On February 14, 2025, the Government of Canada announced further amendments to the Special Economic Measures (Russia) Regulations (“the Russia Regulations”), adding two non-Russian entities to Schedule 1. In this significant move, Canada targeted Volga-Dnepr Airlines (Ireland) Limited, an Irish entity, and Volga-Dnepr Logistics B.V., a Dutch entity. This marks the first application of the 2023 amendments to the Special Economic Measures Act (“SEMA”), which expanded the government’s authority, permitting it to impose “secondary sanctions”. The newly targeted entities are subsidiaries of Volga-Dnepr Airlines and Volga-Dnepr Group, two Russian entities already sanctioned under Schedule 1 for their involvement in Russia’s war on Ukraine.
These Irish and Dutch entities were designated under the Russia Regulations to support the Government’s seizure of a Volga-Dnepr cargo plane, now understood to be owned by these entities. The applicable Order In Council providing for the seizure of the cargo plane was issued in 2023 under the SEMA’s asset seizure and forfeiture mechanism; however, the 2023 Order In Council was recently repealed and re-issued, identifying these Irish and Dutch entities as the owners of the cargo plane. Since its seizure in 2023, the cargo plane has remained at Toronto Pearson International Airport.
In order to successfully forfeit the cargo plane under the SEMA, the Government must bring an application to a court of competent jurisdiction and must prove that the seized property (i.e. the cargo plane) is owned, held, or controlled by the person(s) identified in the seizure order (i.e. the Irish and Dutch entities), whom must also be a person(s) designated under existing Canadian sanctions regulations (i.e. the Russia Regulations). But for the re-issued Order In Council, it appears it would have been difficult, if not impossible for the Government to successfully forfeit the cargo plane.
Amendments to the Special Economic Measures Act
In June 2023, the SEMA was amended to expand the government’s authority to prohibit activities with certain individuals unrelated to a foreign state targeted by SEMA sanctions. This change was partly driven by the growing concern over Russia’s sanctions evasion. Previously, the government could only restrict activities involving a foreign state, its residents, and its nationals who did not ordinarily reside in Canada. The amendments now allow the government to designate and prohibit activities with any ‘person outside Canada who is not Canadian’ under any country-specific regulations issued under the SEMA. In other words, the government can now target a national of, or an entity incorporated in, country ‘Y’ under the SEMA sanctions regulations enacted against country ‘X’. This new authority enables the government to use secondary sanctions to target those conducting business with or supporting a territory or individuals subject to sanctions.
The implementation of Canada’s first round of secondary sanctions aligns with comments made by the Executive Director for the Sanctions Policy Division at Global Affairs Canada (GAC), during the December 2024 American Bar Association event, ‘Nearly Three Years Post-Invasion: Taking Stock of US and Canadian Sanctions Against Russia.’ The representative noted that GAC is also imposing secondary sanctions on individuals or entities directly aiding Russia from third countries. However, these secondary sanctions are not directly related to sanctions evasion.
Expanded Authority Under Russia Regulations
The Government of Canada also amended two criteria for listing individuals under the Russia Regulations. Paragraph 2(a) now clarifies that a person can be listed if they have engaged in sanctionable conduct at any point. Paragraph 2(g) has been amended to specify that former senior officials of listed entities can be sanctioned, and that this criterion also applies to senior officials of entities listed for conduct supporting the war or participating in human rights violations. In sum, these amendments allow for the designation of individuals based on both their current and past activities or positions:
- Previous language under the Russia Regulations:
- 2(a): A person engaged in activities that directly or indirectly 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.
- 2(g): A senior official of an entity referred to in paragraph (e) or (f).
- Current language under the Russia Regulations:
- 2(a): A person who has engaged in activities that directly or indirectly 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.
- 2(g): A current or former senior official of an entity referred to in paragraph (a), (a.1), (e), or (f)
Business Considerations
The implementation of secondary sanctions under the Russia Regulations illustrates Canada’s commitment to sanctioning parties supporting Russia’s illegal war in Ukraine. While this is the first time the Government has imposed secondary sanctions, it appears the impetus for these designations was to enable a forfeiture action under the SEMA. It is likely that the Government will now proceed with a court application to forfeit the cargo plane. However, it remains uncertain whether this first use of the Government’s secondary sanctions authority marks a new era of non-Russian designations under the Russia 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 owned or controlled 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 owned, held or controlled by Schedule 1 entities. An unofficial copy of the legislative amendments to the Special Economic Measures (Russia) Regulations that came into effect on February 14, 2025 are available on Global Affairs Canada’s website here.
