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Canadian Sanctions Related to Russia
Practical Law Canada Legal Update w-034-7756 (Approx. 9 pages)
Canadian Sanctions Related to Russia
by Practical Law Canada Finance
| Published on 17 Mar 2022 • Canada (Common Law) |
In response to Russia's continuing military actions in Ukraine, the Government of Canada has imposed a series of sanctions under the Special Economic Measures Act, S.C. 1992, c. 17.
This Legal Update discusses the economic sanctions implemented by the Government of Canada in response to Russia's ongoing military actions in Ukraine. This update was most recently updated on March 17, 2022.
A current list of sanctions and other actions taken by the Canadian government in connection with the Russian invasion of Ukraine are available on the Government of Canada website: Canadian Sanctions Related to Russia.
Sanctions Under the Special Economic Measures Act
The Special Economic Measures Act, S.C. 1992, c. 17 (SEMA) is the principal legislation that Canada uses to impose sanctions on foreign jurisdictions and persons in relation to grave breaches of international peace and security resulting in a serious international crisis. Under SEMA, Canada enacts separate regulations for each targeted jurisdiction.
The Special Economic Measures (Russia) Regulations, SOR/2014-58 (Russia Regulations) and the Special Economic Measures (Ukraine) Regulations, SOR/2014-60 (Ukraine Regulations) came into force on March 17, 2014, following the Russian occupation and purported annexation of Crimea into the Russian Federation, and have been frequently amended since that time. The most recent amendments to the Russia Regulations were made on February 24 and 28 and March 4, 6, 10 and 14, 2022, in response to both:
- Russia's recognition of the independence and sovereignty of two regions of Ukraine (the Luhansk People's Republic (LPR) and the Donetsk People's Republic (DPR)).
- Russia's unprovoked and ongoing military invasion of Ukraine that commenced on February 24, 2022.
The Russia Regulations
The Russia Regulations include:
- Prohibited Transactions: a list of transactions and activities that persons and entities in Canada and Canadians outside Canada are prohibited from taking.
- Obligations of listed financial institutions to determine on a continuing basis whether they are in possession or control of property owned or controlled by or on behalf of a designated person listed on Schedule 1 of the Russia Regulations.
- Schedules that are lists of designated persons and entities that the sanctions apply with respect to.
Prohibited Transactions
The Russia Regulations now make it illegal for any person or entity in Canada or any Canadian outside Canada to, among other things, engage in the following activities:
- In connection with a person designated on Schedule 1 of the Russia Regulations:
- deal in any property of such a person, including entering into, facilitating, or providing any financial services in respect of a transaction involving such person's property;
- make any goods, wherever situated, available to such person; and
- provide any financial or related service to, or for the benefit of, such a person.
- Import, purchase, or acquire any crude oil, or any other hydrocarbon oils or gases, from Russia or from any person in Russia.
- Dealing in new debt of longer than:
- 30 days maturity in relation Schedule 2 persons, and
- 90 days maturity in relation to Schedule 3 persons.
Section 5 of the Russia Regulations also prohibits any person in Canada or any Canadian outside of Canada from knowingly facilitating or assisting in any prohibited transaction.
Obligations of Financial Institutions and Others
Section 6 of the Russia Regulations imposes an affirmative obligation on a wide range of financial institutions, including banks, insurance companies, trust companies and credit unions, to determine on a continuous basis whether they are in the possession of any assets of a person listed on Schedule 1.
Section 7 of the Russia Regulations imposes an obligation on all Canadian persons and entities to report to the RCMP both:
- The existence of any property in their possession that is owned or controlled by a person listed on Schedule 1.
- Information regarding any transaction in respect of such property.
Schedules
Different levels of sanctions apply under the Russia Regulations depending on which schedule a person or entity is listed. The schedules to the Russia Regulations include:
- Schedule 1: Schedule 1 is a list of persons and entities that have been identified as one or more of:
- a person engaged in activities that facilitate, support, provide funding for or contribute to a violation or attempted violation of the sovereignty or territorial integrity of Ukraine or that obstruct the work of international organizations in Ukraine;
- a person who has participated in gross and systematic human rights violations in Russia;
- associates and family members of any person described above;
- entities owned or controlled by any person described above or by Russia or at the direction of Russia;
- a senior official of entities described in the immediately preceding bullet.
Schedule 1 consists of two parts. Part 1 is a list of individuals and Part 2 is a list of entities.(Section 2, Russia Regulations.) - Schedules 2 and 3: Persons listed on Schedules 2 and 3 are persons who are either:
- owned or controlled by, or acting on behalf of, a person described in the first two bullets under Schedule 1, or
- owned, held or controlled by Russia or acting on behalf of or at the direction of Russia.
- Schedule 3.1 (Repealed): This Schedule was added to the Russia Regulations on February 24, 2022 and repealed on February 28, 2022. Entities listed on this schedule included the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation and the Ministry of Finance of the Russian Federation.
Amendments to the Russia Regulations
The Russia Regulations have been amended several times in 2022.
February 24, 2022 Amendments
On February 24, 2022, the Russia Regulations were amended twice. The first amendments (SOR/2022-027) were introduced in response to Russia's recognition of the independence and sovereignty of the LPR and the DPR. Among other things, this set of amendments:
- Added 351 members of the State Duma (Russia's parliament) and two entities to Schedule 1.
- Created a new Schedule 3.1 to the Russia Regulations on which three entities (the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation and the Ministry of Finance of the Russian Federation) were listed.
- Prohibited any person or entity in Canada and any Canadian outside Canada from transacting in, providing financing for, or otherwise dealing in any new debt instruments issued by the Russian central bank and other entities listed on Schedule 3.1. The prohibition extends also to transactions involving the property or interests or rights in property of an entity listed on Schedule 3.1.
The second set of amendments introduced on February 24, 2022 (SOR/2022-029) in response to the Russian invasion of Ukraine in the LPR and DPR regions. These amendments:
- Added 31 individuals and 19 new banks and corporations to Schedule 1. The additions included numerous Russian banks as well as large Russian companies, including Gazprom.
- Moved five entities from Schedule 2 and three entities from Schedule 3 to Schedule 1, resulting in more stringent prohibitions applying to those entities.
February 28, 2022 Amendments
The Russia Regulations were further amended on February 28, 2022 (SOR/2022-031 and SOR/2022-032) to make the following changes:
- Adding 18 members of the Security Council of the Russian Federation to Schedule 1, including President Vladimir Putin, and the Foreign Minister, Minister of Defence, the Minister of Justice and the Finance Minister of the Russian Federation.
- Schedule 3.1 was repealed and the entities on it (including the Russian central bank) were moved to Part 2 of Schedule 1.
- Adding the Bank of Canada to the list of entities required to assess whether it is in the possession or control of any property owned by or controlled on behalf of a person listed on Schedule 1.
March 4, 2022 Amendments
On March 4, 2022 the Russia Regulations were amended once again to add ten people to Schedule 1 (SOR/2022-046). Each of these new additions is an executive of the state-owned oil companies Gazprom or Rosneft.
March 6, 2022 Amendments
On March 6, 2022, the Russia Regulations were further amended twice (SOR/2022-047 and SOR/2022-048) to, among other things:
- Prohibit ships that are Russian owned or registered, or chartered or leased for the benefit of Russia, a person in Russia or a designated person, from entering Canadian waters or docking in Canada.
- Add ten more individuals to Schedule 1.
March 10, 2022 Amendments
On March 10, 2022, the Russia Regulations were again amended twice (SOR/2022-052 and SOR/2022-053) to:
- Prohibit any person in Canada and any Canadian outside Canada from importing, purchasing or acquiring any petroleum products listed on a new Schedule 5 from Russia or a person in Russia. Schedule 5 currently includes crude oil, petroleum oils other than crude, and petroleum gases and other gaseous hydrocarbons.
- Add 32 new entities to Part 2 of Schedule 1. Each of these entities is a Russian entity involved in the defence industry.
- Add 5 individuals to Schedule 1, including Roman Abramovich.
March 14, 2022 Amendments
On March 10, 2022, the Russia Regulations were further amended (SOR/2022-056) to add to Schedule 1 the names of 15 senior officials of the Russian government who enabled and supported the Russian invasion of Ukraine.
The Ukraine Regulations
Like the Russia Regulations, the Ukraine Regulations came into force on March 17, 2014, following the Russian occupation and purported annexation of Crimea into the Russian Federation, and have been frequently amended since that time.
The focus of the Ukraine Regulations is on regions of Ukraine that Russia has occupied (Crimea) or recognized the alleged independence of (LPR and DPR). Prior to 2022, the Ukraine Regulations simply contained a list of designated persons associated with violations of the sovereignty or territorial integrity of Ukraine and prohibited persons and entities from entering into transactions with those persons or their property, including:
- Dealing in any property of such a person, including entering into, facilitating, or providing any financial services in respect of a transaction involving such person's property.
- Making any goods, wherever situated, available to such person.
- Providing any financial or related service to, or for the benefit of, such a person.
The Ukraine Regulations have been amended twice in 2022 (both on February 24, see SOR/2022-028 and SOR/2022-030) to add four individuals to the schedule and to introduce extensive prohibitions with respect to three regions of Ukraine (the Regions):
- Crimea.
- The DNR region.
- The LNR region.
Activities that are prohibited with respect to these Regions include:
- Making an investment involving any property located in the Regions that is owned, held or controlled by a Region or a person located in the Regions.
- Providing any financial or related services with respect to such an investment.
- Import, purchase, or acquire any goods from the regions or any person located in the Regions.
- Export goods destined for the Regions or for any person in the Regions.
- Providing technical assistance to a Region or to any person in the Regions.
- Engaging in any activities related to tourism in the Regions.
The Belarus Regulations
Sanctions against Belarus were first introduced under SEMA in 2020 as the Special Economic Measures (Belarus) Regulations, SOR/2020-214. As a result of Belarus' involvement in Russia's invasion of Ukraine, these sanctions were amended in February 2022. The scope and nature of these sanctions include prohibitions against:
- In connection with a person designated on the Schedule to the Belarus Regulations:
- dealing in any property of such a person, including entering into, facilitating, or providing any financial services in respect of a transaction involving such person's property;
- making any goods, wherever situated, available to such person; and
- providing any financial or related service to, or for the benefit of, such a person;
- Importing, purchasing, acquiring, shipping or otherwise dealing in any crude oil, or any other hydrocarbon oils or gases from Belarus; providing any financial technical, insurance or other services related to Belarusian oil.
- Importing, purchasing, acquiring, shipping or otherwise dealing in potassium chloride from Belarus.
Recent Amendments to the Belarusian Regulations
The Belarusian Regulations were amended on:
- March 7, 2022, to add 19 individuals and 25 entities to the Schedule (SOR/2022-049).
- March 16, 2022, to add the names of 25 senior officials of the Ministry of Defence of Belarus as a result of their support for, and involvement in, the Russian invasion of Ukraine (SOR/2022-058).
Other Sanctions and Responses
The Government of Canada has taken several other actions in response to the Russian invasion of Ukraine outside of the SEMA. These actions include:
- Cancelling export permits: All permits authorizing goods listed on Canada's Export Control List to be exported to Russia were cancelled on February 24, 2022. Canada also announced that no new permits would be issued, however, consideration would be given to application to export goods intended for medical supply or other humanitarian needs.
- Withdrawal of most-favoured nation status under the customs tariff: Effective March 2, 2022, goods originating from Russia or Belarus are no longer entitled to the most-favoured nation status under the customs tariff and could now be subject to a an import customs duty of 35% (see Customs Notice 22-02).
- Closing Canadian airspace: On February 27, 2022, Transport Canada announced that, effective immediately, Canadian airspace would be closed to Russian-owned, chartered, or operated aircraft.