Order Respecting the Seizure of Property Situated in Canada (Volga-Dnepr Airlines or Volga-Dnepr Group): SOR/2023-120

Canada Gazette, Part II, Volume 157, Number 13

Registration
SOR/2023-120 June 8, 2023

SPECIAL ECONOMIC MEASURES ACT

Order Respecting the Seizure of Property Situated in Canada (Volga-Dnepr Airlines or Volga-Dnepr Group)

P.C. 2023-551 June 8, 2023

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 the aircraft An-124-100-150, manufactured by Aviastar-SP and with the registration number RA-82078 and serial number 9773054559153, is situated at Lester B. Pearson International Airport (CYYZ) in Toronto and is owned — or is held or controlled, directly or indirectly — by Volga-Dnepr Airlines or Volga-Dnepr Group, who is a person in the Russian Federation;

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 that the aircraft An-124-100-150, manufactured by Aviastar-SP and with the registration number RA-82078 and serial number 9773054559153, that is located at Lester B. Pearson International Airport (CYYZ) in Toronto and that is owned — or that is held or controlled, directly or indirectly — by Volga-Dnepr Airlines or Volga-Dnepr Group be seized in such a manner that no dealing can be carried out with respect to the aircraft, other than by the Minister of Public Works and Government Services, and such that the Minister takes possession and control of the aircraft and is authorized to manage or otherwise deal with the aircraft.

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 or continue to support that regime’s violations, by enforcing Canada’s autonomous sanctions regime to seize assets in Canada belonging to designated persons.

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 1 800 individuals and entities have been listed under SEMA for their support and/or complicity of 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

On June 23, 2022, Canada was the first to implement a G7 commitment to seize, forfeit and redistribute sanctioned persons’ assets by amending the Special Economic Measures Act (SEMA) and the Justice for Victims of Corrupt Foreign Officials Act (JVCFOA). This new forfeiture regime enables the Government to seize (if the asset if of physical nature), restrain (if the asset is financial, such as accounts, investments, bonds), forfeit, dispose and redistribute assets belonging to listed individuals and entities that have already been effectively frozen by Canadian sanctions. Since June, a whole-of-government approach has been underway to operationalize the new regime.

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 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 SEMA . Second, once the property is seized or restrained, the Minister may apply to a provincial court in which the property is located for an Order that the property be permanently forfeited to the Crown. If the request to forfeit is successful, the proceeds from its disposal 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 SEMA.

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

On December 19, 2022, Canada announced that an Order-in-Council had been made under the new legislation to restrain US$26 million from Granite Capital Holdings Ltd., a company owned by Roman Abramovich, a Russian oligarch sanctioned under the Russia Regulations. Distinct in the international sanctions context, the new regime is untested and will likely face legal challenges during the process towards potential forfeiture, including questions related to property law and potentially international law. The Government is working through the necessary steps of this new and complex process and will continue to provide updates to relevant departments and agencies throughout the seizure to forfeiture process.

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 a legislative regime allowing for seizure and forfeiture on the basis of a party having been subject to economic sanctions. 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, restore international peace and security, or rebuild affected states.

Description

Pursuant to paragraph 4(1)(b) of SEMA, this proposal would seek authority to seize an aircraft currently situated at Toronto Pearson International Airport. The owners and operators of this asset are believed to be Volga-Dnepr Group and its subsidiary, Volga-Dnepr Airlines, both of which are listed under the 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, co-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 following: Public Services and Procurement Canada (PSPC), the Department of Justice, Public Safety Canada, the Canada Border Service Agency and the Royal Canadian Mounted Police.

In this case, public consultation would not be appropriate, given the risk of circumvention 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 made pursuant to paragraph 4(1)(b) of SEMA would provide the authority required to seize an aircraft related to Volga-Dnepr Group and Volga-Dnepr Airlines, 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.

Although it is not possible to estimate at this time the total costs associated with the seizing, managing and disposing of the asset should it be forfeited, PSPC has the necessary authority to manage and dispose of seized and forfeited property, pursuant to the Seized Property Management Act. This includes providing seized property management and secure storage services to any federal agency, department or Crown corporation on a cost-recovery basis. All costs associated with carrying out activities related to this proposal will be absorbed by the Government.

If a future application for forfeiture under section 5.3 of the 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.

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 any Canadian businesses or business people 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.

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

Given the assets targeted solely involve a listed individual under the Russia Regulations, Global Affairs Canada does not expect any implications on the gender-based analysis plus (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 SEMA and JVCFOA, this proposal seeks to impose a direct economic cost on Russian regime supporters who have profited financially from their support of 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 asset owner of the conditions of the Order.

The compliance and enforcement mechanism is described above under the Background section.

Contact

For more information, please contact

Sanctions Policy and Operations Coordination Division
Global Affairs Canada
Email: sanctions@international.gc.ca