Keeping Up With Sanctions – a Challenge

By | December 15, 2015

The Problem

In concert with its western allies, Canada has instituted a series of trade and economic sanctions against Iran, Syria, Russia, plus about twenty other countries and failed states. These can be tricky seas to navigate for Canadians, doubly treacherous because of the criminal penalties involved when sanctions are transgressed.

The challenges are compounded because these sanctions are in constant flux, meaning Canadian businesses with interests in targeted countries need to be extra vigilant. Businesses with US exposure need to be especially careful in not crossing the line when it comes to American measures. All of this makes for tough navigating.

True, there are all sorts of navigational aids put out by the consulting community and by law firms. Business organizations such as the Canadian Association of Importers and Exporters and the Canadian Manufacturers and Exporters have excellent programs and provide useful information on the state of these Canadian, US and other measures.

The real concern, however, is that while Global Affairs Canada (formerly  Foreign Affairs, Trade and Development or DFATD) provides black-letter factual information on Canada’s sanctions, there is a complete lack of policy guidance for the business community in this area. There is no avenue for seeking even informal views from Ottawa on whether a particular dealing or other activity may be covered, directly or indirectly, by Canada’s sanctions.

Basically, the Canadian private sector is on its own in deciding whether a given transaction is or is not going to run afoul of these measures. This should be changed.

Suggestions for the New Minister

While sanctions and trade embargos aren’t mentioned in the PM’s mandate letter to Foreign Minister Stephane Dion, the letter does talk a lot about openness and engagement. It’s likely that at some point Mr. Dion will take a closer look at how those values apply to Canada’s sanctions regime.

That will be forced on him sooner rather than later. The government has to respond soon to the July 2015 nuclear deal with Iran, approved by the UN Security Council, which calls for a phasing down of western sanctions against that country.

When he does undertake that review, I suggest he make serious improvements by requiring his Department to publish regular policy guidance and compliance notices and initiate outreach programs to assist Canadian business in navigating its way through these sometime treacherous waters.

It’s not being suggested that the government should or could advise companies on the legalities of a specific business decision. That is up to business and their legal counsel. However, compared with the virtual silence now existing in Ottawa, the Canadian sanctions regime would be improved immeasurably by some kind of policy guidance on aspects of sanctions compliance and enforcement. This would be a plus for the private sector.

Need for Policy Guidance

Some ideas for filling this vacuum can be gleaned from looking at the active programs provided to American companies by the US Office of Foreign Assets Controls (OFAC) in the US Treasury Department. They regularly issue interpretive guidance on specific issues related to the application and enforcement of US sanctions. Canada should take a leaf out of the US book.

Here are some areas where policy guidance would be appropriate, without fettering the actions of Canadian enforcement agencies. First and foremost would be informational and outreach programs to supplement those available in the private sector in explaining the background, enforcement criteria and other intricacies of the Canadian system of sanctions to Canadian business. All in the name of openness and engagement, referred to in the PM’s letter.

Second would be publishing regular bulletins and policy guidance on such matters as,

  • How the government applies ambiguous terms in sanctions laws where the meaning is elusive. An example is the prohibition on “financial services”, a term frequently found in the regulations. What is meant by the term? How far does it reach? Does it include all manner of bank transactions and insurance coverage?
  • Cases where remote or indirect business or commercial relations would not be considered within the scope of the sanctions. An example is where personal real estate in a third country is subject to a mortgage held by a bank, financial institution or other person in a sanctioned country;
  • Where Minister’s authorization permits are available to permit a transaction, clarification of the kind of information to be supplied to the Minister and an indication of the wait times for a response to an application;
  • How Canadian and US sanctions in targeted countries work in tandem and where Canadian companies should be aware of critical differences;
  • Hypothetical examples to show when a given transaction or dealing would be considered as running afoul of a particular prohibition; and, most usefully,
  • Information notices on enforcement actions, for example when charges are laid or when a conviction is registered in specific cases.

The above are obviously subject to the caveat that the federal government does not give legal advice on specific transactions. For understandable reasons, government agencies cannot be fettered and their discretion circumscribed in the enforcement of Canada’s sanctions laws. That being said, these are some areas where statements of policy and guidance, with the appropriate caveats, would be of great help to Canadian companies with foreign business ties.

Surely, Canadian companies should have the same advantages as their American counterparts in navigating through our government’s sanctions policy.