Order Respecting the Restraint of Property Situated in Canada (Roman Arkadyevich Abramovich): SOR/2022-279

Canada Gazette, Part II, Volume 157, Number 1

Registration
SOR/2022-279 December 15, 2022

SPECIAL ECONOMIC MEASURES ACT

Order Respecting the Restraint of Property Situated in Canada (Roman Arkadyevich Abramovich)

P.C. 2022-1361 December 15, 2022

Whereas the Governor in Council is of the opinion that the actions of the Russian Federation constitute a grave breach of international peace and security that has resulted in a serious international crisis;

And whereas there is property situated in Canada that is owned — or that is held or controlled, directly or indirectly — by Roman Arkadyevich Abramovich, a national of the Russian Federation who does not ordinarily reside in Canada;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Foreign Affairs, under paragraph 4(1)(b)footnote a and subsection 4(1.1)footnote b of the Special Economic Measures Act footnote c, orders Citco Bank Canada to restrain the amount of US$26,073,990.35 that is owned — or that is held or controlled, directly or indirectly — by Roman Arkadyevich Abramovich and that is credited to a bank account held by Manticore Fund (Cayman) LTD with Citco Bank Canada in such a manner that no dealing can be carried out with respect to that amount.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

Ensuring those who are complicit in their support of regimes that violate international law cannot benefit from their ill-gotten gains.

Background

On February 24, 2022, without provocation, President Putin instructed Russian forces to initiate a comprehensive invasion of Ukraine. This egregious action is a blatant violation of international law and the rules-based international order. The attacks have caused widespread devastation of Ukrainian infrastructure and property, and unnecessary deaths of Ukrainians, particularly civilians. These actions are a continuation and acceleration of the violent steps taken by Russia since early 2014 to undermine Ukrainian security and sovereignty.

Since then, Canada has imposed a significant number of new sanctions under the Special Economic Measures Act (SEMA) in response to Russia’s invasion of Ukraine. The Special Economic Measures (Russia) Regulations (the Russia Regulations) consist of a wide range of measures, including a dealings ban prohibition on listed persons. To date, over 1 500 individuals and entities have been listed under the Russia Regulations for their support and/or complicity of President Putin and his war. The dealings ban under the Russia Regulations prohibits persons in Canada and Canadians outside Canada from dealing with the property, wherever situated, held by or on behalf of a listed person, or entering into or facilitating any transaction or providing any financial or related service in relation to such a dealing. It is also prohibited to make any goods available to a listed person or to provide any financial service to them or for their benefit.

Canada’s asset seizure and forfeiture regime

Following the March 2022 meeting of the Russian Elites, Proxies and Oligarchs (REPO) Taskforce, G7 Finance Ministers released a joint statement outlining their commitment to take all available legal steps to find, restrain, freeze, and, where appropriate, seize, confiscate or forfeit the assets of individuals and entities that have been sanctioned in response to Russia’s invasion of Ukraine. This commitment seeks to target the assets of key sanctioned Russian elites and proxies.

On June 23, 2022, Canada was the first to implement this G7 commitment by amending the Special Economic Measures Act and the Justice for Victims of Corrupt Foreign Officials Act to include authorities that allow the Government to seize, forfeit, dispose and redistribute property in Canada belonging to sanctioned persons listed under any of Canada’s sanctions’ regulations. Since the enactment of these legislative changes, a whole-of-government effort has been underway to identify and analyze property for potential seizure. Within this context, an asset can be seized if it is a physical asset, or restrained if it is a financial asset.

Any property recommended for seizure (or restraint) and forfeiture is assessed on a case-by-case basis. Forfeiture of property requires a two-stage process: first, a Governor-in-Council order would be obtained under paragraph 4(1)(b) of the SEMA, to seize or restrain targeted property belonging to a sanctioned individual or entity pursuant to the triggers set out in subsection 4(1.1) of the act. Second, once the property is seized or restrained, the Minister may apply to a court of the province in which the property is located for an order that the property be permanently forfeited to the Crown. Once the property is forfeited, the proceeds generated from its sale may be used for the reconstruction of affected states, the restoration of international peace and security, and compensation to victims, as described in section 5.6 of the SEMA.

Procedural fairness is an integral aspect of this new legislative scheme. The regime includes the following procedural safeguards:

International response

While like-minded allies continue to explore additional legislative options for implementing the G7 commitment to seize and forfeit assets of sanctioned persons, Canada is the first to implement this commitment through the creation of a legislative regime allowing for seizure and forfeiture on the basis of a party having been subject to economic sanctions. Canada’s chosen vehicle for implementing this commitment was through amendments to the Special Economic Measures Act and the Justice for Victims of Corrupt Foreign Officials Act. Canada’s allies are supportive of Canada’s efforts in this regard.

Objective

  1. Impose further costs on Russia for its unprovoked and unjustifiable invasion of Ukraine, including through seizing or restraining targeted property belonging to sanctioned persons pursuant to triggers set out in subsection 4(1.1) of the Act.
  2. Send a clear message that those who are complicit in their support of regimes that violate international law can no longer continue to benefit.
  3. Funds resulting from asset forfeiture may be used to compensate victims of human rights abuses, restore international peace and security, or rebuild affected states.

Description

Pursuant to paragraph 4(1)(b) of the Special Economic Measures Act, this Order would restrain funds totalling US$26,073,990 (approximately Can$33.3 million) situated in Canada. The Ultimate Beneficial Owner of the payment is identified as Mr. Roman Abramovich, a listed individual under the Special Economic Measures (Russia) Regulations.

Regulatory development

Consultation

Global Affairs Canada engages regularly with relevant stakeholders including civil society organizations, cultural communities and other like-minded governments, regarding Canada’s approach to sanctions implementation.

An interdepartmental committee, chaired by Global Affairs Canada and the Department of Finance was established with a mandate to review and analyze potential assets in Canada and make recommendations under Canada’s new asset forfeiture authorities. Other committee members include the Departments of Public Services and Procurement Canada, Justice, Public Safety, Canada Border Service Agency and Global Affairs Canada, as well as Royal Canadian Mounted Police, Canadian Security Intelligence Service, Communications Security Establishment and the Office of the Superintendent of Financial Institutions.

In this case, public consultation would not be appropriate given the risk of asset flight and the urgency to impose these measures in response to the ongoing breach of international peace and security in Ukraine.

Modern treaty obligations and Indigenous engagement and consultation

An initial assessment has been conducted and no modern treaty implications have been identified.

Instrument choice

An Order in Council made pursuant to paragraph 4(1)(b) of SEMA will restrain the relevant property belonging to Mr. Abramovich, and permit the Government of Canada to seek forfeiture of the same property at a later stage.

Regulatory analysis

Benefits and costs

Given the assets targeted do not involve Canadians or persons in Canada, Global Affairs Canada does not expect any Canadian to be negatively impacted by the seizure or forfeiture of this asset.

If a future application for forfeiture under section 5.3 of SEMA is successful, the Minister may pay out amounts from the proceeds account for the purpose of the reconstruction of a state, the restoration of international peace and security, and/or compensation of victims, pursuant to section 5.6 of the SEMA. Canada is a world leader in its support for Ukraine’s reconstruction efforts.

Canadian sanctions related to Russia have generated a high number of media inquiries and media coverage since the February 24, 2022, invasion of Ukraine. Canada’s asset forfeiture measures have consequently generated high levels of media interest given Canada is the first G7 member to enact such legislation.

Small business lens

Analysis under the small business lens concluded that the Order will not impact Canadian small businesses since the assets targeted do not involve Canadians or persons in Canada.

One-for-one rule

The one-for-one rule does not apply to the Order, as it does not impose an incremental administrative burden on businesses.

Regulatory cooperation and alignment

While like-minded allies remain supportive of Canada’s initiative and continue to explore options for implementing the G7’s commitment to seize and forfeit the assets of sanctioned persons, Canada is the first to implement this commitment through the creation of a new legislative regime for forfeiture on the basis of economic sanctions. Canada implemented this commitment through amendments to the Special Economic Measures Act and the Justice for Victims of Corrupt Foreign Officials Act.

Strategic environmental assessment

This Order is unlikely to result in important environmental effects. In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus (GBA+)

Given the assets targeted solely involve a listed individual under the Russia Regulations, Global Affairs Canada does not expect any implications on GBA+ in this instance.

Rationale

The asset seizure and forfeiture regime came into force in June 2022 in direct response to the Russian invasion of Ukraine that began on February 24, 2022, which continues Russia’s blatant violation of Ukraine’s territorial integrity and sovereignty under international law. While the new asset seizure and forfeiture regime applies equally to all regulations under the Special Economic Measures Act and the Justice for Victims of Corrupt Foreign Officials Act, this Order seeks to impose a direct economic cost on Russian oligarchs and proxies who have profited financially from their support of President Putin’s regime.

Implementation, compliance and enforcement, and service standards

The Order comes into force on the day on which it is registered. Global Affairs Canada would then notify the financial institution, as well as the asset owner of conditions the Order. The compliance and enforcement mechanism is described above under the “Background” section.

Contact

Stephen Burridge
Director
Sanctions Policy and Operations Coordination Division
Global Affairs Canada
Telephone: 343‑203‑7904