Update on Canadian Sanctions Against Russia: One Year On

One year has passed since Canada’s first major wave of wide-ranging economic sanctions targeting Russia in response to the full-scale invasion of Ukraine on February 24, 2022. Since then, Russian sanctions have been amended dozens of times, expanding to encompass a broad range of industries, goods, services, and entities and individuals.

You can learn about the first significant waves of amendments in our February 2022 Blakes Bulletin: Canada Imposes Extensive New Sanctions and Other Economic Measures Against Russia and April 2022 Blakes Bulletin: Update on Canadian Sanctions and Other Economic Measures Against Russia.

This update highlights key developments since April 2022 and offers an overview of all Canadian sanctions currently in place against Russia.

PROHIBITIONS ON DEALINGS IN PROPERTY OF DESIGNATED PERSONS

Individuals and entities listed in Schedule 1 of the Special Economic Measures (Russia) Regulations (Russia Regulations) are subject to a comprehensive ban that prohibits transacting with, providing financial or related services to, making goods available to or otherwise dealing in any property that is “owned, held or controlled” by or on behalf of a listed individual or entity.

The first wave of amendments to the Russia Regulations in February 2022 designated a large number of major financial institutions and oil and gas companies in Russia under Schedule 1, as well as the Russian central bank and Ministry of Finance, among others.

Schedule 1 has since expanded to over 1,000 individuals and entities drawn from both the government and private sector and across the industry spectrum.

Sanctions apply to property owned, held or controlled by or on behalf of listed individuals regardless of where that property it is located. In October 2022, the first Canadian court decision interpreting the Russian Regulations concluded that property “owned, held or controlled by” a listed person could extend to property held by a subsidiary incorporated outside Russia (see our January 2023 Blakes Bulletin: First Court Decision to Interpret Sanctions Against Russia Adopts Broad Interpretation of Corporate “Control”).

SECTOR-SPECIFIC SANCTIONS

The first waves of sanctions against Russia targeted the Russian financial services, shipping, and oil and gas industries. Over the course of 2022, sectoral sanctions broadened to encompass a range of new industries, including:

• Aviation and Insurance: In April 2022, Canada prohibited all insurance, reinsurance and underwriting services related to Russian aviation.

• Luxury Goods: In May 2022, Canada prohibited the import, export, sale, supply or shipment of luxury goods listed in a new Schedule 6 of the Russia Regulations.

• Services: In July 2022, Canada added a new Schedule 8 to the Russia Regulations, prohibiting a broad range of services, including technical, management, accounting and advertising, to specific industries, particularly in the energy and chemical manufacturing industries.

• Manufacturing and Mining: In July 2022, Canada added a range of mining and manufacturing industries to Schedule 8, including metal mining and manufacturing of computer, electrical or machinery equipment. Canada also prohibited the import, purchase or acquisition of gold from Russia.

Canada’s financial services industry continues to be subject to more stringent compliance obligations with respect to Russian sanctions. You can learn about these measures and related FINTRAC guidance in our April 2022 Blakes Bulletin: Update on Canadian Sanctions and Other Economic Measures Against Russia.

IMPORT AND EXPORT RESTRICTIONS

On February 24, 2022, Canada cancelled all export permits for Russia issued under the Export and Import Permits Act and halted the issuance of all future export permits. On March 3, 2022, Canada revoked the entitlement of Russia and Belarus to Most-Favoured-Nation Tariff treatment under the Customs Tariff, resulting in a 35% tariff on most imports. Those measures remain in place.

Canada began imposing restrictions on the export of specific goods and technologies on March 24, 2022, by enacting the Restricted Goods and Technologies List. Since then, several new schedules have been added to the Russia Regulations:

• Schedule 6 lists luxury goods that are prohibited for import or export, including items such as beer, clothing, motorcycles and watches

• Schedule 7 lists goods that could be used to manufacture weapons and includes various dual-use raw materials and industrial equipment that are also widely used in civilian commercial industries

• Schedule 8 lists services that are prohibited in relation to certain industries in Russia, including computer services, architectural and engineering services

• Schedule 5.1 lists advanced goods, technologies and raw materials that are also used in a range of industries, from components used in quantum computing to microscopes

The effect of the new schedules has been to extend sanctions beyond goods with an obvious military use to a broad array of everyday commercial and consumer goods, services and technologies.

APPLICATION AND NON-CIRCUMVENTION

The Russia Regulations apply to all individuals or entities in Canada and all Canadian citizens and Canadian corporations outside Canada. The Russia Regulations also broadly prohibit facilitation activities: it is prohibited for any person in Canada and any Canadian outside Canada to knowingly do anything that causes, facilitates or assists in, or is intended to cause, facilitate or assist in, activities prohibited by the Russia Regulations.

PERMIT AUTHORIZATION ORDERS

Individuals and companies may apply to the Canadian Minister of Foreign Affairs for an exemption from any restriction set out under the Russia Regulations. Applications are considered on a case-by-case basis and may take several months to process.

CONCLUSION

The expanding nature of Canadian sanctions relating to Russia highlights the importance for Canadian businesses to monitor the regulations carefully and be alert to dealings with sanctioned industries or property of subsidiaries owned, partially or indirectly, by sanctioned persons.

For more information about the Canadian sanctions legislation, please refer to our Blakes Sanctions Primer or contact:

Brady Gordon               +1-604-631-5255
Roy Millen                     +1-604-631-4220
Vladimir Shatiryan        +1-416-863-4154

or any member of the International Trade group.