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Navigating Canada’s economic sanctions against Russia

By Kim Walsh and Olivia Bungay

Canadian sanctions targeting Russia in relation to Russia’s ongoing invasion of Ukraine were significantly expanded over the past year.

The Special Economic Measures (Russia) Regulations impose sanctions on individuals and entities listed in Schedule 1 (designated persons), most of whom are tied in some way to Russian oil and gas companies, financial institutions, government departments, the Russian central bank, and Russian companies that provide military services to Russia.  As recently as April 13, 2023, Canada announced additions to those listed in Schedule 1, which now contains over 1600 individuals and entities.

The sanctions effectively impose an asset freeze on designated persons. It is prohibited to deal in property of any kind that is owned, held or controlled by a designated person, no matter where that property may be located.  In addition, individuals and entities in Canada, Canadian citizens when they are outside Canada, and Canadian businesses operating outside Canada are not permitted to:

  • enter into transactions with designated persons,
  • provide financial and related services to designated persons, or
  • make goods available to designated persons.

Sanctions are not limited to dealings with designated persons, and a broad array of Russian industries including financial services, oil and gas, shipping, aviation, mining and manufacturing are targeted. For instance, Canadian businesses are not permitted to export, sell, supply or ship goods for use in oil exploration, wherever situated, to Russia or to any person in Russia. Likewise, Canadian businesses are not permitted to provide to Russia or to any person in Russia any financial, technical or other services related to any good whose export, sale, supply or shipment is intended for use in oil exploration.

Canada has also prohibited trade in luxury goods, the provision of insurance and underwriting services to the Russian aviation industry, and the provision of services like accounting, advertising, engineering, management and technical services to various Russian industries. Further, persons in Canada and Canadians outside Canada are prohibited from knowingly doing anything that causes, facilitates or assists in, or is intended to cause, facilitate or assist in, the activities prohibited by the Regulations.

It is prohibited for ships registered in Russia or used for the benefit of Russia to dock in Canada or pass through Canada, unless the docking or passage is necessary to safeguard human life or to ensure navigational safety. These restrictions are also having an impact on global supply chains.

Some Russian businesses are seeking out alternate means to secure goods and services, and to supply goods to customers, as the scope of sanctions against Russia expand. Notably, this includes the use of shell companies in jurisdictions outside Russia, designed to conceal their involvement.  Canadian businesses should therefore exercise a sufficient level of due diligence when transacting business with foreign entities, particularly when the business relationship is new, to reduce the risk of noncompliance with the Regulations.

This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact the author.

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