are promulgated to fulfill UN Security Council obliga- tions — for example, those restrictions targeting specific groups like the Taliban or al-Qaida.11 Canada’s country-specific sanctions regime under
8 These so-called unilateral sanctions might be contrasted with related sanctions enacted under the authority of the United Nations Act, RSC 1985, c U-2 [UN Act], the Al-Qaida Regulations, supra note 5, and the Suppression of Terrorism Regulations, supra note 5. Both Regulations target individuals in a non-country specific manner; they implement UN Security Council decisions that individuals should be listed for their connection to terrorist organizations. 9 See e.g. Cotler, supra note 4. 10 For an overview of the controversy that arose and some of the problems that followed, see Michael Nesbitt, “Canada-Iran Relations: Sanctions, Diplomatic Relations, Booby-Traps and the Law” (22 January 2016), Ablawg, online:
SEMA have not received the same attention. There is an inequality of arms in terms of the attention given to two regimes that, frankly, share many similar goals. Fourth, although there is great overlap between the various legislative restrictions Canada places on the import, export, or transfer of goods and services that target countries, businesses, and/or entities, and people, the economic impact of SEMA sanctions on Canadians hits home in an acute way, particularly for diaspora communities whose small busi- nesses wish to continue to trade with their sanctioned home countries.12 With this in mind, the second part of this paper begins with an over- view of SEMA13 and the country-specific regulations promulgated there- under. In the third part, a case study of the only prosecution to date under SEMA puts the sanctions legislation and some of its shortcomings into perspective. The fourth part discusses the first major limitation ofSEMA , that being its strict territorial requirements. In the fifth part, this paper discusses the merits and demerits of the SEMA amendments to allow Can- 2017 CanLIIDocs 119 ada to sanction for human rights abuses. Finally, this paper concludes with a discussion of several discrete issues related to enforcement and due pro- cess under SEMA, with a particular view to both improving enforceability, due process, and transparency of SEMA’s listing processes.
II. AN INTRODUCTION TO CANADIAN SANCTIONS, SEMA, ITS PURPOSES, AND ITS SCOPE A. What Are SEMA Sanctions and When Are they Used? SEMA is Canada’s umbrella “unilateral” sanctions legislation.14 By virtue of section 4, the Governor-in-Council — in practice, the Minister of For- eign Affairs — has the authority to promulgate regulations that impose
addressed at the European Court of Human Rights in Kadi and Al Barakaat International Foundation v Council and Commission v Commission, C-402/05, [2008] ECHR 6351. 12 For a good overview of the types of sanctions that are available to a country and when and why they might be used, see Department for International Trade, Sanctions, Embargoes and Restrictions (31 March 2016), online: United Kingdom Government
(somehow) been deemed by the Governor-in-Council to be a “threat to 2017 CanLIIDocs 119 international peace and security.”16 Significantly, determining whether there has been a threat to inter- national peace and security and whether a country should be sanctioned as a result, is uniquely Canadian. That is, the regulations targeting specific nations are promulgated by virtue of a sovereign Canadian determina- tion — usually made in cooperation with allies such as the United States (US) and the European Union — and not because a third-party has deter- mined that Canada is required to act. By way of contrast, Canada’s sanc- tions enacted under the umbrella of the United Nations Act are mere implementations of United Nations (UN) requirements. The UN Security Council will call on states to sanction a country — or group — and, as part of the implementation of our duties to the UN as legislated in the UN Act, Canada enacts regulations giving effect to the UN requirements.17
B. Justifications forSEMA : What Good Are Canada’s Economic Sanctions? Whether or not unilateral economic sanctions exert enough targeted economic pressure to alter state behaviour, particularly the behaviour of
15 Global Affairs Canada,Current Sanctions Imposed by Canada (22 April 2016), online:
non-democratic regimes, is a source of some controversy.18 Still, current research, both anecdotal and otherwise, suggests that, at the very least, some sanctions, some of the time, are effective in altering state behaviour, particularly when states collaborate in their implementation.19 The most obvious and oft-cited example of successful sanctions is the international regime imposed on Apartheid South Africa in the 1980s.20 More recently, the tough sanctions imposed by the US, Canada, and the European Union on Iran resulted in a 2015 “nuclear accord,” whereby Iran granted unprecedented access to its nuclear sites in exchange for an easing of international sanctions.21 Cause and effect are hard to prove empirically in both cases. However, the economic crises in both countries, the corres- ponding change in state behaviour after the imposition of comprehensive sanctions, and the subsequent state demands for the easing of sanctions combine to give a good sense that economic sanctions played an import-
ant role in changing state behaviour. 2017 CanLIIDocs 119 Of course, even if sanctions might be successful, the corollary ques- tion for Canada and others is: when do sanctions exert enough specific, targeted pressure to change behaviour? Unfortunately, this question has no clear answer. More troubling, it seems that no Canadian department is studying the effectiveness of existing sanctions or when and how they might be used to alter behaviour. The government has issued no public papers on this topic, and Global Affairs Canada’s (GAC) website does not advert to the issue. It is also unclear whether the issue is even evaluated
18 For criticisms of the effectiveness of US sanctions, see Dursun Peksen, “Better or Worse? The Effect of Economic Sanctions on Human Rights” (2009) 46:1 J Peace Research 59; Joseph J Collins & Gabrielle D Bowdoin, Beyond Unilateral Economic Sanctions: Better Alternative for US Foreign Policy (Washington: Centre for Strategic and International Stud- ies, 1999) at 1, 10; Gary Clyde Hufbauer & Barbara Oegg, “Economic Sanctions: Public Goals and Private Compensation” (2003) 4:2 Chicago J Intl L 305. Contra Janie Chuang, “The United States as Global Sheriff: Using Unilateral Sanctions to Combat Human Traf- ficking” (2006) 27:437 Mich J Intl L 437; Sarah H Cleveland, “Norm Internalization and U.S. Economic Sanctions” (2001) 26:1 Yale J Intl L 1. 19 See e.g. Hufbauer & Oegg, supra note 18. 20 For an in-depth analysis of the sanctions in South Africa, see Bronwen Manby, “South Africa: The Impact of Sanctions” (1992) 46:1 J Intl Affairs 193. For a discussion on inter- national norm internalization in South Africa, see Audie Klotz, “Norms Reconstituting Interests: Global Racial Equality and US Sanctions Against South Africa” (1995) 49:3 Intl Organization 451. Contra Philip I Levy, “Sanctions on South Africa: What Did They Do?” (1999) 89:2 American Economic Assoc Papers & Proceedings 415. 21 For greater discussion on this topic, see Nesbitt, “Canada-Iran Relations”, supra note 10. For more information on the joint initiative see US Department of State, Joint Comprehen- sive Plan of Action, online:
22 See Government of Canada, Archived — Communique by the Friends of the Syrian people Inter- national Working Group of Sanctions (25 June 2013), online:
C. When Has Canada Traditionally Been Authorized to Enact Sanctions under SEMA? In terms of the types of situations that would justify the promulgation of sanctions for the aforementioned purposes, SEMA’s legislative history has the following to say:
Historically, Canadian governments have been guided by three basic prin- ciples in the application of economic sanctions. First, they have sought broad international agreement on the necessity and usefulness of sanc- tions. Second, they have insisted that the burden of sanctions be shared among the countries imposing them. Third, they have made every effort to avoid placing Canadian businesses and workers at a disadvantage in relation to their foreign competitors. Nothing in [SEMA] would require a departure from any of these principles.25 2017 CanLIIDocs 119 However, the actual language adopted in 1992 was much stricter than the principles elaborated above. Specifically, up until 18 October 2017 when the Magnitsky Law amended, inter alia, SEMA, section 4(1) of SEMA lim- ited the Governor-in-Council’s authority to promulgate sanctions in the following way:
[F]or the purpose of implementing a decision, resolution or recommenda- tion of an international organization of states or association of states, of which Canada is a member, that calls on its members to take economic measures against a foreign state, or where the Governor in Council is of the opinion that a grave breach of international peace and security has occurred that has resulted or is likely to result in a serious international crisis.26 Although this provision appears quite broad, depending on the interpretation given to it — and GAC seems to have read it in a restrictive fashion27 — section 4(1) has throughout its history seriously constrained the situations in which
25 Committee Hearings, supra note 23 at 1545 (Mr Mawhinney). 26 SEMA, supra note 1, s 4(1). The Magnitsky Law amendment to SEMA, and the necessity therefor, will be discussed infra at pages 561–69. 27 See infra note 47 for a discussion of GAC’s (formerly Department of Foreign Affairs and International Trade) interpretation of section 4(1) to restrict its authority to impose uni- lateral investment sanctions. For a discussion of this restrictive reading of section 4(1), see Craig Forcese, “Human Rights Mean Business: Broadening the Canadian Approach to Busi- ness and Human Rights” in Isfahan Merali & Valerie Oosterveld, eds, Giving Meaning to Economic, Social, and Cultural Rights (Philadelphia: University of Pennsylvania Press, 2001) 71 at 91–93 [Forcese, “Human Rights Mean Business”]. 522 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 Canada might act. Put simply, section 4(1) stated that Canada could only promulgate sanctions regulations if either: (i) an international organiza- tion to which Canada is a member “calls” on it to do so, the most relevant example being the UN Security Council specifically requiring sanctions;28 or (ii) Canada determines that “a grave breach of international peace and security has occurred” and this breach “has resulted or is likely to result in a serious international crisis.”29 In practice, only the latter authority has been relevant under SEMA to date. The reason is simple: while any international organization to which Canada is a member may call on Canada to sanction a foreign state, in practice, the UN Security Council has made the call. When the UN Sec- urity Council calls on Canada to act, Canada generally responds by way of regulations enacted under authority of the UN Act, as discussed above.30 So Canada has tended to implement “unilateral” sanctions under SEMA’s
authority and UN sanctions under other regulations pursuant to the UN 2017 CanLIIDocs 119 Act. For this reason, Canada actually has two sets of regulations sanc- tioning Iran: one (“unilateral”) set of sanctions enacted under SEMA and another pursuant to the UN Act and Canada’s obligations thereunder.31 It is thus the section 4(1) authority to act when there is a threat to international peace and security on which we will focus in order to under- stand the history of Canadian sanctions under SEMA and indeed the way in which the Magnitsky Law amends SEMA. The relevant language in this regard was largely borrowed from the UN context.32 In particular, the phrase “threat to international peace and security” is usually associated with Chapter VII of the UN Charter,33 which allows the UN Security Coun- cil to authorize coercive actions, including the use of force, when there
28 Note that this is fully redundant of the UN Act’s authority to implement UNSC-mandated sanctions. The legislative history of Bill C-53 (SEMA) indicates that this redundancy was intended to create overlap in terms of whether UNSC-mandated sanctions would be implemented under the UN Act, supra note 8, regulations or regulations promulgated under SEMA. See Committee Hearings, supra note 23 at 1:14. 29 SEMA, supra note 1, s 4(1). 30 In theory, Canada could certainly implement Security Council sanctions via SEMA as well. 31 For an explanation of the difference between the sets of regulations, see Global Affairs Can- ada, Canadian Sanctions Related to Iran (5 February 2016), online:
has been a threat to international peace and security.34 However, there is little agreement on the precise meaning of the term in international law.35 At a very basic level, the phrase has traditionally been interpreted to include situations of international armed conflict. More recently, it has included internal armed conflict as well.36 Regardless, Canada has seem- ingly taken its own approach to interpreting the phrase. As a result, let us focus on the history of Canada’s interpretation. When SEMA was introduced in 1992, and its scope and focus were being debated, Lloyd Axworthy, then MP for Winnipeg South Centre, stated:
The interpretation of that grave international crisis [wording] is exclu- sively, again, an executive judgment. It could be anything from an outbreak of violence to a major ecological disaster, presumably. Let’s say somebody was pumping oil into the ocean and we wanted to stop them. But that interpretation is not spelled out in [SEMA] in any way, is it?37 2017 CanLIIDocs 119 In response, the Legal Advisor (top legal official) at what was then Exter- nals Affairs stated:
No, it is not, and I think it would be very difficult to set out a set of criteria, which would virtually have to be as inexhaustible as the types of situa- tions that might arise. It is very clear that the policy aspects of this are not addressed in the act. What the act attempts to do is to set out two broad thresholds. But I would be foolhardy as an individual and even more as an official to speculate on what the particular situation might be that would trigger this threshold. The threshold is designed to describe in a broad way the two areas where the government would feel compelled to act.38 In the end, Axworthy proposed an amendment to the ‘grave threats’ pro- vision to clarify when it would apply in order to “broaden the application of the act.”39 The language would have allowed for sanctions “where the Governor in Council is of the opinion that grave violations of human rights have occurred in a foreign state and continue or are likely to continue.”40 However,
34 See e.g. UNSCOR, 69th Year, 7242nd Mtg, 2170 Res (2014). 35 Krisch, supra note 32 at 1275. 36 Ibid at 1282–83. 37 Committee Hearings, supra note 23 at 1605 (Axworthy). 38 Ibid at 1605 (Mawhinney). 39 House of Commons Debates, 34th Parl, 3d Sess, vol 8 (5 May 1992) at 10149 (Hon Lloyd Axworthy) [Debates]. 40 Ibid at 10150 [emphasis added]. Using an example that strikingly mirrors a situation that continues today, Axworthy stated: “Once again we have seen with the actions of the Kurds 524 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 the proposed amendment was not adopted at least in part because of con- cern that “violations of human rights” was too broad a term, and given that Canada could act without multilateral institutional backing under SEMA, a higher threshold should exist.41 So by virtue of SEMA’s legislative history, we know that a (relatively) high threshold must be met in order to find a breach of international peace and security. But what has this high(er) standard meant in practice? Unfortunately, the tension with regard to how Canada has interpreted the phrase “threat to international peace and security” has not been resolved by transparent government practice. Successive governments have not tended to explain specifically why a sanctioned country was deemed a threat to international peace and security. Nor does Canada release its legal opinions — or parts thereof — which otherwise would help explain how it came to determine that a country is a threat to international peace
and security. 2017 CanLIIDocs 119 As Professor Craig Forcese noted fifteen years ago, there is neverthe- less evidence to suggest that government lawyers have traditionally taken the view that SEMA section 4(1) “would require a trans-border conflict and cabinet would be acting improperly to impose sanctions in the absence of such a conflict.”42 In 2009, Alan Kessel, then Legal Advisor to Foreign Affairs’ Legal Bureau, seemed to buttress this conclusion in his writings in the yearly review of Canadian Practice in International Law: “[Section 4(1)] may be a more onerous standard than that which appears in the UN Charter for Security Council action.”43 He went on to explain that not only is SEMA’s standard higher than in the UN context, but the UN standard is itself so high that the “Security Council has found actual breaches (as opposed to threats) in [four] instances.”44 Still, while Kessel was likely offering a version of GAC’s interpretative orthodoxy at the time, the interpretation remains hard to square with government practice. Looking at the countries currently listed, it can be surmised that some of them have been deemed threats by virtue of their serious international provocations, including Russia (sanctioned after it
in Iraq and the plight of minorities…that the issue of human rights is increasingly becom- ing a matter that extends beyond one’s boundaries as a matter of principle and as a matter of action” (ibid). 41 Ibid at 10151 (Benno Friesen). 42 Forcese, “Human Rights Mean Business”, supra note 27 at 92. 43 Alan Kessel, “Canadian Practice in International Law at the Department of Foreign Affairs and International Trade in 2008–09” (2009) 47 Can YB Intl Law 411 at 430. 44 Ibid. Canada’s “Unilateral” Sanctions Regime Under Review 525
moved into Ukraine’s sovereign territory), North Korea (sanctioned with respect to its nuclear program, at least in part), and Iran (sanctioned for its ballistic missile and nuclear programs). Some of the other listed countries, like Zimbabwe or Burma,45 are less self-evidently threats to international peace. One might guess that their designation under SEMA was influenced, at least in part, by their governments’ atrocious records of internal repres- sion and human rights abuses. Certainly, a cross-border conflict did not exist when the Burma or Zimbabwe sanctions were promulgated. So, SEMA’s historic language leaves us, on the one hand, with a clear intention to remit a great deal of discretion46 to the responsible Minister (technically the Governor-in-Council) for enacting sanctions under SEMA. On the other hand, we are left with an unqualified phrase — a “grave threat to international peace” — the ordinary reading of which would require meeting a high threshold before this broad discretion is properly exer- 47 cised. When put into practice, the implementation of SEMA language 2017 CanLIIDocs 119 would seem to go as follows: remit a high degree of discretion to the Min- ister to decide whom to sanction and when; require a “high threshold” of “threat to international peace and security” to meet the requisite standard for exercising discretion; and, recognize that a wide array of “threats” — which include inter-state and intra-state conflict, international provocations (without conflict), and possibly certain internal human rights provoca- tions — are capable of triggering the high threshold.
45 See Forcese, “Human Rights Mean Business”, supra note 27 at 92 (Forcese criticized the interpretation of SEMA at the time because it would not have allowed for sanctions against Burma that have since been adopted). See also Krisch, supra note 32. See also infra, note 96 and accompanying discussion. 46 The same has been said about the UN Security Council’s powers to determine a threat to international peace and security, that is, “the SC enjoys considerable discretion” (Krisch, supra note 32 at 1275). 47 Indeed, despite the discussion, the provision for a grave threat to international peace and security was never defined, namely: what it meant, what type of situations it was intended to cover, whether an international organization such as the UN Security Council had to make a finding, and whether the finding ever had to be justified to, and perhaps reviewed by Parliament. See Canada, House of Commons Debates, 34th Parl, 3rd Sess, No 7 (2 April 1992) at 1141–1155 (Jeffrey Grenville-Woods). Grenville-Woods stated the following: I would think my preference would be, for the case of clarity and predictability … [t]he finding of a breach of international peace and security by the international com- munity through one of these international organizations or associations of states is sufficient for a decision to implement economic sanctions by Canada. The question of serious international crisis is really much too subjective and too vague to be of any real use (ibid at 1150). 526 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 Put another way, in practice the Minister seems to have a great deal of discretion, and that discretion is not fettered by whether the conflict is domestic or international, or even if it is an active conflict. With that in mind, the “seriousness” of the situations, however defined, is clearly on the high end of any scale. In no situation is a country sanctioned merely for being authoritarian, or for the type of human rights abuses that are prevalent the world over, such as inhibiting freedom of speech by jailing dissidents or journalists, discriminating against ethnic, religious, cultural, or other groups, etc. In each case, there is either a serious threat of future conflict (as in the case of North Korea and Iran) or widespread and sys- tematic human rights abuses that include serious physical human suffering (Zimbabwe and Burma).
D. SEMA: Who Might Be Listed and Why? 2017 CanLIIDocs 119 SEMA subsection 4(1)(a) allows sanctioning regulations to contain such restrictions and prohibitions on trade and commerce as might be required by the government of Canada.48 In drafting the subsection, the idea was to grant the government as much discretion and flexibility as possible to determine the appropriate measures:
The Special Economic Measures Act would fill gaps in the existing [statu- tory] authority [under the UN Act] for economic sanctions and would enable the government to choose from among a broad range of meas- ures in order to apply those measures most appropriate in particular circumstances.49 To be clear, SEMA was not intended to impose specific criteria on the types of punitive economic measures that could be imposed.50 SEMA subsection 4(1)(b) then limits the scope of application of any sanctions, specifically requiring that they target a foreign state, a person in the foreign state, or “a national of that foreign state who does not ordin- arily reside in Canada.”51 We will come back to why this limitation is vitally important, but for now, it is sufficient to know that subsection 4(1)(b)
48 SEMA, supra note 1, s 4(1)(a) states: The Governor-in-Council may “make such orders or regulations with respect to the restriction or prohibition of any of the activities referred to in subsection (2) in relation to a foreign state as the Governor in Council considers necessary.” 49 Committee Hearings, supra note 23 at 1540. 50 Ibid at 1545. 51 See SEMA, supra note 1, ss 4(1)(b)(i)–(iii). Canada’s “Unilateral” Sanctions Regime Under Review 527
allows Canada to sanction only a foreign state, e.g. Syria or Russia, people in that state, or nationals of that state residing outside Canada. Country-specific regulations enacted under SEMA will then generally explain who may be “listed” in what is commonly section 2, though again who may be listed is territorially limited to the country targeted, its busi- nesses, or its citizens. The listing of individuals and entities is done on “reasonableness” grounds.52 Similarly, one can apply for delisting on rea- sonableness grounds,53 as well as a “permit” allowing for the shipment of otherwise restricted goods,54 or a “certificate,” which states that a person with the same name as a listed person is not, in fact, that listed person.55 What is usually section 3 of the country regulations lists “prohibitions,” which, in essence, function as an explanation of how far the sanctions reach into the economy of the targeted nation. For example, prohibitions can come in the form of arms embargoes, limitations or bans on financial
transactions, or import and/or export restrictions. 2017 CanLIIDocs 119
E. Enforcing SEMA: Powers and Punishments GAC is then “responsible for the administration and enforcement” of SEMA and its regulations.56 This responsibility creates some practical limitations in that GAC is neither an investigative department nor does it have enforce- ment powers. The result is that GAC determines when sanctions are to be enacted, drafts regulations and the legal opinions interpreting Canada’s obligations thereunder, and holds the pen on which individuals and entities are listed under the various country-specific regulations. However, although GAC is statutorily responsible for SEMA’s enforcement, in practice, the Canada Border Services Agency (CBSA) and the Royal Canadian Mounted Police (RCMP) “enforce” breaches of SEMA regulations by investigating and levying charges. The Federal Public Prosecution Service of Canada is in turn responsible for the ultimate prosecution of charges under the various SEMA regulations. SEMA section 8 then provides for a hybrid offence for the breach of country regulations:
52 See e.g. Special Economic Measures (Iran) Regulations, SOR/2010-165, s 2 [Iran Regulations]. 53 Ibid, s 11; Special Economic Measures (Russia) Regulations, SOR/2014-58, s 9. 54 Iran Regulations, supra note 52, s 4(4). 55 SEMA, supra note 1, s 6(1). 56 See ibid. 528 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2
Every person who willfully contravenes or fails to comply with an order or regulation made under section 4 [of SEMA] (a) is guilty of an offence punishable on summary conviction and is liable to a fine not exceeding twenty-five thousand dollars or to imprisonment for a term not exceeding one year, or to both; or (b) is guilty of an indictable offence and is liable to imprisonment for a term not exceeding five years.57 Clearly, the government has determined that sanctions breaches should, in certain circumstances, be taken very seriously. A five-year jail term would not be contemplated otherwise. It flows from this that the proper investigation and prosecution of Canadian operators who run afoul of SEMA regulations is thought fundamental to its ultimate value as a stick in the foreign policy tool-box. One does not ordinarily attach a weighty pen- alty to an offence, an indication of its seriousness, and then refuse to take the enforcement of the offence seriously. Teeth that are never used do not serve as a threat. It follows that in order to act as a deterrent, Canada must 2017 CanLIIDocs 119 be able to enforce its sanctions legislation in court, if necessary. Moreover, discrete prosecutions serve a signalling function, which we saw was one of the purposes of SEMA sanctions: they demonstrate that actors who run afoul of SEMA will be punished, and serve as a reminder of the existence of the Canadian sanctions to would-be sanctions busters (most often com- panies or individuals). Finally, recall that the intention behind SEMA was, in general, to install sanctions as part of a multilateral effort to exert economic pressure on a state to change its behaviour. Enforcement actions signal to Canada’s part- ners — primarily the US and the European Union — that Canada is uphold- ing its end of the bargain in a multilateral endeavour. It does a disservice to Canada’s reputation as a reliable partner in fighting rogue regimes, ter- rorist financing, and money laundering, if others see Canada as a laggard in enforcing its own (sovereign, unilaterally promulgated) laws. Unfortunately, Canada is indeed seen as a laggard in each of these areas.58 With respect to SEMA and sanctions-busting in particular, the
57 Ibid, s 8. 58 See Kent Roach, “The Air India Report and the Regulation of Charities and Terrorist Finan- cing” (2011) 61 UTLJ 45 at 48–50. For further discussion of specific tools Canada uses to counter terrorist financing, see Jeffrey Simser, “Terrorism Financing and the Threat to Financial Institutions” (2011) 14:4 J Money Laundering Control, 334–45. The Financial Action Task Force (FATF) has criticized Canada’s efforts to counter money-laundering, though comments that Canada is at a relatively low risk for terrorist financing as of 2008, when FATF last produced a report (FATP, Anti-Money Laundering and Counter-Terrorist Canada’s “Unilateral” Sanctions Regime Under Review 529
US59 and elsewhere — including within the Canadian Security Intelligence Service (CSIS) — suspect that Canada is a hub of transshipment of goods from the US to Iran and other locations,60 or of goods originating in Can- ada and ending in Iran.61 Canada is failing at enforcement and, in so doing, failing to uphold the purposes for which SEMA exists. With that in mind, let us now consider Canada’s sparse enforcement (prosecution) record under SEMA to see where, and perhaps why, Canada is failing.
III. CANADA’S LEGAL ENFORCEMENT OF SEMA REGULATIONS: THE LEE SPECIALTIES CASE STUDY Since 1992, there have not been any publicly reported prosecutions under SEMA,62 although, in 2014, a company called Lee Specialties pleaded guilty to violations under the Iran Regulations, the first and only charge levied to 63 date under any SEMA regulations. Of course, there could be many rea- 2017 CanLIIDocs 119
Financing Measures Canada: Mutual Evaluation Report (Paris: FTAP, 2016), online:
ment has been so difficult in Canada. This case reveals that, at least in part, 2017 CanLIIDocs 119 the lack of enforcement of SEMA in Canada is related to SEMA’s strict “territorial” requirements. Lee Specialties Ltd is a multimillion dollar manufacturer of oilfield equipment operating out of Edmonton. More specifically for the case at hand, they make Viton o-rings, which are essentially rubber circles that can be used in the oil industry and, worryingly in the Iran context, in nuclear programs. Given the vast oil reserves in both Alberta and Iran, Iran would seem a natural trading partner for such a manufacturer; but given Iran’s purported nuclear ambitions, one can also see why this export was of great concern to the government of Canada. The problem for Lee Specialties was that exporting Viton o-rings to Iran was unlawful in Can- ada at the time that it shipped the goods to Iran. As a result, Lee Special- ties, a multimillion-dollar company, received a $90,000 fine in return for pleading guilty to its breach of SEMA’s Iran Regulations. What is interesting about this guilty plea is the justification that was offered by Lee Specialties during sentencing — which was accepted by the court and the Prosecutor and led to a reduced sentence. Lee Specialties’
to Exporting Prohibited Goods to Iran”, Canadian Manufacturing (15 April 2014), online:
shipment was called a “mail-room mix-up.” According to a Globe and Mail article: “[t]he original order had the account address in Iran, but the shipping address in the United Arab Emirates. The account and ship- ping addresses were changed five times as Lee Specialties went back and forth … over the details of the shipment and payout.”67 Eventually the final “version of acknowledgment” listed a Dubai address for both the account and shipping address, but the cargo was accidentally sent to Tehran.68 In approving the $90,000 fine for this mix-up, presiding Judge Fradsham called Lee Specialties’ actions “an innocent thing.”69 However, on the admittedly limited facts available, it looks like the sen- tencing was reduced for one of two reasons, neither of which amounted to an innocent thing. Either (1) Lee Specialties sent the goods to Iran in violation of SEMA, but actually meant to ship the goods to Dubai knowing that they would be transshipped to Iran. Or, (2) Lee Specialties meant to
ship its goods to Dubai and was willfully blind to the likelihood that the 2017 CanLIIDocs 119 goods would then be transshipped to Iran.70 The distinction between (1) and (2) is minimal in practice; either way, engagement in a transshipping scheme, if proven in court, would have been unlawful under SEMA’s Iran Regulations, as they were at the time of the guilty plea.71 As of the date of the transaction in question, Iran Regulations section 4(1) stated that “[i]t is prohibited for any person in Canada and any Canadian outside Canada to export, sell, supply, or ship goods, wherever situated, to Iran, to a person in Iran, or to a person for the purposes of a business carried on in or oper- ated from Iran.”72 The key here is that it was unlawful to ship the o-rings to Iran, or to another person or country “for the purposes of a business carried on in or operated from Iran.” In other words, so long as the purpose was to help the company in Iran, it did not matter whether or not Lee Specialties meant to send the o-rings to Iran or to Dubai where they would be for- warded (transshipped) on to Iran.
67 Carrie Tait, “Mail-Room Mix-Up: How 30¢ O-Rings Became a $90,000 Fine”, The Globe and Mail (14 April 2014), online:
departments. 2017 CanLIIDocs 119 The second explanation for the reduced sentence is that nobody believed that Lee Specialties was under the impression that the goods were sent to Dubai ultimately for the “purposes of a business carried on in or operated from Iran.” But this interpretation would similarly reveal an important weakness in SEMA. On the facts available, the parties agreed that Lee Specialties was in negotiations about whether the goods should be shipped to Iran or elsewhere; Lee Specialties had discussed back and forth whether the importing company should be billed in Iran or else- where; the goods were ultimately sent to an address in Iran, where the negotiating partner was located; Lee Specialties’ lawyer admitted that the company had two addresses, one in Dubai and one in Iran, and Lee Specialties eventually settled on the Dubai location;73 and, the “original [billing] order had the account address in Iran, but the shipping address in the United Arab Emirates.”74 Moreover, as the Institute for Science and International Security’s Report on the incident states, even if an unwit- ting sales representative mistakenly listed Tehran as the shipping address, “the difference on the description of the goods and the actual content of the package suggests some level of knowing deception.”75 If prosecutors
73 See Graveland, supra note 63 (“‘That’s absolutely in our view what happened here. You have an accounting system that allows multiple addresses to go in,’ said lawyer Kristine Robidoux. ‘They have the same company name but two different addresses … one in Teh- ran and one in Dubai and so when it should have gone to Dubai, it went to Tehran’”). 74 See Tait, supra note 67. 75 See Albright & Stricker, supra note 63 at 2. Canada’s “Unilateral” Sanctions Regime Under Review 533
could not show under section 4(1) a “purpose” to benefit a company in a sanctioned country under this set of facts, it is hard to imagine a situation where a transshipment for the “purposes” of a company in or run by an individual in a sanctioned country would succeed.76 Put more generally, Canada got lucky in this case when the ultimate destination was accidentally listed as Iran instead of Dubai. If Lee Special- ties had simply sent the goods to Dubai as intended, and then on to Iran, then there is little evidence to suggest such a “transshipment” case would have been successfully prosecuted, if it were prosecuted at all. Instead, it appears that Canada is looking to direct transfers of goods and services to Iran, which is not how most sanctions evaders send things to Iran. Even if Canadian prosecutors showed the appetite to prosecute a transshipment case, which has not yet happened under SEMA, they could only have acted if border officials had evidence to suggest that the goods
would be shipped on to Iran. But how would a Canadian border official get 2017 CanLIIDocs 119 such information from the United Arab Emirates (UAE) or a country like Uzbekistan, which has minimal dealings and cooperation with Canadian officials? There are, again, two alternatives. First, Canada could rely on that third intermediary country to: (1) know that Canada prohibited the goods from being shipped through the inter- mediary to Iran; (2) identify the goods as coming from Canada, track them, then identify those same goods as continuing to Iran; and (3) be willing to inform Canada and, ideally, interdict the goods on Canada’s behalf. Even in this scenario, once the goods left Canada, it would be nearly impossible to act.77 The second, and more likely, alternative is for Canada to receive sur- veillance information from a source or ally nation that the goods are likely to be transshipped to Iran. But in this scenario, even if one could prove that the goods travelled from the original shipping address in the UAE to Iran, Canadian officials would then have to show that the Canadian seller
76 Only one prosecution under similar circumstances, though under the UN Act, supra note 8 regulations, did in fact succeed (see Yadegari, supra note 62 and accompanying discussion). 77 As will be discussed below at page 535, the US also might not be able to act after the goods left the country. But, in contrast to Canada, the US could use information about the trans- shipment to list the intermediary business in the third country in its sanctions. In so doing, the US would, like Canada, fail to interdict the goods the first time around, but the US would be able to take steps to avoid a repeat by listing the intermediary business. The US would then punish that company for wrongdoing and send a signal that sanctions-busting through transshipments, even where the goods make it across borders, will have conse- quences. Canada, as it stands, can do no such thing. 534 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 had reason to know that this transshipment would happen, that they were implicated in or wilfully blind to the scheme. The Lee Specialties case reveals that this knowledge might be very hard to prove and that Canadian courts or prosecutors might not be taking the threat of transshipment par- ticularly seriously. To add to the complexity, the evidence of intent to transship goods to Iran — particularly where the goods are stopped at the Canadian border before leaving port — will presumably come from secret intelligence, either obtained in Canada or abroad, likely in the Five Eyes community.78 We are then left with the now-famous ‘intelligence versus evidence’ dilemma, where the information needed to prosecute might not be disclosable in court, or at least the agencies holding it might not wish to disclose it.79 One can see in the result that, when it comes to enforcement, Canada has all its eggs in one basket under SEMA. Canada must hope that the
information available with respect to a single transshipment is sufficient 2017 CanLIIDocs 119 to support a prosecution or interdiction of that shipment and that ship- ment only. It must also hope that the particular information is of the sort that Canadian officials will be willing to use to support a prosecution. In other words, even if Canada receives word that goods are likely to be transshipped, whether that information will be both usable and con- vincing in court is another question entirely, and one that is not often answered in the affirmative. Taken together, one can see that there is good reason why Canada has one prosecution under SEMA in almost 25 years: as it stands, Canadian sanctions are easily circumvented by ship- ping goods through third-party countries.80
78 The “Five Eyes” is a collection of five nations (Canada, the US, the UK, Australia, and New Zealand) that cooperates on intelligence sharing. 79 See Kent Roach, “Secret Evidence and its Alternatives” in Aniceto Masferrer, ed, Post 9/11 and the State of Permanent Legal Emergency: Security and Human Rights in Countering Terrorism (New York: Springer, 2012) 179. Charkaoui v Canada (Citizenship and Immigration), 2007 SCC 9, [2007] 1 SCR 350, brought this issue into the public eye in Canada. The Criminal Code, supra note 5, s 83.06, deals with this dilemma in part by setting out a complex procedure by which secret information may be admitted, reviewed, and challenged. Of course, this procedure only covers intelligence that Canada intends to use to support its case. The more likely scenario is to abandon prosecution based solely on third-country information regard- ing a specific shipment. It is arguably easier to maintain a double-extraterritorial listing in this regard because Canada would not necessarily be solely reliant on information related to one particular shipment, but could justify sanctioning the company by cobbling together sufficient “reasonable grounds” from numerous shipments. 80 See Albright & Stricker, supra note 63 at 2 (the authors note that the number of inves- tigations may be a problem in the first place, “Canada’s lack of adequate outreach to Canada’s “Unilateral” Sanctions Regime Under Review 535
Of course, none of this makes prosecutions impossible. Enforcement agencies like CBSA must work in close collaboration with other agencies in order to successfully fight the transshipment of goods, something clearly of value to Canada. Parliament’s ongoing review of SEMA thus might be an opportunity for it, or for Canada’s bureaucracy, to review Canadian enforce- ment practices and reach out to our allies for greater cooperation. But, at the same time, one can get a sense of how hard it is to catch a case and prosecute, and likely why SEMA prosecutions have been so rare in Canada.
IV. SECTION 4(1) OF SEMA AND ITS TERRITORIAL LIMITATIONS Amongst the numerous practical difficulties with identifying and prosecut- ing sanctions evaders, the Lee Specialties case study reveals one particularly meaningful shortcoming in the existing SEMA architecture. As discussed,
SEMA sections 4(1)(b) and 4(2) ensure that Canada’s sanctions regime is 2017 CanLIIDocs 119 territorially limited. In particular, they stipulate that SEMA Regulations can target a foreign state, a person or entity in that foreign state, or a “national of that foreign state who does not ordinarily reside in Canada.”81 But they cannot target a business incorporated and residing in a third state by way of a listing. This is often called the territorial limitation of SEMA. These provisions mean that Canada cannot target third-party sanctions-busters for listing under its sanctions, which seems to have signalled to businesses, and to the court in Lee Specialties, that Canada is not particularly con- cerned with the transshipment of goods to sanctioned countries, some- thing for which international actors have castigated Canada.
A. Legislative History and SEMA’s Territorial Limitations: Sovereignty, Territoriality, and (Double) Extraterritoriality One way of understanding precisely what SEMA’s territorial limitation means in practice is to compare it with the US’ sanctions, which were themselves the impetus for the Canadian territorial limitation when SEMA was enacted in 1992. In contrast to Canada, the US has a vast, complex sys- tem of imposing economic sanctions, with both the Treasury Department and the State Department responsible for their own sanctioning rules and regulations, though they work in close cooperation through regular
companies and enforcement of export controls, including the use of string operations to target illicit procurement, may mean that such cases are more common than thought”). 81 SEMA, supra note 1, ss 4(1)(b), 4(2). 536 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 interdepartmental meetings to coordinate listings and investigations. To get to the heart of the matter, that being the Canadian approach to uni- lateral country-specific sanctions, US sanctions can have what is called “extraterritorial application.” For example, the US’s Foreign Sanctions Evad- ers list enumerates extraterritorial entities that are determined to have evaded US sanctions:
OFAC publishes a list of foreign individuals and entities determined to have violated, attempted to violate, conspired to violate, or caused a vio- lation of U.S. sanctions on Syria or Iran. It also lists foreign persons who have facilitated deceptive transactions for or on behalf of persons subject to U.S. sanctions. Collectively, such individuals and companies are called “Foreign Sanctions Evaders” or “FSEs.” Transactions by U.S. persons or within the United States involving FSEs are prohibited.82
In practice, this means that US sanction legislation focusing on a country 2017 CanLIIDocs 119 does not have to limit its listings strictly to operations or operators solely within that country, whereas SEMA does. Rather, if a third-party — be it a business or an individual — is working to transship goods between the US and a sanctioned state, that third-party from a third country can be listed as a sanctioned entity, meaning that American companies are restricted from trading with them. For the US government, the mere threat of putting a business on this list is often considered the best deterrence against sanction-busting activ- ities. For example, if the US knows goods are being transshipped from the US through Dubai and into Iran, but cannot track all possible goods being transshipped, then it can threaten the financial institutions allowing for the exchange of money or the shipping companies that it knows have, in at least one instance, taken goods into Iran by way of a transshipment scheme. The potential loss of business — the loss of access to the Amer- ican economy — can be enough to deter companies not just from dealing with known transshippers, but from undertaking even risky behaviour that might run afoul of US legislation. In practice, though it is not without its controversy, as we shall see, it is a logical, relatively economical, and effective means of enforcing the intention behind the US’s sanctions — to punish the economy of a nation or the limit the income of certain indi- viduals within that economy. So, if it makes sense from an enforcement
82 See US Department of the Treasury, Foreign Sanctions Evaders List, online:
83 Helms-Burton Act, Pub L No 104-114, 110 Stat 785 (1996). For some background on the legislation, its impact, and the perceived effect on Canada, see David M Shamberger, “The Helms-Burton Act: A Legal and Effective Vehicle for Redressing US Property Claims in Cuba and Accelerating the Demise of the Castro Regime” (1998) 21:2 Boston College Intl & Comp L Rev 497; Sahadeo Basdeo, “Helms-Burton Controversy: An Issue in Canada-US Foreign Relations” in Heather N Nicol, ed, Canada, The US and Cuba: Helms-Burton and its Aftermath (Kingston, Ont: Centre for International Relations, Queen’s University, 1999) 5; Barrry R Campbell, “Extraterritorial Sanctions in the Canada/US Context–A Canadian Perspective” (1998) 24:3 Can-USLJ 209; Andreas F Lowenfeld, “Congress and Cuba: The Helms-Burton Act” (1996) 90:3 AJIL 419. 84 See Committee Hearings, supra note 23. See also “Bill C-53, An Act to provide for the imposition of special economic measures”, House of Commons Debates, 34th Parl, 3rd Sess, No 8 (28 April 1992) at 1230 (Rob Nicholson) [Committee Hearings, No 8], particularly the statements by MP Nicholson: “If Canada believes it’s within its rights to impose its legal will on citizens, be they corporate or individual, within another sovereign country, then we’ve admitted that the United States has been right all along, that they’ve had a per- fect right to tell the Worthington Locomotive Company in Montreal that they shouldn’t build locomotives for export to Cuba, for instance” (ibid). 85 Foreign Extraterritorial Measures Act, RSC 1985, c F-29 [FEMA]. 86 SOR/92-584. This order deals specifically with US regulations on trade with Cuba. It is an “Order Requiring Persons in Canada to Give Notice of Communications Relating to, and Prohibiting Persons from Complying with, an Extraterritorial Measure of the United States that Adversely Affects Trade or Commerce Between Canada and Cuba” ibid( ). The 538 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 the impact of American “anti-Cuban” legislation;87 it was an act to nullify a practice and a concept that, at the time, Canada and other nations did not support. But it was not just the practice — and its effects on Canadian busi- nesses — that Canada objected to at the time. There were some legal con- cerns with the US’s use of extraterritorial sanctions — some of which persist today.88 In particular, Canada was concerned with the legality of using coer- cive economic measures to try to change the behaviour of a foreign, sover- eign nation. Indeed, SEMA’s history reveals a debate about the extent to which Canada could do it completely alone on sanctions — whether uni- lateral sanctions could ever be justified under Canadian or international law89 — with the government occasionally implying it cannot target coun- tries with sanctions unless its allies were acting as well.90 External Affairs, in particular, was struggling with reconciling the his-
toric supremacy of national borders and sovereignty with the recogni- 2017 CanLIIDocs 119 tion that countries regularly exercise extraterritorial powers. Times were changing, and sometimes extraterritorial powers should even be com- mended — as they would be only a few years later when the International Criminal Tribunal for the Former Yugoslavia was established. These legal concerns were articulated in 1992 by the head of then-External Affairs’ legal bureau, who was brought in to clarify to the House of Commons hearing participants the legal concerns with extraterritoriality:
Extraterritorial[ity] is not by itself something illegitimate to international law, it’s applied all the time. We have extraterritorial measures in our own statutes every day. That’s … how, for instance, in the Criminal Code you get at international terrorists … [The problem with extraterritoriality is] when it’s used to force your nationals to behave in a foreign territory in a way
other existing order under FEMA is Certain Foreign Extraterritorial Measures (United States) Order, 2014, SOR/2015-12. 87 For an article discussing a bit of this history and the introduction of FEMA, see Andrew C Dekany, “Canada’s Foreign Extraterritorial Measures Act: Using Canadian Criminal Sanc- tions to Block US Anti-Cuban Legislation” (1997) 28 Can Bus LJ 210. 88 See Committee Hearings, No 8, supra note 84 at 1235. 89 See Forcese, “Human Rights Mean Business”, supra note 27 at 92. “[S]ome policymakers are apparently of the view that unilateral investment sanctions are impermissible under Canadian law” (ibid). 90 Browder, supra note 4 (describes Minister Dion’s position with respect to the proposed Magnitsky legislation thusly: “Mr. Dion also explained his inaction by saying that Canada cannot work independently — that it must work with its allies and under recommenda- tions from the international bodies of which Canada is a member”). Canada’s “Unilateral” Sanctions Regime Under Review 539
which is contrary to the local laws or local governmental policy that you have a breach of comity, of respect for each other regarding international law. And those cases happen … in 5% of the extraterritorial instances … So by itself it’s not illegitimate. Its application in certain exceptional cases whereby usually the Americans don’t abide by the rules accepted by every- body else … that you have problems. In a way that explains why you need in legislation of this kind the possibility to apply law extraterritorial[ly] … I’m not going to write legal opinions which say the opposite of what we’ve always been saying, or start saying things such as if the Americans do it, it’s bad, but if Canada does it, it’s good.91 It is difficult to follow the implications of the legal reasoning here. There is no clear explanation of when and why the extraterritorial application of Canadian law goes from legitimate in the context of Criminal Code pro- visions on terrorism to illegitimate in the US extraterritorial application of its sanctions laws to other countries. It clearly has little to do with the 2017 CanLIIDocs 119 legal application of Canadian laws “used to force your nationals to behave in a foreign territory in a way which is contrary to … local governmental policy,”92 as the representative from External Affairs, Mr. April, asserted. If that were the case, then there would be legal problems with Canada’s current SEMA regime — which requires Canadian companies operating abroad to act a certain way — but there would be no troubles with US-style “extraterritorial” sanctions, which seek to punish foreign nationals in for- eign countries. Nevertheless, for External Affairs in 1992, it would seem that the US approach was a step too far: it did not merely exercise jurisdiction over its citizens in a foreign country, or over an individual or entity that existed in a sanctioned country, but over companies that otherwise existed in third — “innocent” — countries. And though not articulated at the time in cogent legal terms, the real problem External Affairs had with extraterri- torial sanctions was the application of foreign (US) laws to foreign (third- party) companies operating in foreign territories. But even here, Canadian sanctions under SEMA necessarily apply to foreign companies operating in foreign countries. By their very nature, sanctions are extraterritorially coercive; that is the point of sanctions.
91 “Bill C-53, An Act to provide for the imposition of special economic measures”, House of Commons, Minutes of Proceedings and Legislative Committee E on Bill C-53, 34th Parl, 3rd Sess, No 9 (29 April 1992) at 1655 (Lloyd Axworthy). 92 Ibid. 540 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 Were sanctions not coercive on foreign actors in foreign lands, they would necessarily be ineffective and thus unnecessary. Take the Canadian sanc- tions on Iran: any company operating in Iran (foreign company, foreign country) that can be tied to its ballistic missiles program, for example, can be listed under Canada’s sanctions legislation. The idea is to coerce Iran, and perhaps some of its companies and citizens, to behave differently. So, it is not really the legality of the extraterritorial sanctions that was the main concern. Rather, it was the political distinction between the sanctions regimes that was meaningful. Indeed, MP Nicholson, a lead- ing proponent of SEMA sanctions in 1992, indicated during the House of Commons hearings:
[w]e may decide there’s nothing wrong with extraterritoriality, in which case we certainly have no complaint when it happens here and we should move rapidly to repeal the Foreign Extraterritorial Measures Act. So I 2017 CanLIIDocs 119 think it’s almost a question of philosophical principle at the level of these examples.93 In the end, when SEMA was drafted, the government decided that the question of philosophical principle should be answered so as to exclude the power to introduce extraterritorial sanctions on third parties. But the Parliamentary Committee also did not fully agree with External Affairs’ implicit requirement for multilateral agreement before the introduction of Canadian sanctions. Instead, a compromise was reached. So, while Can- ada had moved to a unilateral sanctions regime for the first time, so-called extraterritorial sanctions were deemed a step too far. The drafters came out against the US sanctions on Canadian companies operating in Cuba and in favour of FEMA, although it was always more for political rather than legal reasons.
93 See Committee Hearings, No 8, supra note 84 at 1230 [emphasis added]. In response to the Conservative MP Nicholson at the time, Lloyd Axworthy stated: Mr. Nicholson, the whole development that gives rise to this bill is that there is a change in the notion of sovereignty. The international community, through international multi- lateral groupings such as the UN or others, are imposing a whole set of requirements upon individual countries … For the protection of human rights or a reduction of conflict or whatever it may be, the international community is now taking onto itself powers to intervene. What we’re trying to see here is a parallel development in commercial, financial, international law to keep pace with that evolution. I guess that’s where the conundrum hits. So I don’t think you can use as a base of your argument a defence of sovereignty. In fact ,… sovereignty is no longer what it used to be [ibid]. Canada’s “Unilateral” Sanctions Regime Under Review 541
B. Parliamentary Review: Time for a Different Decision on Extraterritoriality This time around, with the ongoing legislative review of and amendment to SEMA, a different logic should prevail with respect to extraterritorial sanctions. Let me explain by first clarifying precisely the type of sanctions that we have excluded in SEMA. Given that External Affairs was correctly treating sanctions as necessarily extraterritorial, the type of sanctions that were and are disallowed might be best explained as those exhibiting “double-extraterritoriality”; that is, Canada’s authority to act is limited in instances where a company in a third country trades with the sanctioned country. Canada’s authority, in other words, does not extend to the situa- tion to which FEMA largely responds. An example might better illustrate the point. If Canada chooses to
sanction Iran, then it is justified in doing so when Iran is deemed respon- 2017 CanLIIDocs 119 sible for a grave breach of international peace and security. Canadian sanctions have always targeted and continue to target foreign compan- ies in foreign countries through SEMA’s extraterritorial reach. But let us be very clear about what Canada is doing in this instance: it is list- ing a company in, say, Iran or Russia, or listing an industry in a foreign country, thereby prohibiting trade between Canada or a Canadian indi- vidual or company and that foreign industry or company. The target is extraterritorial, but SEMA does not criminalize that foreign target, nor does it allow Canada to sue the company in a foreign court. SEMA sim- ply limits trade between Canada and that company, individual, group, or industry (the entity). This, of course, does not mean that SEMA has no extraterritorial effect. Like any trade decision Canada takes — every time it extends preferential treatment to one country or industry and denies it to another — there will be losers. Indeed, the very goal of targeted sanc- tions is to create losers and hope that the effect will be to bring about a change in policy in the foreign country. As a nation, Canada, or at least successive Canadian governments, have become comfortable in the moral justification for using economic sanctions to punish people or companies in countries such as Apartheid South Africa, Iran, Russia under Putin, or others, to bring about needed change, or at least try to do so. In this way, SEMA is already extraterritorial to Canada because it applies to a foreign country’s people and businesses, though only insofar as they try to trade or conduct transactions with, in, or between Canada and a sanctioned country like Iran. 542 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 But what if a Canadian company is dealing with a company in the UAE, which in turn deals with a company in Iran? Well, SEMA prohibits the export of goods from Canada to the UAE and on to Iran because SEMA focuses on the “purpose” of the shipment. As discussed earlier, if the pur- pose of the Canadian company is to ship goods to Iran, then so long as CBSA can prove that purpose, they can stop the goods from leaving Can- ada for the UAE just as it could if the goods were going straight to Iran. However, just because that company in the UAE acts one time as a transshipper of goods between Canada and Iran does not mean that Can- ada can list the UAE company in its sanctions legislation, as the US might do. Each transaction involving the third-party — in this case, the company in the UAE — will have to be evaluated in its context in Canada, as was discussed in the Lee Specialties case study. In particular, without proof of both the connection of the exports to Canada and (extraterritorially)
to Iran as the importing nation, Canada will not extend the reach of its 2017 CanLIIDocs 119 legislation. Thus, the term double-extraterritoriality best describes the situation where the reach of Canada’s legislation would list as prohibited partners, not just Iranian companies (extraterritorially), but also those in companies in third, non-sanctioned countries (double-extraterritorially). Why is it time for SEMA sanctions to introduce double-extraterritorial authority? There are four primary reasons, though other reasons may exist as well. The first three reasons respond to the arguments that were origin- ally put forward — and have been used since — to justify SEMA’s limitation against double-extraterritoriality. The fourth reason explains (positively) why the authority to enact double-extraterritorial sanctions should be included in SEMA.
C. The First Three Justifications for Double-Extraterritoriality: Why the Predominate Justifications for Excluding Double‑Extraterritorial Power Hold Little Water 1. Double-Extraterritorial Sanctions and the Unilateral/Multilateral Implementation Debate First, it was argued in 1992 and for some time thereafter that when enact- ing economic sanctions, Canada must act multilaterally in the sense that it would be enacting sanctions only in concert with its allies, whether or not an international organization had asked it to act.94 As such, the argu-
94 See SEMA, supra note 1, s 4(1); see generally Committee Hearings, supra note 23. Canada’s “Unilateral” Sanctions Regime Under Review 543
ment went, there was no need for Canada to act extraterritorially because our allies would help cover the territorial gaps in SEMA. This argument relies first on the idea that Canada actually acts multilaterally in a way that would limit the need for double-extraterritorial sanctions, so let us start the rebuttal there. While the history of SEMA, as we saw, reveals debate about the extent to which Canada could truly enact “unilateral” sanctions, SEMA’s lan- guage contains no such limitations. Nevertheless, the legislative history is clear that there was an assumption that SEMA would be used in cases where Canada wished to act with its close allies. This debate should now be considered antiquated for several reasons. First, the 2007 sanctions against Burma have been called “the first non-multilateral sanctions under SEMA,”95 though the US had already sanctioned Burma and indeed the Canadian sanctions followed on the heels of an important update to 96 the US sanctions. Second, even where not already acting unilaterally, 2017 CanLIIDocs 119 the “multilateral” scope of Canada’s cooperation on sanctions has always been very limited, usually referring to Canada acting alongside the US or the US and Britain/the European Union. Third, there is no domestic or international legal reason why sanctions would be unlawful if enacted by Canada unilaterally but lawful if, say, the US acted to sanction the same country as well. This lack of legal reason is precisely why Canada enacted sanctions against Burma to relatively little fanfare, and certainly with no legal challenge. Fourth and finally, even when acting “multilaterally,” the extent to which Canada has actually enacted its sanctions in a coordinated fashion with its allies appears to be limited. This is true both with respect to the content and timing of Canada’s sanctions. So, for example, in the case of Canadian sanctions on Burma, Iran, and others, Canada enacted its sanctions long after the US had done so. In other words, Canada might and usually does act months or years after its allies, which is less a con- sistent multilateral enactment of sanctions and more of a wait and see approach by Canada. Next, the listed entities — the targets of the sanc- tions and even the reasons for targeting them — have consistently differed between Canada and its fellow “multilateral” actors. Put another way, the list of targeted entities is different in almost all cases between Canada and the US, and the justifications for why sanctions are levied can vary
95 Andrea Charron, “Canada’s Domestic Implementation of UN Sanctions: Keeping Pace?” (2007) 14:2 Can Foreign Policy J 1 at 6–7. 96 For an overview of the US sanctions on Burma, see US Department of the Treasury, Burma Sanctions (18 May 2017), online:
table, and as such, Canada’s legislation would not need to be extraterri- 2017 CanLIIDocs 119 torial. This argument made little sense in the early 1990s and makes even less sense today. Today, international trade is truly globalized; goods are shipped to and from virtually any country, not just to or through Canada’s closest allies. In any event, the US and the UK were never going to be the primary concern when it came to the transshipment of goods. As we have seen with the recent release of the “Panama Papers,” if a company wishes to avoid connection to those countries they can fairly easily incorporate off-shore so as to avoid a connection with a sanctioning or a sanctioned country, at least on paper.97 In the end, it is no excuse for Canada to say it does not need extraterri- torial sanctions because it will act in close concert with close allies. Such collaboration does not always happen to a meaningful degree in prac- tice, and the collaboration that does exist is too geographically limited in coverage to justify SEMA’s current scope.
2. International Law Surrounding Sovereignty Does Not Prohibit Double‑Extraterritoriality Second, the legal notion of near-sacrosanct sovereignty that played a role in limiting the reach of Canada’s sanctions regime was always overblown. By enacting sanctions, Canada is already interfering with the economic affairs of a foreign country. Moreover, listing a company that Canada has reasonable grounds to believe is engaging in transshipping to an already
97 See e.g. BBC News, Panama Papers, online:
sanctioned country does not run afoul of modern notions of sovereignty or “comity,” as has already been discussed. Whether that company is listed extraterritorially, as is currently the case, or double-extraterritorially should not much matter from a legal perspective (though again, it might from a diplomatic perspective). Put another way, any perceived legal challenge to double-extraterritorial sanc- tions applies equally to the existing SEMA regime. Even the drafters of SEMA recognized that extraterritoriality in the sense of listing entities and sanctioning countries was more a question of philosophy than law. This proposed double-extraterritorial listing process might be con- trasted with other forms of extraterritorial legislation,98 perhaps most notoriously the jurisdiction claimed by the US under the Alien Tort Statute (ATS).99 Under the ATS, the US exercises “prescribed jurisdiction,” where it “prescribe[s] rules governing foreign conduct”100 by granting federal courts
the power to exercise jurisdiction over “any civil action by an alien for a tort 2017 CanLIIDocs 119 only, committed in violation of the law of nations” or a treaty of the United States.101 The US thus creates a conflict of laws problem by proclaiming its jurisdiction over the actions of foreign entities in foreign lands and allowing for those foreign entities to be sued in US courts.102 However, in listing a foreign company, SEMA is merely disciplining Canadian compan- ies, individuals, or those acting from Canadian territory from trading with that particular company. Recall here that prohibitions — and thus punish- ments — apply only to “any person in Canada or any Canadian outside Can- ada” who deals with a listed entity or country in a prohibited way.103 Thus, SEMA is not taking jurisdiction over foreign entities (operating wholly out- side of Canada) for their foreign operations in the way contemplated by the ATS. Listing double-extraterritorially does not change this conclusion; rather, it expands the list of entities with which entities operating in Can- ada or Canadians operating abroad are forbidden from dealing.
98 For a thoughtful analysis of the legal implications of extraterritorial sanctions with a specific focus on US-style extraterritorial sanctions, which are very different than what is proposed herein related to SEMA, see Cleveland, supra note 18 at 48–85. 99 Alien Tort Statute, 18 USC tit 28 § 1350 (2006) [ATS]. 100 Anthony J Colangelo, “What is Extraterritorial Jurisdiction?” (2014) 99:6 Cornell L Rev 1303 at 1304. 101 Ibid at 1337, citing ATS, supra note 99, § 1350. 102 For an overview of ATS and its legal and extraterritorial ramifications, see “Developments in the Law: Extraterritoriality” (2011) 124 Harv L Rev 1226. 103 See e.g. Iran Regulations, supra note 52, ss 3, 4(1), 4(2), 8. 546 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2
3. Manageable Political Risk to Double-Extraterritoriality Third, what I have called double-extraterritorial powers were omitted from SEMA because, at the time, External Affairs and others thought that these powers would introduce a meaningful political risk that would cause countries to retaliate against Canada in a way that would hurt the econ- omy or national security.104 However, the risk of reprisals that had Exter- nal Affairs concerned about extraterritorial sanctions has proven to be of limited concern105 and, in any event, could be evaluated on a case-by-case basis while leaving Canada’s options open. There is no need to fetter Par- liament’s discretion completely just because sometimes there might be a risk of reprisal. The evaluation by the elected Minister can and should take place on a case-by-case basis. Of course, Canada can also remove sanctions at any time if there are economic reprisals that are deemed too onerous on Canada. Put another way, the risk can be managed proactively
(minimizing the risk of retaliation) and/or reactively (changing course 2017 CanLIIDocs 119 should there be retaliation). The corollary political concern about double-extraterritorial sanctions was that even if one could limit the risk of reprisals, sanctions such as those introduced by Helms-Burton were unfair in that they punished enti- ties and countries whose only wrongdoing was trading with a country that the US had deemed a threat. The “philosophical” question, as it was then called, was whether Canada wanted to support the very type of sanctions that it had introduced legislation (FEMA) to counter, and that its busi- nesses and politicians had so thoroughly opposed. This is a valid concern that continues to exist, in updated form, today. As Philippe Sands has written in the context of post-2001 American unilateralism, it is not that unilateral actions — including unilateral sanc- tions — are in and of themselves necessarily offensive, for such actions occur daily and are made by every country in the world. Rather, “‘[u]nilat- eral’ acts become especially contentious where they are associated with one community imposing its values on another, where that other com- munity has not consented to the imposition of such values or where the
104 For a review of such legislation see Riyaz Dattu & John Boscariol, “GATT Article XXI, Helms-Burton and the Continuing Abuse of the National Security Exception” (1997) 28:2 Can Business LJ 198. 105 For a discussion of legislative responses to US extraterritorial sanctions legislation, see Harry L Clark, “Dealing with US Extraterritorial Sanctions and Foreign Countermeasures” (1999) 20:1 U Pa J Intl L 61 (most of this responsive legislation, much like Canada’s FEMA, was “blocking” or nullifying, rather than responsively punitive, at least at the country level). Canada’s “Unilateral” Sanctions Regime Under Review 547 imposed act offends against strongly felt values of the other commun- ity.”106 So applied to sanctions, the concern with double-extraterritoriality is not that Canada is acting alone per se. Rather, the concern is that Canada would be making a value-laden decision about which regimes are rogue and what behaviour constitutes a threat to international peace, and then it would be forcing companies and countries caught in the middle — between Canada and the sanctioned state — to choose sides. Let us flesh this out by way of example. In the context of unilateral SEMA sanctions, say those imposed against Iran, Canada already accepts that its actions may — and likely will — offend the “other community,” being Iran, for that is the goal. Canada has come to accept the use of so-called unilateral sanctions against such rogue regimes, even where they impose (Canadian) values on a foreign state. Moreover, Canada has accepted that under SEMA it can prosecute cases where a Canadian com- pany uses transshippers, though as we saw with Lee Specialties, in prac- 2017 CanLIIDocs 119 tice prosecution is unlikely. The principle here being that Canada has the authority to enact unilateral sanctions and, to be effective, those sanctions must capture transshipment attempts. Arguably then, expanding SEMA to allow for the (double-extraterritorial) listing of transshippers is no jump in principle or logic from the current Canadian approach: the same third parties (transshippers) are targeted for the same reasons (trying to help evade sanctions), Canada just becomes more specific in identifying those targets. Under both the current regime and a double-extraterritor- ial regime that targets transshippers, if a third-party company wishes to trade with, for example, a sanctioned Iranian entity then it may continue to do so. Canada is not stopping the third-party (listed) entity nor is it criminalizing it; but in both cases Canada is saying that a Canadian entity or an entity operating from Canada cannot use the third-party to facilitate trade between Canada and Iran without consequence or the threat thereof, which in practice amounts to an interdiction of the goods being shipped or a prosecution of the Canadian company dealing with the transshipper. However, the example thus framed relies on an underlying presump- tion: it presumes that Canada would only use its double-extraterritorial sanctioning power to list those suspected of transshipping, using the “rea- sonable grounds to believe” threshold common to SEMA. This is what the recent practice of the US has tended to be with respect to sanctions and
106 Philippe Sands, “American Unilateralism” (Lecture delivered at the American Society of International Law 96th Annual Meeting, Washington, DC, 13–16 March 2002), (2002) 96 American Society Intl L Proceedings 85 at 90. 548 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 third-party companies listed for their dealings with Iran, Syria, and others. But double-extraterritorial sanctions could also, depending on how the legislative provision was drafted, allow for the listing of any company in the world that traded with a sanctioned country. Remember that this was really Canada’s concern with the US sanctions on Cuba: it was not so much concerned about Canadian companies that might think to operate as intermediaries between the US and Cuba to evade US sanctions, but rather with the possible sanctions against any Canadian company that might be trading with Cuba. This distinction offers an important nuance to the usual framework of the double-extraterritorial sanction debate. Amending SEMA to allow for the listing of third-party entities does not have to mean that any com- pany that trades with a listed country could be targeted for listing. Rather, Canada could limit its legislative amendment to target only transshippers
and in so doing largely overcome the “philosophical question” that has 2017 CanLIIDocs 119 plagued the extraterritorial debate in this country. Targeting only this sub-group of double-extraterritorial entities would be a step towards plugging the transshipment loophole we saw in Lee Specialties, on the one hand, while not offending the primary Canadian philosophical concern with Helms-Burton style delimited double-extraterritorial sanctions, on the other. The amendment could contemplate the US Foreign Sanctions Evad- ers List language and allow for the listing of foreign “entities” suspected on “reasonable grounds” (SEMA language) to “have facilitated deceptive transactions for or on behalf of persons subject to [Canadian] sanctions” (Foreign Sanctions Evaders List language).107 The deceptive practices could then be defined by reference to common sanction-busting activities, such as transshipping, facilitating transshipping, acting as a financial intermedi- ary, etc. However, even this limited approach will not be without concerns. First, there will always be those who dislike any third-party exten- sion of Canadian sanctions. However, by leaving open the current option to prosecute those that knowingly use transshippers, Canada is already extending the reach of its legislation in a theoretically similar, though practically far less effective, way. Second, just because a company has facilitated deceptive transactions in the past does not mean that it will do so in the future. Thus, the argu- ment might go, the justification for future listings does not necessarily
107 See Foreign Sanctions Evaders List, supra note 82. Canada’s “Unilateral” Sanctions Regime Under Review 549
follow from the proof of past actions. The question then becomes: on what grounds will Canada decide when a company should be delisted? The fact that SEMA already provides that listed entities can challenge their listings, first with the Minister and then in court, is no satisfactory response to this concern. For if the legislation merely allows for listings based on past behaviour, then the promise of future good behaviour will be no salvation in a challenge for a listed entity. The other side of this argument is that sanctions listings, much like fines or incarceration, serve as a punishment as well as a signal to deter others from similar behaviour. The promise of future good behaviour should not necessarily exempt one from punishment for past bad behav- iour. Moreover, SEMA has always contemplated a great deal of discretion for the Minister. A company that undertakes to cooperate in the future can still be delisted based on information at the Minister’s disposal, so
presumably, the listing would only be maintained where there is the threat 2017 CanLIIDocs 119 of future transshipments. Of course, this is no consolation for the listed company, but it does put a check in place for the Minister to balance Can- adian foreign policy objectives with the “philosophical” obligation to treat foreign and Canadian companies fairly. Finally, as will be discussed in the final section of this paper, there is one other protection that might make the resolution of this dilemma in favour of double-extraterritorial listings more palatable: Canada should amend SEMA to require a mandatory review of all listings every two years (as already exists with respect to listed terrorist entities in the Criminal Code).108 In this way, each double-extraterritorially listed entity would be ensured that, even without a challenge, their listing would be reviewed for its reasonableness at regular intervals. The third concern with this limited double-extraterritorial amend- ment, as contemplated, is arguably the most serious. The concern goes as follows: does it matter that the deceptive practices are to help evade Can- adian sanctions, or would it be sufficient for the third-party company to engage in deceptive practices to help an Iranian company (subject to Can- adian sanctions) overcome US sanctions? Put another way, would Canada have authority to list a company in the UAE that used deceptive practices to help a US company trade with an “entity subject to Canadian sanc- tions”? Or would the amended SEMA require a link between the deceptive practices and Canada-Iran trade? For the US, this is a question that rarely
108 For a discussion on the listing process, see pages 555–61, below. 550 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 arises because the US economy is so big and the sanctions investigations so robust that the US worries only about deceptive practices to overcome US sanctions. But for Canada, this distinction matters because the former (broader) approach could expand the possible scope of Canadian sanc- tions to allow for the listing of foreign entities that may not have ever used deceptive practices to breach Canadian sanctions — only to help an entity or country listed by Canada. At the same time, the latter situation requires a proven link between the deceptive practices and both Canada and the sanctioned country, something that in practice might be difficult to prove on the reasonable grounds threshold. Let us look in more detail at the considerations for Parliament in such a situation. If Canada expanded SEMA’s listing authority to include “deceptive practices” to evade any ally’s sanctions on a mutually-listed country, then Canada could pre-emptively list known sanctions evaders that might target
Canada once listed by the US or other allies. In other words, SEMA would 2017 CanLIIDocs 119 allow Canada to get ahead of suspected sanctions evaders. The benefit here would be that Canada would have authority to go after companies that it suspects are evading Canadian sanctions, but only has reasonable grounds to prove have evaded, say, US sanctions. Canada could also tar- get transshippers that might turn to Canada when listed by an ally, such as the US. It would further ensure that Canada could keep its listings in greater alignment with those of its allies, particularly the US. Finally, such an approach would encourage maximum information sharing on sanc- tion-busting activities as between Canada and its allies in order to ensure that the listings of entities in allied countries have the same coverage. However, the downside of such an approach likely outweighs its theor- etical benefits. First, to support such a listing, Canada may be completely or substantially reliant on foreign intelligence, the veracity of which may be difficult to determine and even more difficult to prove in court, depending on the permissions that those providing the intelligence attach to the exchange of information. This assertion is premised on the ( justi- fiable) assumption that the US is most likely to have the information pertaining to “deceptive practices” intended to overcome US sanctions, and thus Canada would need that information to uphold its own listing of the same company. Second, Canada could be punishing foreign entities whose only wrong is to breach a third-party’s — albeit an ally’s — sanctions, which may or may not sit well with Canadian citizens and parliamentar- ians. The problem is then not merely that Canada would be imposing its values on a third-party that Canada has no proof has done Canada wrong, Canada’s “Unilateral” Sanctions Regime Under Review 551
but that Canada would be largely imposing American values on a third- party country. All of this reveals the political compromise that Canadian politicians will have to keep front of mind were Canada to introduce double-extraterritor- ial sanctioning powers. If Canada wishes to get tough on sanctions evad- ers, it theoretically can, but the concerns about unilateralism, the unfair imposition of Canadian values, and retaliation likewise become more acute the further down this road Canada travels. As one moves away from broad double-extraterritoriality, the alternative options involve less controversy but also increased inefficiencies with respect to the eventual enforcement of Canadian sanctions. This analysis, in turn, brings us to the positive reason to enact a limited form of double-extraterritorial sanctions. Remember, this argument does not rebut the arguments that have been used to support a limited scope of
SEMA. Instead, it offers a justification for why Canada needs double-extra- 2017 CanLIIDocs 119 territorial sanctions.
4. The Fourth Justification for Double-Extraterritoriality: Why SEMA Should be Amended to Include such an Authority The simplest reason to justify a limited move to double-extraterritorial sanctions is that if business ever functioned in a way that would make Can- ada’s territorially-limited sanctions effective, it does not do so today. As already noted, in enacting sanctions Canada does not always act through multilateral agencies. Even when there is a robust international sanctions regime in place to support Canada’s sanctions, businesses too easily find hidden transshipment hubs that are not involved in the multilateral sanc- tions regime, or in countries that do not intend to enforce the regimes. The UAE, for example, has been a well-known hub for transshipment of goods into Iran, but proving the matter on a shipment-by-shipment case has always been difficult.109 Quite simply, sanctions cannot be effective in today’s business world if the law is drafted such that Canada’s enforcement agencies — most notably the CBSA — have to prove that each individual shipment of goods is being transshipped through opaque third-party coun- tries, particularly where Canada often has no verifiable access to or cooper- ation with the border services of so many third-party countries. Likewise, evidence of transshipment passed along to Canada from allies — such as
109 Gillis & Armstrong, supra note 60. 552 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 the US — currently becomes useful only where it specifically offers infor- mation that would allow for the interdiction of a particular shipment of goods and is received in advance of the shipment. Sanctions become all but moot when they can be so easily “busted” by simply moving first through a third-party country and then to the sanctioned country. Sure, Canada may catch some transshipments, but not most — as our prosecution rec- ord shows — and the record is dismal. The easier and more effective route would be to leave the option open for double-extraterritorial sanctions where reasonable grounds exist to find that the entity engaged in deceptive practices to evade Canadian sanctions. This is true even if such authority is rarely used against double-extraterritorial entities. Expanding the scope of SEMA to allow for double-extraterritorial sanc- tions would mean that evidence could be collected over time to sustain the listing of companies and prevent transshipments, rather than hoping
for one-off successes each time a good is shipped. As it has for the US, 2017 CanLIIDocs 119 double-extraterritorial sanctions could also act as a powerful deterrent.110 Threatening companies with listings — and thus threatening to end their business relations with any Canadian business or trade partner — is often much more effective and efficient than mounting a multi-year prosecution intended to stop one shipment — or, rather, punish for one intended ship- ment. A listing also sends a strong message, signalling to other businesses operating in the region that Canada is willing to sanction companies that transship goods to a sanctioned country.111 There remains the risk that third-party companies that are sanctioned or threatened with listing will simply transship through another inter- mediary, or open up a new shell company for their operations. One can see a number of such counter-moves available and undoubtedly such actions will be taken. However, the reality is that such counter-moves are not without cost: a new intermediary would have to be found, the paperwork to create a new shell company completed. In other words, even if listing
110 “The Treasury’s Office of Foreign Assets Control (OFAC), responsible for implementing all US sanctions programs, began targeting hundreds of individuals, companies, and associated properties that were subject to asset freezes and shut them out of the US financial system. Banks not just in the United States but throughout Latin America stopped doing business altogether with individuals labeled by the OFAC as ‘Specially Designated Nationals’ … Those who appeared on what became known as ‘la lista Clinton’ suffered a virtual financial death penalty. Banks clearly recognized that it was better to continue doing business in the United States than to risk doing business with designated parties” (Juan C Zarate, Treasury’s War: The Unleashing of a New Era of Financial Warfare, 1st ed (New York: Public Affairs, 2013) at 7 [emphasis added]). 111 Ibid. Canada’s “Unilateral” Sanctions Regime Under Review 553 double-extraterritorial companies does not stop their evasion activities, it makes them more expensive and difficult, possibly to the extent where transshipment or facilitation is no longer worth the risk.112 For example, for some companies that facilitate transshipping — ones that have both “legit- imate” business dealings and may be involved in transshipping113 — listings or the threat thereof can cast a pall over other, legitimate operations. In the end, it is exceedingly difficult to stop all evasion activities, just as it is difficult to catch all money laundering114 and terrorist financing when it is so profitable,115 and when numbered accounts for unnamed businesses can pop-up in tax havens the world over.116 But steps can be taken to make such illegal activities more difficult and costly. Even if such steps do not prevent all such activity, they might serve as a signal to deter others who might be weighing the risk. This is all to say that battling sanctions evaders will be a game of constant cat-and-mouse. But just because there is a risk of a cat-and-mouse game does not mean that Canada should dispense with 2017 CanLIIDocs 119 the cat. Better to have the threat of enforcement (the cat, or double-extra- territorial sanctions) than to leave the cat outside (or viable enforcement measures outside the law). Finally, theoretically, Canada could better take advantage of US intel- ligence to sustain double-extraterritorial listings than it can to support one-off prosecutions for one-time transshipments, meaning that there is a theoretical enforcement benefit above and beyond the deterrence and signalling benefits. For example, the US might come across information that American products are being shipped through Canada, to the UAE and then on to Iran, and pass this information to Canada. Such evidence of past transshipments could meet the “reasonable grounds to believe” standard required for a listing, whereas such information is of little value
112 Ibid. 113 Consider think tanks, shipping companies, or even a company like Lee Specialties, were it not Canadian. 114 For a discussion of just how difficult this field is to study, let alone counter, see Killian J McCarthy, “Why Do Some States Tolerate Money Laundering? On the Competition for Illegal Money” in Brigitte Unger & Daan van der Linde, eds, Research Handbook on Money Laundering (Cheltenham: Edward Elgar Publishing, 2013) 127. 115 See Louise I Shelley, Dirty Entanglements: Corruption, Crime, and Terrorism (Cambridge: Cambridge University Press, 2014). 116 See Arthur J Cockfield, “Transforming the Internet into a Taxable Forum: A Case Study in E-Commerce Taxation” (2001) 85:5 Minn L Rev 1171 (for an interesting backgrounder). See also Jonty Bloom, “Panama Papers: How Assets Are Hidden and Taxes Dodged”, BBC News (3 April 2016), online:
government will also be increasing the opportunity to challenge the list- 2017 CanLIIDocs 119 ing regime. But again, such a threat should not deter Canadian action. If Canada is confident with its processes of investigating and listing individ- uals and entities, then it should not be worried about a court challenge. If on the other hand, Canada is concerned about its listings processes, then this is a problem that extends to the current regime and needs to be addressed independently of whether or not SEMA is amended to allow for double-extraterritorial sanctions. In fact, expanding the scope of SEMA might provide the incentive or at least the opportunity for Canada to review and revise its listing processes. For example, the US is able to deter transshipments by issuing warnings about its double-extraterritorial listing process. It does so in part by talk- ing with suspicious companies, reaching out to businesses to educate them about US sanctions, and warning companies that are in danger of being listed. Canada does no such thing: GAC’s outreach to businesses is virtually non-existent. Indeed, even if SEMA is not amended, Canada desperately needs an informational outreach program. Such outreach to business would ensure that innocent companies — particularly small and medium-sized compan- ies — are not accidentally caught up in the sanctions regime. But outreach can also provide another good source of information for the government in terms of who is doing what and how various industries are conducting business. Regardless of whether or not the SEMA is ever amended to provide for double-extraterritorial sanctions, Canada should take the opportunity to make its listing process more robust, including instituting Canada’s “Unilateral” Sanctions Regime Under Review 555
consistent, pro-active outreach to educate and warn businesses. Moreover, in undertaking business outreach, Canada will also improve the deter- rence function of SEMA, a much more effective and cost-efficient method of enforcement than relying on prosecutions or the one-off interdiction of goods at the border. As we saw in Lee Specialties, prosecutions of one- off shipments are not going to adequately restrict the shipment of goods from Canada to sanctioned countries. Better to rely on the use or threat of double-extraterritorial sanctions to deter action and, in so doing, help to cover what appears to be a gaping hole in Canada’s sanctions regime. This brings us to the next topic, which is when SEMA can be invoked to justify resort to sanctions and, in particular, whether it made sense at a general level to amend SEMA through the Magnitsky Act to allow for sanc- tions against perpetrators of gross human rights abuses. 2017 CanLIIDocs 119 V. A FURTHER JURISDICTIONAL LIMITATION: SEMA AND THE SANCTIONING OF HUMAN RIGHTS ABUSERS A. SEMA Section 4(1): The Power to Target Human Rights Abusers and the Indeterminate (Existing) Threshold for Resorting to Sanctions The issue of whether or not human rights abusers can be targeted by Canadian sanctions came into the public consciousness with the debate around the Magnitsky Act in late 2015 and early 2016. Indeed, the debate around whether or not Canada should enact Magnitsky-styled legislation was arguably the primary reason for the Standing Committee’s decision to review SEMA for the first time. Sergei Magnitsky was, until his death, a tax lawyer in Moscow. One of his clients was Hermitage Capital, an investment firm with a large portfolio in Russia run by Bill Browder. Along with Bill Browder, he uncovered wide- spread corruption by senior Russian officials. He testified against these officials but was jailed and reportedly tortured and killed in prison in 2009. As Irwin Cotler stated, he was then “posthumously convicted — in a Kafka- esque cover-up — of the very fraud he had exposed.”117 His former-client, Bill Browder, has subsequently taken up his mantle and advocated for coun- tries to implement sanctions — such as travel bans and asset freezes — on those responsible. The sanctions are held out as Magnitsky acts, and the idea is simple: human rights abusers responsible for such actions in Russia
117 See Cotler, supra note 4. 556 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 will not be held responsible domestically for their criminality, so the inter- national community should take tangible steps to condemn such grave actions. To date, the US and European Parliament have enacted Mag- nitsky sanctions to punish Russian human rights violators,118 though as already mentioned Canadian legislation has just passed. For the US, this enactment is not out of step with their general approach to sanctions. The US Treasury and State Departments are empowered to enact sanctions against human rights abusers in other countries,119 for example as part of their sanctions against the Iranian regime.120 In contrast, Canada’s Mag- nitsky Law signals a meaningful departure from its stated practice in that it explicitly amends SEMA to allow for the sanctioning of persons respon- sible for gross violations of international human rights laws. The Canadian version of the Magnitsky legislation, Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law),121 received Royal Assent 122 on 18 October 2017, mere days before the finalization of this paper. For 2017 CanLIIDocs 119 this reason, this paper will deal only briefly with the broad implications that the Magnitsky Law had on SEMA, and not with the stand-alone Act itself, which targets corrupt foreign officials, or with what are sure to be questions of interplay and fit between theAct and SEMA. For present pur- poses, what is then important is that although Canada could have theor- etically enacted stand-alone Magnitsky legislation targeting only Russian human rights abuses and corrupt officials, it instead amended SEMA, which applies to all country regulations. Thus, the cleaner and more prin- cipled approach taken in Canada’s Magnitsky Law was to amend all existing
118 See US Treasury, supra note 4. 119 See US Department of the Treasury, Frequently Asked Questions Relating to the Lifting of Cer- tain US Sanctions Under the Joint Comprehensive Plan of Action (JCPOA) on Implementation Day, December 2016 update (United States: Office of Foreign Assets Control) at 4–5, online:
sanctions authority under SEMA. This allows for a broader power to sanc- tion for human rights abuses anywhere in the world, not just in Russia. Implicated in this decision is SEMA’s current section 4(1) which, recall, until very recently allowed for the promulgation of sanctions where an international organization of which Canada is a part has so requested, or “where there has been a grave breach of international peace and security that has or is likely to result in an international crisis.”123 On its face, section 4(1), as it then was, did not seem to contemplate the power to sanction for human rights abuses. But in practice, things were never so clear. Let us briefly review this practice under the previous SEMA regime. In 2016, shortly after being appointed Foreign Minister, Stephane Dion asserted that there was no need to introduce Magnitsky legislation because existing laws already allowed Canada to sanction human rights abusers. In a Globe and Mail article, Minister Dion was taken to task for this
pronouncement by Bill Browder: “Either this is an attempt to mislead the 2017 CanLIIDocs 119 public or Mr. Dion is unaware that Canada’s sanctions law, the Special Eco- nomic Measures Act, does not provide a mechanism to freeze the assets of human rights violators in Canada.”124 Subsequently, speaking outside the House of Commons after a debate on the Magnitsky Act, Dion asserted that Canada “could yet have legislation that freezes the assets of human rights violators,” implying that such legislation does not exist.125 Dion said, “potential amendments to the existing Special Economic Measures Act are to be reviewed by the House of Commons committee on foreign affairs. ‘We need to adjust SEMA,’ he said. ‘We’ll see where the committee will go.’”126 Unfortunately, GAC’s public testimony tended to reinforce Minis- ter Dion’s confusion rather than clarify the situation. For example, GAC long implied that, as a general matter, sanctions for human rights viola- tions were ultra vires the powers conferred on the Governor-in-Council by SEMA.127 Yet when the Burma Regulations128 were enacted, GAC stated that these sanctions were intended “to respond to the human rights and humanitarian situation in Burma,” which “threatened peace and security
123 SEMA, supra note 1. 124 Browder, supra note 4. 125 John Ivison, “John Ivison: Liberals Deny Appeasing Russians over Human Rights Law for Invi- tation to Syrian Peace Talks”, National Post (17 May 2016), online:
129 See Global Affairs Canada,Canadian Sanctions Related to Burma (5 June 2015), online:
hard to see how GAC’s very “onerous” sanctions threshold for a threat to international peace and security is met by such contained, albeit serious, abuses.132 Again, both the Burmese and Zimbabwean133 situations are grave, but not in the traditional sense of “grave threats to international peace and security,” and certainly not in the sense of the term as defined by Legal Advisor Kessel in 2009.134 Second, as a result of the first problem, it is very difficult to explain how precisely Canada has come to some of its decisions to impose sanctions. GAC does not offer detailed explanations for how its sanctions decisions are made. Some of the decisions seem on their face to defy a plain reading of SEMA’s grant of authority; and, there seems to be a complete dearth of internal, governmental evaluation of its sanctions record — both successes and failures. As a result, some of the sanctions decisions taken by GAC can seem indeterminate — that is, it is not clear that they are properly guided
(or “determined”) by law and by evidence. For this reason, based on exist- 2017 CanLIIDocs 119 ing explanations, interpretations, and practice, it has been near impossible to predict when Canada will impose sanctions on a foreign country. Per- haps the best predictor of Canada’s practice is to look at foreign relations with other countries and what Canada’s closest allies are doing on the sanctions file and to assume that SEMA has been malleable enough to find a threat to international peace and security where one is needed.135 This lack of clarity in the law as written severely limits the signalling and deterrence functions of Canada’s sanctions legislation because it is not clear the precise bases upon which certain countries are being sanc- tioned nor that the sanctioning decisions are based on a legal principle — to
132 See Kessel, supra note 43. 133 For an overview of the situation in Zimbabwe and of the justifications that tended to accom- pany an international call for sanctions on the country, see Katherine Hughes, “Operation ‘Drive Out the Trash’: The Case for Imposing Targeted United Nations Sanctions Against Zimbabwean Officials” (2007) 76:1 Fordham L Rev 323. 134 Kessel, supra note 43. 135 For example, Canada’s Iran Regulations were initially justified, it would seem, on the basis of the threat posed by Iran’s nuclear proliferation, based on public statements at the time and an assessment of the entities listed in the Iran Regulations. However, Canada has never been particularly clear on its justification(s) (Nesbitt, “Canada-Iran Relations”,supra note 10). When an inspection regime was put in place on Iran as part of a UN Security Coun- cil-approved agreement that included the removal of some US and EU sanctions, Canada seemed simply to change its justification for its sanctions from “nuclear proliferation” to “Iran’s ballistic missile program.” Meanwhile, Canada seemed to make minimal changes to the list of entities under the Iran Regulations, supra note 52. For a more in-depth analysis of the Iran nuclear accord and Canada’s reaction on the sanctions file, see Nesbitt, “Can- ada-Iran Relations”, supra note 10. 560 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 counter threats to international peace and security — as opposed to ad hoc political determinations regarding what states are in favour or disfavour at any time. We have seen that SEMA’s signalling and deterrence func- tions are central to the Canadian justification for the existence of sanc- tions powers. If undermined by the language or application of SEMA, the legislation itself loses much of its theoretical efficacy — not only as a stick, but also as a signal. The (historic) lack of clarity and consistency is also problematic from a rule of law perspective. Clear (legal) rules are good (legal) rules. That is not to say that SEMA cannot grant broad discretion to act — indeed that was always the intention. But it is to say that if that discretion is going to be fettered by legal limitations in SEMA, namely the power to act only where there is a threat to international peace and security, then that language must guide (determine) the decisions. When legal language says one thing
and the government acts another way, the legitimacy of the law is under- 2017 CanLIIDocs 119 mined. To borrow a term from legal philosopher Lon L Fuller, there is no longer “congruence” in such situations between the declared rule (SEMA’s threshold for acting) and the official governmental action (the real, com- plicated reasons the government imposes sanctions).136 Increased transparency on the part of GAC in explaining its decisions to resort to sanctions and setting a sort of common law interpretive guide for the phrase “threats to international peace and security” may go a long way to resolving the problem. But these actions would not completely resolve the problem where decisions are being taken, in practice, to sanc- tion human rights violations but where, in theory, both SEMA’s terms and the government’s public pronouncements indicate that such decisions were ultra vires. A lot has been made in the media about the indeterminacy of the term “grave human rights abuses;” it is one of the reasons that the phrase was not introduced in SEMA in the first place. Yet, in practice, the term “threat to international peace and security” has proven just as vague, if not more so. Existing practice does not comfortably match existing law on the books and does not offer a stable, predictable guide for how official action will take place in the future. At the very least, the extent to which grave human rights abuses forms a part, or all, of the justification for resort to Canadian sanctions remains unclear even to experienced Foreign Minis- ters like Mr. Dion.
136 Lon L Fuller, The Morality of Law (New Haven: Yale University Press, 1967) at 81ff. Canada’s “Unilateral” Sanctions Regime Under Review 561
B. Why the Government Was Right to Clarify the Situation As already mentioned, greater transparency by GAC in explaining why sanctioning decisions have been made would, even without a legislative change, go a long way to clarifying, and thus rectifying the process. Such explanations should extend both to how countries are chosen as targets for sanctioning and how individual entities are chosen for listing. The US Treasury’s Office of Foreign Assets Control (OFAC) offers a very brief para- graph to explain why an entity has been targeted by its sanctions, includ- ing a list of aliases, sanctioned activities or companies to which the entity is associated, and the “directive” under which the entity is sanctioned.137 OFAC then does extensive outreach with relevant business communities to explain the legislation and the legislative decisions. This practice has the dual benefit of clarifying government practice and, in so doing, signalling
to other nations the types of actions that tend to attract sanctions. By way 2017 CanLIIDocs 119 of contrast, when Canada promulgates new sanctions or adds additional listed entities it is, at best, followed up with a terse press release. Canada does not explain why particular entities have been added or removed, as does the US and now the UK, or even why new sanctions are being levied. There is equally little to no outreach with implicated (usually business) communities. Canada has even refused to acknowledge the entities that have been added or removed from existing lists when SEMA Regulations are updated.138 Such practices are, at best, unnecessary, and, at worst, under- mine the legitimacy of SEMA and do harm to the rule of law in Canada. Although changing Canadian practice on the sanctions file is overdue, this alone is insufficient to overcome the challenges related to the lack of clarity in the application of SEMA. The government needed to decide clearly what was to be done about sanctioning powers and human rights violators — and it decided in favour of an expanded authority to punish gross abuses of international human rights — to help respond to the calls
137 See US Department of the Treasury Office of Foreign Assets Control,Specially Designated Nationals List Update (3 February 2017), online:
innocent and vulnerable — suffer the most from the sanctions. Better to 2017 CanLIIDocs 119 constructively engage with the relevant nations to change their behav- iours through “norm internalization” rather than to try and strong-arm them into compliance through methods that harm the innocent first and foremost. The other side of this argument is that the findings on the efficacy of human rights sanctions are mixed and thus inconclusive in that, some- times, it appears that human rights sanctions can work.140 Apartheid South Africa again comes to mind as a countervailing example, one where sanc- tions played a major part in changing the targeted racist, exclusionary practices of the South African state. Moreover, “norm internalization” can be effected through sanctions in the right situation, just as it can come through constructive engagement; a country does not have to rely solely on one strategy or the other.141 Professor Forcese has persuasively argued for just such a “responsible engagement” strategy, where constructive engage- ment with human rights abusing nations is supplemented with sanctions or the threats thereof in the alternative (and where the costs to innocent
139 See generally Peksen, supra note 18. See also Dursun Peksen & A Cooper Drury, “Economic Sanctions and Political Repression: Assessing the Impact of Coercive Diplomacy on Political Freedoms” (2009) 10:3 Human Rights Rev 393; Dursun Peksen & A Cooper Drury, “Coercive or Corrosive: The Negative Impact of Economic Sanctions on Democracy” (2010) 36:3 Intl Interactions 240. 140 Ibid. 141 For an argument to this effect, see Cleveland,supra note 18. Canada’s “Unilateral” Sanctions Regime Under Review 563
civilians do not outweigh the perceived benefits of economic sanctions).142 Applied to the Canadian context, these findings suggest that the power to sanction for human rights abuses might be useful in some situations (hav- ing the power to do so can help), but with the grant of such authority comes the need to exercise extreme caution in sanctioning human rights abus- ers. Further, the debate suggests an overwhelming need for the Canadian government to begin to take seriously the study of the efficaciousness and impacts of Canadian sanctions — “responsible engagement” strategies rely on thoughtful, evidence-based approaches to engagement and sanctions, which is a far cry from the current government approach. Second, there is the cultural relativist argument that sees as problem- atic the process of one nation (Canada in this case) unilaterally determin- ing human rights values for the world and imposing its values on others through coercive economic sanctions.143 This argument has greater merit
in the US, where economic sanctions are much more likely to cripple the 2017 CanLIIDocs 119 targeted nation than are Canadian sanctions. This argument also had more support when countries like Cuba were the target of US extraterri- torial sanctions, as opposed to more recent and less controversial Western sanctions that have targeted countries like Iran, Russia, and North Korea. Nevertheless, one should not assume that just because recent Western sanctions have tended to be less controversial and attracted fewer “cul- tural relativist” critiques, the principled (cultural relativist) opposition to human rights sanctions does not stand. Indeed, the argument has particu- lar resonance in the historical context of SEMA, where Canada has had an uneasy relationship with the imposition of any unilateral sanctions, even those against nations perceived to threaten international peace. Once again, this anti-human rights sanctions argument militates at least in favour of exercising real caution in sanctioning human rights abus- ers. But it is also easy to see how the power to sanction human rights abusers, exercised with due discretion and care, could help Canada avoid controversy. Indeed, in some situations it will surely be more (or equally) controversial not to target — and thus be seen to tolerate — certain state- sponsored human rights abuses, for example widespread murder and
142 Craig Forcese, “Globalizing Decency: Responsible Engagement in an Era of Economic Integration” (2014) 5:1 Yale Human Rts & Dev LJ 1. 143 Christopher Wall, “Human Rights and Economic Sanctions: The New Imperialism” (1998) 22:2 Fordham Intl LJ 577. See also Pak K Lee, Gerald Chan & Lai-Ha Chan, “China in Dar- fur: Humanitarian Rule-Maker or Rule-Taker” (2012) 38:2 Rev Intl Studies 423; Leo Panitch, “The New Imperial State” (2000) 2 New Left Rev 5. 564 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 government-inflicted disappearances or even perceived crimes against humanity,144 particularly where some of our allies like the US are acting against the abusers. Third and finally, there is the question of the determinacy of the term “human rights,” and whether Canada could properly craft a legislative amendment to SEMA that would limit — and thus legally “determine” — the scope of the power to sanction. This argument bleeds into the cultural relativist argument. Granting the authority to sanction human rights abusers is dangerous if we cannot know — or properly circumscribe — the types of human rights violations that should elicit Canada’s sanctions, or even who should be empowered to make that legal-moral choice. Seen in its best light, this argument relies on either or both of two assumptions. First, “human rights” cannot be meaningfully limited and defined so that the term could help determine — or meaningfully guide — Canada’s deci-
sion-making processes. Again, this argument had great force when SEMA 2017 CanLIIDocs 119 was first enacted. Second, even if we can limitSEMA powers to a core group of human rights, that core is still too broad and/or controversial to vest in a Minister the power of sanctioning others on the basis of his or her determination of a breach of these core rights. If one believes these two assertions to be true, one will likely be against the power to sanc- tion for human rights abuses and thus against the new Magnitsky Law. If one agrees with analysis below, namely that certain core human rights abuses can be defined so as to limit their scope to an acceptable, relatively uncontroversial degree, then the discretionary power to sanction human rights abusers was rightly added to SEMA. So, the question then becomes: what options were available for Can- ada to amend SEMA to allow for the sanctioning of human rights abus- ers, while still limiting the discretion of the Foreign Minister to sanction only serious, relatively uncontroversial abuses? The first option might be to allow for the sanctioning of “human rights abuses,” which presumably includes any human rights abuse. However, this option was never advis- able. Although SEMA always granted a great deal of discretion to the Foreign Minister, if SEMA allowed for the sanctioning of “human rights abuses” without qualification, we fall back into the indeterminacy trap. Setting the threshold at “human rights abuses” is setting no threshold at all. Unfortunately, any country in the world can legitimately be accused
144 For a definition of Crimes Against Humanity, see UNGA,Rome Statue of the International Criminal Court, UN Doc A/CONF183.9, July 1998, art 7 [Rome Statute]; Crimes Against Humanity and War Crimes Act, SC 2000, c 24, s 3 [CAHWCA]. Canada’s “Unilateral” Sanctions Regime Under Review 565 of human rights abuses, whether it be social and economic rights, a viola- tion of the right to water or housing, or because of its historical treatment of Indigenous peoples. In this situation, how would the SEMA language guide the Minister in determining which human rights abusing nations to target and which to let be? It is better to be clear in the legislation that the Minister may choose to sanction any country provided the Minister’s rea- sons are explained in writing; then the public can judge the quality of the Minister’s exercise of discretion. At least in this way, the responsible Min- ister could not fall back on vague allusions to human rights abuses without further explanation as to what makes any abuse worthy of targeting. At the other end of the human rights spectrum, one could imagine an amendment that allowed for sanctions for genocide, war crimes, or crimes against humanity, all of which are defined in the Rome Statute for the International Criminal Court145 and Canada’s Crimes Against Humanity 146 and War Crimes Act. Such a proposal would likely have been relatively 2017 CanLIIDocs 119 uncontroversial because Canada already exercises jurisdiction to try such crimes, even where they take place extraterritorially. Moreover, the Geno- cide Convention, which Canada has ratified, already contains a requirement that Canada respond where the crime is being or has been perpetrated.147 Such an amendment would have had the benefit of clarifying the types of abuses — in this case, those that rise to the level of serious international crimes — that could be considered as part of the equation when defining threats to international peace and security. But arguably the human rights abuses in Burma or Zimbabwe did not rise to the level of such crimes at the time that those countries were first sanctioned by Canada; as a result, such an amendment would never have explained some of Canada’s past practice. Such an amendment would also fail to cover the situation, like in Iran, where serious human rights abusers are contributing to the instab- ility and threat, but where the crimes arguably do not rise to the level of crimes against humanity or genocide. So, under this proposal, human rights abusers in Iran or Russia could not have been targeted for listing, even when they almost certainly form part of the moral and political justi- fications for existing Canadian sanctions. The third and preferable option, the one chosen, was to amend SEMA to include the power to target perpetrators of “gross and systemic human
145 Rome Statute, supra note 144, arts 6–8. 146 CAHWCA, supra note 144. 147 Convention on the Prevention and Punishment of the Crime of Genocide, 9 December 1948, UNTS 1021, arts 5, 8. 566 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 rights abuses.” Such language has long been on the table. At the time that SEMA was enacted in 1992, then-MP Lloyd Axworthy proposed that sanc- tioning power be expanded to include situations “where the Governor in Council is of the opinion that grave violations of human rights have occurred in a foreign state and continue or are likely to continue.”148 It seems that Can- ada’s House of Commons has amended Axworthy language, though at first blush only as a means of instantiating the intention behind the proposal while ensuring that the scope of the term grave human rights abuses is properly circumscribed. SEMA has now been amended by the Magnitsky Law to look as follows:
4 (1) The Governor in Council may, if satisfied based on reliable and appro- priate evidence that the circumstances described in subsection (1.1) have occurred,
4 (1.1) The circumstances referred to in subsection (1) are the following: 2017 CanLIIDocs 119 (a) an international organization of states or association of states, of which Canada is a member, has made a decision or a recommenda- tion or adopted a resolution calling on its members to take economic measures against a foreign state; (b) a grave breach of international peace and security has occurred that has resulted in or is likely to result in a serious international crisis; (c) gross and systemic human rights abuses have been committed in a foreign state; (d) a national of a foreign state who is either a foreign public official, within the meaning of section 2 of the Corruption of Foreign Public Officials Act, or an associate of such an official, is responsible for or complicit in ordering, controlling or otherwise directing acts of cor- ruption — including bribery, the misappropriation of private or public assets for personal gain, the transfer of the proceeds of corruption to foreign states or any act of corruption related to expropriation, government contracts or the extraction of natural resources — which amount to acts of significant corruption when taking into considera- tion, among other things, their impact, the amounts involved, the for- eign national’s influence or position of authority or the complicity of the government of the foreign state in question in the acts.149
148 Debates, supra note 39 at 1609 [emphasis added]. 149 See SEMA, supra note 1. Canada’s “Unilateral” Sanctions Regime Under Review 567
In general, adding the power to sanction for “gross and systemic human rights abuses” is to be commended. It continues to allow for economic sanctions where an international organization has so requested or where Canada has determined that there is a threat to international peace and security. But it also responds to the widespread calls for Magnitsky legis- lation and the perceived need for Canada to be able to signal its distaste for serious human rights abusers, particularly ones operating in nations that are also considered threats to international peace and security. It also includes the qualifier “gross” before “human rights abuses.” “Grave,” “gross,” or “serious” human rights abuse are variants of a fairly well-settled phrase in international law. It is recognized, for example, that “grave” modifies both “violations” and “human rights.”150 So, one would have to look at the extent and scope of the violations to determine if they were grave: is it a single case of torture or many cases? How bad or grave are
the violations themselves? For example, is the torture that the prison cells 2017 CanLIIDocs 119 are slightly smaller than international guidelines suggest, or is the torture the serious infliction of bodily harm on individuals? “Grave” or presum- ably “gross” also modifies the term “human rights” to clarify that not all human rights violations are contemplated, but only the most serious, as recognized by international law. So, murder or torture would fall within the definition, but a failure to provide a community with its appropriate right to housing would generally not. Moreover, the term “systemic” clari- fies that we are indeed not talking about one grave act, but rather serious abuses that are part of a systemic governmental or organizational plan or course of action. The language is thus legally determinative because it provides a reasonable guide for the scope and limits of the responsible Minister’s powers. Moreover, such language provides further “congruence” between the wording and past practice — and thus presumably future practice — in a way that SEMA’s previous language did not. As we have seen, how SEMA could or should be interpreted and how it has been interpreted have long diverged. Including the power to sanction for gross and systemic human rights abuses is a more honest explanation of what Canada has done in the
150 Theo van Boven, “The United Nations Basic Principles and Guidelines on the Right to a Remedy and Reparation for Victims of Gross Violations of International Human Rights Law and Serious Violations of International Humanitarian Law” in United Nations Audiovisual Library of International Law (UN, 2010) 1; Basic Principles and Guidelines on the Right to a Remedy and Reparation for Victims of Gross Violations of International Human Rights Law and Serious Violations of International Humanitarian Law, A Res 60/147, UNGAOR, 60th Sess, 1. 568 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 past — and arguably for what it will want to do in the future. Rather than trying to fit legal justifications into a definition of “threat to international peace and security,” where they may not easily fit, it is better to be honest about the rationale for future sanctions. From a rule of law perspective, the legislation will be clearer. We will know more precisely what the Min- ister can do and the Minister’s reasons are more likely to be transparent if those reasons fit nicely into a reasonable legal interpretation ofSEMA . The amended legislation is also arguably a better fit with international trends related to national security. It recognizes that threats to peace and security are usually the result not of one thing, but of a complex amalgam of factors. For example, the Iranian ballistic missile program appears to be the current threat to international peace justifying Canada’s Iran Regula- tions listings. However, other factors contributing to such a threat include bad governance, nuclear proliferation, state-sponsored terrorism, inter-
nal repression, and widespread, state-sponsored human rights abuses. 2017 CanLIIDocs 119 Amending SEMA in this way will allow Canada to target a broader range of actors responsible not just for the threats to international peace and security, but the activities — serious human rights abuses — that Canada legitimately opposes and which contribute to the broader threat to inter- national peace and security that emanates from any given country. Returning to the Iran example, the newly legislated amendment to SEMA will allow Canada to sanction the heads — and lead torturers — in the notorious prisons (like Evin) where the Iranian regime keeps its pol- itical prisoners, including the likes of the late Canadian Zahra Kazemi.151 The Iranian regime is indeed a threat because of its nuclear and ballistic missile programs, and also its state sponsorship of Hezbollah, but it is a host of people within the regime that hold it up and allow it to perpetuate this threat by systematically repressing political and social dissent. Cer- tainly, human rights abusers within the notorious al Quds force or at the Evin prison are equally blameworthy in this regard as those associated with the ballistic missiles program. The end result is that, whatever its other flaws that will surely be exposed over time, Canada’s new amendment to SEMA through the Mag- nitsky Law will bring Canada more in line with its largest trade partner, the US. Sanctions have long been seen as more effective when they are imple- mented in collaboration with a number of like-minded states. Historically
151 “Canadian Tortured for Days, Says Iranian Doctor”, CBC News (31 March 2005), online:
under SEMA, Canada could fully collaborate with the US on a sanctions regime because the US has long been able to list human rights abusers whereas Canada could not (or would not). Now it may be that Canada never chooses to collaborate closely with the US on both countries’ listing processes, but the amendment to SEMA will never demand that Canada does so. However, the SEMA amendment does provide the opportunity for Canada to close some loopholes between the sanctions regimes of the two nations if it so desires.152 Now that the Magnitsky Law has been passed, it will be particularly imperative that the government exercises a high degree of caution and an evidence-based approach when considering the sanctioning of human rights abusers. The Foreign Minister should soon turn his or her mind to how such sanctions can be effectuated so as to target the abusers while putting minimal impact on the innocents — often victims — in targeted
nations. Clearly, that exercise of discretion should be supported as best 2017 CanLIIDocs 119 as possible by close scrutiny of past and existing sanctions — again, some- thing GAC does not appear to be doing.
VI. SOME REMAINING CONSIDERATIONS FOR PARLIAMENT: DUE PROCESS, ENFORCEMENT, AND THE SUBSTANCE OF SEMA REGULATIONS Consideration of whether or not to amend SEMA to allow Canada to enact sanctions double-extraterritorially is arguably the most important con- sideration for Parliament moving forward on the sanction file, but it is far from the only one. A host of other issues also require consideration. The intention here is not to go into great detail on any of these remain- ing issues. Rather, the hope in this final section is to point to some of the more salient procedural shortcomings that might stand in the way of Can- ada doing a better, fairer job in promulgating and enforcing its economic sanctions. Perhaps the discussion below will beget better questions, and in turn, better answers than an outsider can provide at this time. In this regard, the government must ask its bureaucracy tough questions about how sanctions are working and how they can be improved. The gov- ernment bureaucracy — perhaps with the forceful lead of Parliament — must
152 This idea of improving collaboration with Canada’s allies brings us to the final section of this paper, which discusses several other issues with SEMA legislation and enforcement that would be prudent for the government of Canada to study while the Standing Com- mittee conducts its review. 570 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 then reimagine its practice with updates for the 21st century business and intelligence environments. In undertaking its task, both Parliament and the government bureaucracy should look for input far beyond that of GAC, who has traditionally held the pen and was the only government depart- ment to provide meaningful insight in 1992 when SEMA was first drafted.
A. The Process of Listing Entities under SEMA First, we start with the issues surrounding the current listing process under SEMA. Currently, the legislation does not mandate an automatic review of existing listings under SEMA Regulations, or what used to be called the designation of persons or entities. This means that once an individual or entity is listed under SEMA, there is no requirement that the government ensure that the “reasonable grounds” that existed to justify
the listing in the first place continue to be met. By way of contrast, under 2017 CanLIIDocs 119 Canada’s Criminal Code, there is a periodic review of all listings every two years to ensure that there are “reasonable grounds”153 to keep the individ- ual or entity on the list.154 Much as is the case under the Criminal Code, under SEMA, it is not a crime to be a listed entity. But under both pieces of legislation the conse- quences can be dire for a listed individual or entity. It can be the end of a business or livelihood, and the penalty for dealing with a listed entity
153 According to the Ministry for Public Safety: The process of listing begins with criminal and/or security intelligence reports on an entity disclosing the reasonable grounds to believe that the entity has knowingly carried out, attempted to carry out, participated in or facilitated a terrorist activity; or the entity is knowingly acting on behalf of, at the direction of or in association with, an entity involved in a terrorist activity. The criminal and/or security intelligence reports are submitted to the Minister of Public Safety for consideration. If the Minister has reasonable grounds to believe that the above test is met, the Minister may make a recommendation to the Governor in Council to place the entity on the list. If the Governor in Council is satisfied that there are reasonable grounds to believe that the above test has been met, then the entity may be placed on the list of entities (Public Safety Canada, About the Listing Process (2 December 2015), online:
can be as much as five years of imprisonment under SEMA, as serious a penalty as one could get for some terrorist offences in theCriminal Code. But periodic reviews to ensure that Canada’s sanctions are up-to-date, that Canada is targeting the right people and businesses and not penaliz- ing the innocent, is not merely a basic issue of due process benefitting the listed or their business contacts in Canada. The process under the Criminal Code to review listings is long, laborious, and likely painful for the respon- sible bureaucrats. There will be no will within the government bureaucracy to repeat the task with sanctions listings. But the review process ensures that a process is in place. That is, it ensures that government workers are tasked with keeping files on listed entities, updating them periodically, and determining whether a listed entity has undergone a name change that should be updated, a business has expanded and a new entity added, or an individual has died and should be removed. In other words, while
the review process will surely be painful, that pain demonstrates tangible 2017 CanLIIDocs 119 benefits that ensure not just that Canada is working to avoid targeting the innocent, but that Canada has a comprehensive, up-to-date understanding of the reach — and pseudonyms — of listed entities. This is all to say that there is a real and meaningful benefit to the review process that ensures listings are fair, more effective, and do a better job of protecting Canadians. To say that individuals and entities can challenge SEMA listings and have their names removed is no defence. It should not be incumbent on foreign individuals and businesses — particularly ones with limited resources — to challenge their listings. The Criminal Code provides for both the right to challenge a listing155 and an automatic review; SEMA should do the same. Ensuring that government workers are tasked specifically with con- firming that there are reasonable grounds for Canada’s listings in not important merely in theory. There is a very real doubt as to whether Can- ada’s listing and review process is as robust as it should be. When SEMA was being drafted in 1992, MP Lloyd Axworthy noted the following:
There is one other set of questions I really want to ask the legal counsel, because I think it is an important issue we are faced with right now, where we are still in a position of exercising a substantial program of economic sanctions against Iraq and yet nobody in this Parliament has ever been told exactly how they are working, what effect they are having – the imple- mentation of it.156
155 Criminal Code, supra note 5, s 83.05(2). 156 Committee Hearings, supra note 23 at 1605. 572 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 In other words, while the government was reviewing sanctions legislation in 1992, it was unclear whether the bureaucrats were reviewing existing sanctions at all. The same is true today, and this uncertainty unearths both a due process issue, as well as very real questions about whether Canada’s lack of enforcement under SEMA is due in part to neglect.
B. Government Silos and SEMA: Enforcement and Oversight Recall that GAC, specifically its Legal Bureau, is responsible for Canada’s sanctions regime. But GAC has no investigative powers or expertise in the way that the CBSA, CSIS, or the RCMP do. Moreover, GAC has no enforcement powers; enforcement is left to the Public Prosecution Ser- vice of Canada. One would, therefore, assume that there would be some sort of “sanctions coordination unit,” either within GAC or externally.
Such a unit would bring together the enforcement arm of the Public Pros- 2017 CanLIIDocs 119 ecution Service and GAC’s foreign country expertise, with investigative expertise from others, like the CBSA, RCMP, CSIS, the Communications Security Establishment of Canada (CSE), and arguably Canada’s financial intelligence unit, the Financial Transactions and Reports Analysis Centre (FINTRAC). However, to date, no such unit, formal or informal, exists in Canada as it does in the US and, as of several years ago, as it does to a degree in the UK.157 Calls for greater intelligence coordination have been a common refrain across Western governments in recent years,158 with Canada’s Air India Report offering a sobering reminder of what happens when interdepart- mental intelligence coordination breaks down.159 Coordinating Canada’s sanctions regime should not be an exception to the lessons learned. These are lessons for threat assessment and intelligence gathering and sharing, not to be applied with undue formality only to “terrorist” inves- tigations but not sanctions, which are imposed for similar reasons — a threat to peace or security. The risks and inefficiencies of operating in
157 For further discussion, see Michael Nesbitt, “Canada Can do More to Fight Terrorism”, National Post (29 October 2015), online:
and CBSA — have no independent oversight or review at all. At least with 2017 CanLIIDocs 119 respect to review, that is about to change with the creation of the National Security and Intelligence Committee of Parliamentarians, which will review the work of the government agencies operating in the field of national security.161 Further, the newly-proposed National Security and Intelligence Review Agency162 will also have responsibilities for reviewing activities of government departments that relate to national security and/or cut across all of Canada’s government departments, including CBSA and GAC. Ensuring that the new review bodies take a long look at Canada’s sanc- tions regime as early as possible would not only contribute to account- ability, it would also ensure that somebody is finally taking an interest in the big interdepartmental picture and questioning employees to help ensure they do not fall prey to groupthink, something that can undermine
160 For a distinction between review and oversight, see Commission of Inquiry into the Actions of Canadian Officials in Relation to Maher Arar, A New Review Mechanism for the RCMP’s National Security Activities (Ottawa: Public Works and Government Services Can- ada, 2006) (“In their pure forms, oversight mechanisms can be seen as direct links in the chain of command or accountability: they both review and are responsible for the activ- ities of the overseen body. By contrast, review mechanisms are more appropriately seen as facilitating accountability: they ensure that the entities to which the organization under review is accountable, and the public, receive an independent assessment of that organiza- tion’s activities” (ibid at 457)). 161 See Bill C-22, An Act to establish the National Security and Intelligence Committee of Parliamen- tarians and to make consequential amendments to certain Acts, 1st Sess, 42nd Parl, 2016 (first reading 16 June 2016). 162 See Bill C-59, An Act Respecting National Security Matters, 1st Sess, 42nd Parl, 2017 (first reading 20 June 2017). Canada’s “Unilateral” Sanctions Regime Under Review 575
the best of thinkers. Accountability in this context does not merely serve the interests of due process, nor does it merely protect the interests of Canadians who might be investigated for sanctions-busting, though these aspects are crucial. Such accountability also serves to improve effective operations. Accountable employees are diligent employees. Canada’s practice on the investigation and enforcement of sanctions leave much to be desired, and undoubtedly other procedural and due pro- cess issues not covered by this article require a close look. Parliament took the first step in updatingSEMA with the Magnitsky Law, but it is now time to go beyond this legislation and conduct a more robust review of Can- ada’s law and practice related to international sanctions. Whether it is Par- liament or Canada’s bureaucracy that takes the initiative to consolidate, refine, and update Canada’s practice, the recent attention to and review of SEMA provides an ideal opportunity to take the first step. 2017 CanLIIDocs 119
CONCLUSIONS Even as it stands, SEMA does have some very real benefits — it is not to be junked. It allows CBSA to interdict goods. It can act as a powerful signal to businesses and foreign countries alike — and in so doing, it operates in a preventive fashion. SEMA is unique in Canadian legislation in the security arena: It focuses first and foremost on the actions of foreign governments and transnational businesses; whereas the Criminal Code applies to simply individuals or terrorist groups. SEMA captures the import or export of goods, the travel of persons into or out of Canada, and financial trans- actions. When there is a threat to peace and security or, now gross and systemic human rights abuses perpetrated in foreign nations, SEMA can help Canada act to punish those who fund or support such threats. But SEMA and Canada’s practice investigating and prosecuting viola- tions of its sanctions leave much to be desired. SEMA is due for a very broad update — much broader than that instituted by the Magnitsky Law — starting with proper consideration of whether it is time to allow for the (double) extraterritorial application of Canadian sanctions where Par- liament warrants. But the review should not end there. Other issues of due process require a keen eye; the most salient issue being the question of when and how Canada justifies, and advertises its sanctions listings. Canada could improve numerous procedural areas on the sanctions file, including with respect to greater interdepartmental cooperation on the file, ideally with the assistance of a sanctions coordination unit. If Parliament 576 Revue de droit d’Ottawa • 48:2 | Ottawa Law Review • 48:2 continues to take a keen interest in sanctions, it must start to ask broader questions about Canada’s sanctions regime under SEMA. Canada has the opportunity to go beyond merely expanding its sanctioning authority to serious human rights abusers by working to improve the due process and enforcement capacity of its international sanctions. To ensure that Can- adian sanctions are more than unenforced goodwill, that they not only target threats to international peace and the world’s worst, most corrupt human rights abusers, it is imperative that a broad rethink take place on the file, and that numerous sources and departments from across Can- ada’s government are consulted in the process. 2017 CanLIIDocs 119