On June 10, 2023, Canada announced additional amendments to the Special Economic Measures (Ukraine) Regulations (the “Ukraine Regulations”) in response to “Russia’s attempts to destroy Ukraine’s cultural sites, institutions and identity” and Canada ordered the seizure of a Russian-registered cargo aircraft pursuant to its new authority under the Special Economic Measures Act (the “SEMA”).
Amendments to Ukraine Regulations
The amendments list an additional 24 individuals and 17 entities under Schedule 1 of the Ukraine Regulations and took effect on June 8, 2023. There are now over 500 parties listed under Schedule 1 of the Ukraine Regulations. The newly listed individuals and entities are “connected to Russia’s theft of Ukrainian cultural objects and efforts to ‘Russify’ Ukraine’s culture”, and are “related to private military companies fighting for Russia that originate in Ukraine.” The individuals include Ukrainians who work at museums and other cultural centers, and the entities include Russian entities in Ukraine, such as the “so-called Ministries of Education and Culture.”
Generally speaking, designation under Schedule 1 of the Ukraine Regulations imposes an asset freeze and dealings prohibition against the designated person. Subject to limited exceptions, any person in Canada or any Canadian outside Canada cannot:
- deal in any property, wherever situated, that is owned, held or controlled by or on behalf of a designated person whose name is listed in Schedule 1;
- enter into or facilitate, directly or indirectly, any transaction related to such a dealing;
- provide any financial or other related services in respect of such a dealing;
- make available any goods, wherever situated, to a designated person listed in Schedule 1 or to a person acting on their behalf; or
- provide any financial or related service to, or for the benefit of, a designated person listed in Schedule 1.
Additionally, individuals listed in Part 1.1 of Schedule 1 of the Ukraine Regulations are also inadmissible to Canada under the Immigration and Refugee Protection Act.
Since February 2022, Canada has continually updated the Ukraine Regulations, as well as the Special Economic Measures (Russia) Regulations and the Special Economic Measures (Belarus) Regulations. Businesses should continually assess their sanctions compliance in this shifting legal landscape. Regulations enacted under the Special Economic Measures Act obligate persons in Canada and Canadian citizens to disclose certain property held by Schedule 1 entities and any related transactional information to the RCMP. Additionally, certain entities have a continuing duty to determine and disclose certain property held by Schedule 1 entities.
An unofficial copy of the legislative amendments to the Ukraine Regulationsthat came into effect on June 8, 2023 are available on Global Affairs Canada’s website here.
Seizure of Russian Cargo Aircraft
Canada has ordered the seizure of a Russian-registered cargo aircraft pursuant to the June 2022 amendments to the Special Economic Measures Act, which permit Canada to seize and seek forfeiture of Russian assets to be repurposed for rebuilding Ukraine. This is the second seizure order of Russian assets made pursuant to the SEMA. The aircraft is alleged to be held or controlled, directly or indirectly by Volga-Dnepr Airlines or Volga-Dnepr Group, designated persons under Schedule 1, Part 1 of the Special Economic Measures (Russia) Regulations (the “Russia Regulations”).
Canada is the first G7 nation to establish an asset forfeiture regime of this nature. Before assets are forfeit, the Minister of Foreign Affairs must make an application for forfeiture before a Canadian Superior Court of Justice. A court must determine whether (1) the property named in an application is the property described in an order, (2) and if the property is owned, held or controlled, directly or indirectly, by the person referred to in the order. If the Court allows an application, the forfeit property is held by the government pursuant to the terms and conditions under the Seized Property Management Act.
The first seizure order was issued in mid-December 2022, when Canada seized US $26 million in assets, alleged to be property owned, held or controlled, directly or indirectly by a Schedule 1 designated person under the Russia Regulations. In this case, the assets are in the name of a company alleged to be held or controlled by a designated person (individual) and are held at a Canadian bank.
To date, no Russian assets have been forfeit by order of a Canadian court.