Ukrainian Law Blog: Canadian Sanctions Related to Ukraine (Amendments, November 28, 2016)

Prohibitions

Sanctions related to Ukraine were enacted under the Special Economic Measures Act, in order to respond to violations of Ukraine’s constitution, sovereignty and territorial integrity. On March 17, 2014, the Special Economic Measures (Ukraine) Regulations(“the Regulations”) came into force.

Amendments to the Ukraine Regulations were made on March 19, April 12, May 12, June 21, July 11, July 24, August 6, December 19, 2014, February 17, 2015, June 29, 2015, March 18, 2016, and November 28, 2016.

The Special Economic Measures (Ukraine) Regulations impose an asset freeze and dealings prohibition on designated persons, which include both individuals and entities. They prohibit persons in Canada and Canadians abroad from:

· dealing in any property, wherever situated, held by or on behalf of a designated person;

· entering into or facilitating, directly or indirectly, any transaction related to such a dealing;

· providing any financial or related service in respect of such a dealing;

· making goods, wherever situated, available to a designated person; and,

· providing any financial or related service to or for the benefit of a designated person.

The Regulations include a definition of the “Crimea region of Ukraine” as follows: the Crimea Region of Ukraine means the Autonomous Republic of Crimea and the city of Sevastopol, and includes their land areas and territorial sea.

It is also prohibited for any person in Canada and any Canadian outside Canada to:

· make an investment in the Crimea region of Ukraine if that investment involves a dealing in any property, located in the Crimea region of Ukraine, held by or on behalf of the Crimea region of Ukraine or a person in the Crimea region of Ukraine;

· provide or acquire financial or other related services to, from or for the benefit of or on the direction or order of the Crimea region of Ukraine or any person in the Crimea region of Ukraine for the purpose of making an investment referred to in paragraph (a);

· import, purchase, acquire, ship, or otherwise deal in goods, wherever situated, that are exported from the Crimea region of Ukraine after the day on which this section comes into force;

· export, sell, supply, ship, or otherwise deal in goods, wherever situated, destined for the Crimea region of Ukraine or any person in the Crimea region of Ukraine;

· transfer, provide or communicate technical data or services to, from or for the benefit of or on the direction or order of the Crimea region of Ukraine or any person in the Crimea region of Ukraine;

· provide or acquire financial or other services related to tourism, to, from or for the benefit of or on the direction or order of the Crimea Region of Ukraine or any person in the Crimea Region of Ukraine; or

· dock a cruise ship in the Crimea region of Ukraine that is registered or licensed, or for which an identification number has been issued, pursuant to any Act of Parliament.

Causing, assisting or promoting prohibited activities is likewise prohibited.

The Regulations provide a review mechanism to remove names from the schedule upon receipt of an application from a designated person.

Exceptions

Exceptions to the above-noted asset freeze and dealings prohibition are available for the following:

· Payments made by or on behalf of designated persons pursuant to contracts entered into prior to the coming into force of the Regulations, provided that the payments are not made to or for the benefit of a designated person;

· Pension payments to any person in Canada or any Canadian outside Canada;

· Transactions in respect of accounts at financial institutions held by diplomatic missions, provided that the transaction is required in order for the mission to fulfill its diplomatic functions under the Vienna Convention on Diplomatic Relations, or, transactions required in order to maintain the mission premises if the diplomatic mission has been temporarily or permanently recalled;

· Transactions by international organizations with diplomatic status, agencies of the United Nations, the International Red Cross and Red Crescent Movement, or Canadian non-governmental organizations that have entered into a grant or contribution agreement with the Department of Foreign Affairs, Trade and Development;

· Transactions necessary for a Canadian to transfer to a non-designated person any accounts funds or investments of a Canadian held by a designated person on the day on which that person became designated;

· Financial services required in order for a designated person to obtain legal services in Canada with respect to the application of any of the prohibitions in the Regulations; and,

· Loan repayments made to any person in Canada or any Canadian abroad in respect of loans entered into before the coming into force of the Regulations, enforcement of security in respect of those loans, or payments by guarantors guaranteeing those loans.

Permits and Certificates

The Special Economic Measures (Ukraine) Permit Authorization Order, made pursuant to subsection 4(4) of the Special Economic Measures Act, authorizes the Minister of Foreign Affairs to issue to any person in Canada or any Canadian outside Canada a permit to carry out a specified activity or transaction, or any class of activity or transaction, that is restricted or prohibited pursuant to the Regulations. Further information is available on the “Permits and Certificates” page.

FACFOA Prohibitions

The Freezing Assets of Corrupt Foreign Officials (Ukraine) Regulations (the "FACFOA Regulations") create a freeze on the assets of the politically exposed foreign person listed in the Regulations by prohibiting the following activities by anyone in Canada or any Canadian outside Canada:

· dealing, directly or indirectly, in any property, wherever situated, of a listed politically exposed foreign person;

· entering into or facilitating, directly or indirectly, any financial transaction related to a dealing referred to in point (1);

· providing financial services or other related services in respect of any property of a listed politically exposed foreign person.

The official list of persons whose assets are subject to freezing under the Freezing Assets of Corrupt Foreign Officials Act Regulations is found in the link to the regulations below.

Background

In November 2013, the refusal of then-Ukrainian President Viktor Yanukovych to sign a landmark association agreement with the European Union set off major protests in Kyiv, leading to the fall of the Yanukovych government.

In March 2014, Russian forces occupied the Crimean peninsula of Ukraine. Following the unconstitutional “referendum” on March 16, 2014, President Putin signed a treaty purporting to incorporate Crimea into the Russian Federation on March 18, 2014. Canada, along with the international community, continues to condemn Russia’s illegal annexation of Crimea.

In the wake of the illegal annexation of Crimea, Russian-backed militants quickly gained control of significant portions of the Donetsk and Luhansk regions of eastern Ukraine, declaring the creation of the ‘Donetsk People’s Republic’ and the ‘Luhansk People’s Republic’. Fraudulent so-called “independence referendums”, initiated by pro-Russian separatists, were held on May 11, 2014, but gained no international recognition. In the months following, violence increased as Russian-backed insurgents clashed with Ukrainian government forces.

Peace agreements were reached in talks held in Minsk, Belarus, in September 2014 and in February 2015. The February ‘Package of Measures’ contains 13 commitments, including: an immediate and complete ceasefire in the Donetsk and Luhansk regions; the full withdrawal of heavy weaponry by both sides; full exchange of prisoners; a dialogue on the modalities for conducting local elections in Donetsk and Luhansk regions, under Ukrainian legislation; amnesty for the separatists; constitutional reform, including decentralization and special status of ‘certain areas’ of the Donetsk and Luhansk regions; and the regaining by Ukraine of control of its border with Russia, amongst other measures.

Despite ongoing diplomatic efforts to seek a resolution to the conflict, the situation in eastern Ukraine remains tense, with continuous ceasefire violations, and frequent shelling along the line of contact. Canada has been a consistent supporter of the Minsk peace process and believes that it represents the only feasible path to a durable and peaceful solution to the conflict in Ukraine. Canada continues to call on both parties, in particular Russia, to fully implement their commitments and obligations under the Minsk agreements.

Regulations and Orders made under the Special Economic Measures Act: