By Linda McKay-Panos
Republished with permission from LawNow Vol 42(2) (Nov/Dec 2017)
On October 4, 2017, Minister of Foreign Affairs, Chrystia Freeland, announced that the House of Commons had passed a bill that originated in the Senate: the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) (Bill S-226, First Session, Forty-second Parliament, 64-65-66 Elizabeth II, 2015-2016-2017 (the “Magnitsky Act”). The bill must be approved again by the Senate before it becomes law. It is said to be similar to legislation and other motions passed in other countries and jurisdictions: United States, European Parliament, the Netherlands, the UK, Italy, Poland and Estonia. The legislation is named in memory of Russian whistle-blower Sergei Magnitsky, who accused Russian officials of tax fraud and was later beaten to death in 2009 in a Moscow prison. When debating Bill S-226 at its second reading, Senator A. Raynell Andreychuk spoke at length about Canada’s international human rights obligations and efforts to ensure that human rights laws are adhered to around the world (see online: Senate of Canada, October 25, 2016) 1st Session, 42nd Parliament, Volume 150, Issue 65 https://sencanada.ca/en/Content/Sen/chamber/421/debates/065db_2016-10-25-e#54).
The Preamble of the Magnitsky Act states (in part):
Whereas adding gross violations of internationally recognized human rights as a ground on which sanctions may be imposed against foreign states and nationals would further Canada's support for human rights and advance its responsibility to protect activists who fight for human rights. . . .
Canada’s Magnitsky Act amends the Special Economic Measures Act, SC 1992, c 17 (SEMA) and the Immigration and Refugee Protection Act, SC 2001 c 27. The purpose of the Bill is “to provide for measures that can be taken against foreign nationals who have committed gross violations of internationally protected human rights” (Karine Azoulay and Robin MacKay, Legislative Summary of Bill S-226: An Act to provide for the taking of restrictive measures in respect of foreign nationals responsible for gross violations of internationally recognized human rights and to make related amendments to the Special Economic Measures Act and the Immigration and Refugee Protection Act (July 10, 2017) Online: https://lop.parl.ca/About/Parliament/LegislativeSummaries/bills_ls.asp?source=library_prb&ls=S226&Parl=42&Ses=1&Language=E#a12, (Legislative Summary of Bill S-226) at 1.
If a foreign national (an individual who is not a Canadian citizen or a permanent resident of Canada) is responsible for, or complicit in extrajudicial killings, torture or other gross violations of internationally recognized human rights against human rights advocates or other whistleblowers, the Governor in Council of Canada can issue a number of orders relating to the foreign national’s property (Legislative Summary of Bill S-226 at 8). The Governor in Council can also issue orders that relate to a foreign national’s property if that person is responsible for or complicit in directing “acts of significant corruption” (e.g., expropriation of private or public assets for gain, corruption of government contracts or the extraction of natural resources) (Legislative Summary of Bill S-226 at 8-9).
Further, the Governor in Council can prohibit individuals and entities in Canada, or any Canadian citizen or corporation outside of Canada, from entering into or assisting in financial transactions that relate to property held by a foreign national (Legislative Summary of Bill S-226 at 9). Orders made under the Bill are in effect for five years and can be extended more than once (Legislative Summary of Bill S-226 at 9).
Both federally and provincially regulated businesses (e.g., banks, credit unions, insurance companies, trust and loan companies, and investment managers) have a duty to determine on a continuing basis whether they are in possession or control of property that they have reason to believe is subject to an order or regulation under the Magnitsky Act (Legislative Summary of Bill S-226 at 9). To allow for some protection for the Canadian businesses, there is a provision for the Minister of Foreign Affairs to grant certificates to people who claim not to be a foreign national subject to an order (Legislative Summary of Bill S-226 at 9).
The current SEMA allows Canada to impose sanctions against other states, even where there is no United Nations Security Council resolution. These economic sanctions are allowed (Legislative Summary of Bill S-226 at 7):
· where an international organization to which Canada belongs calls on its members to take economic measures against a foreign state; or
· where a grave breach of international peace and security has occurred and is likely to result in a serious international crisis.
When sanctions are imposed under SEMA, the names of listed persons are published in regulations, and names can be added to or removed from the list through an amendment to the regulations. These listed persons are generally subject to any of the imposed sanctions or restrictions (Legislative Summary of Bill S-226 at 7).
The Magnitsky Act will amend SEMA to expand the grounds upon which the Governor in Council can seize or freeze assets or otherwise sequester property held by or on behalf of a foreign state. An order for seizure can be made where a foreign state is responsible for or complicit in gross human rights violations, including extrajudicial killings or violations of the human rights of whistle-blowers or human rights advocates who are exercising internationally recognized human rights, such as freedom of expression or the right to peacefully demonstrate (Legislative Summary of Bill S-226 at 10).
Once Canada’s Magnitsky Act comes into force, this new law and SEMA have to be reviewed within five years, and a report must be provided to Parliament. Also, any list of foreign nationals designated under the Magnitsky Act must be reviewed by Parliament and the Senate annually (Legislative Summary of Bill S-226 at 10).
There are some concerns about the limitations of this law, however. First, none of the existing Canadian legislation related to sanctions provides Canada with the ability to take legal action against non-Canadians beyond our country’s borders (Andrea Charron and Meredith Lilly, “More Sanctions is the Wrong tool for human rights Protection” (February 16, 2017) Policy Options Online: http://policyoptions.irpp.org/fr/magazines/fevrier-2017/more-sanctions-is-the-wrong-tool-for-human-rights-protection/ (Charron and Lilly). Canadian regulations can be used to seize the property and assets of individuals or states that are found in Canada, or the property of Canadians that is abroad, but the existing legislation cannot be used to target assets that are held by non-Canadians abroad. The new legislation does not permit any change to this situation (Charron and Lilly). Since our current banking system is quite strong in the area of preventing money laundering or holding assets gained through foreign corruption, it is already likely that foreign human rights abusers are quite unwilling to keep their money or assets in Canada (Charron and Lilly).
The second critique notes that Canada best contributes to fighting human rights abuses when we work with other states, such as the European Union and the United States. The United Nations Act, RSC 1985, c U-2, and SEMA already allow Canada to target human rights abusers, particularly when the abuses are ”a grave breach of international peace and security” (Charron and Lilly). The new legislation would allow Canada to act alone even when there is no threat to global peace, which would mean that Canada is “volulnteering to be the world’s police officer on human rights abuses” (Charron and Lilly). Charron and Lilly also argue that Canada lacks the resources to be effective in that role alone.
Third, the new legislation will place a great deal of onus on our banks and private companies to comply with the regulations. They are complex and difficult to interpret and companies must either take their chances and face hefty fines or must employ lawyers to advise them on how to meet the requirements. The law will thus increase the administrative burden for banks and other companies without necessarily preventing human rights abuses (Charron and Lilly). Parliament did respond to some of the criticisms and amended the proposed legislation in an attempt to clarify and address some of the confusion (Cyndee Todgham Cherniak, “Canada’s Magnitsky Act Moves Closer to Law on October 2, 2017” (October 1, 2017) Canada-U.S.-Blog Online: http://www.canada-usblog.com/2017/10/01/canadas-magnitsky-act-moves-closer-to-law-on-october-2-2017/).
Canada has long maintained its desire to encourage respect for human rights and the rule of law. This legislation provides additional measures to hold violators to account and to discourage future violations. In particular, Canadian companies often engage in business in countries that demonstrate gross human rights abuses. It would be against our values to seek financial rewards while ignoring human rights abuses. This legislation is an attempt to provide an additional tool to provide a disincentive to corrupt foreign officials engaged in human rights abuses against either Canadians or others.