Vol. 148, No. 21 — October 8, 2014

Registration

SOR/2014-204 September 16, 2014

SPECIAL ECONOMIC MEASURES ACT

Regulations Amending the Special Economic Measures (Russia) Regulations

P.C. 2014-934 September 16, 2014

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 or is likely to result in a serious international crisis;

Therefore, His Excellency the Governor General in Council, on the recommendation of the Minister of Foreign Affairs, pursuant to subsections 4(1) to (3) of the Special Economic Measures Act (see footnote a), makes the annexed Regulations Amending the Special Economic Measures (Russia) Regulations.

REGULATIONS AMENDING THE SPECIAL ECONOMIC MEASURES (RUSSIA) REGULATIONS

AMENDMENTS

1. Section 3.1 of the Special Economic Measures (Russia) Regulations (see footnote 1) is replaced by the following:

New debt financing — 30 days

3.1 (1) It is prohibited for any person in Canada and any Canadian outside Canada to transact in, provide or otherwise deal in a loan, bond or debenture, of longer than 30 days’ maturity in relation to:

New debt financing — 90 days

(1.1) It is prohibited for any person in Canada and any Canadian outside Canada to transact in, provide or otherwise deal in a loan, bond or debenture, of longer than 90 days’ maturity in relation to:

Non-application

(2) Subsections (1) and (1.1) do not apply in respect of a loan that was made or a bond or debenture that was issued before the designated person was listed in Schedule 2 or 3.

2. Part 1 of Schedule 1 to the Regulations is amended by adding the following after item 62:

3. Items 2 and 3 of Part 2 of Schedule 1 to the Regulations are repealed.

4. Part 2 of Schedule 1 to the Regulations is amended by adding the following after item 29:

5. Schedule 2 to the Regulations is amended by adding the following after item 5:

APPLICATION PRIOR TO PUBLICATION

6. For the purpose of paragraph 11(2)(a) of the Statutory Instruments Act, these Regulations apply before they are published in the Canada Gazette.

COMING INTO FORCE

7. These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Russian Federation continues to violate the sovereignty and territorial integrity of Ukraine.

Background

Acting in coordination with the United States and the European Union, the Governor in Council has found that the actions of the Russian Federation constitute a grave breach of international peace and security that has resulted or is likely to result in a serious international crisis. As a result, the Special Economic Measures (Russia) Regulations were approved on March 17, 2014. Amendments to these Regulations were made on March 19, 2014, March 21, 2014, April 28, 2014, May 4, 2014, May 12, 2014, June 21, 2014, July 24, 2014, and on August 6, 2014.

On September 5, 2014, at a meeting of the Trilateral Contact Group in Minsk, Belarus, it was announced that a ceasefire agreement had been reached between Ukraine and the Russian-backed separatists in the provinces of Donetsk and Luhansk. Despite a number of reported violations of the agreement, as of September 11, 2014, the ceasefire is largely holding. However, there remains grave international concern regarding the implementation of the rest of the items of the 12-point peace plan that was agreed upon by the presidents of Ukraine and Russia, including the release of prisoners, permanent observation of the ceasefire by the Organization for Security and Cooperation in Europe, the full withdrawal of Russian soldiers and weapons from the region, and selfdetermination by the Donetsk and Luhansk provinces on their future status. Russia has violated previous commitments, including agreements reached in Geneva in April 2014 and in Berlin in July 2014.

Russia’s direct military involvement in the conflict, which the Russian government continues to deny, has resulted in a significant reversal of gains made by Ukrainian forces since June. One of the most important developments by the pro-Russian rebels is their taking of the strategic town of Novoazovsk, which lies between the Russian border and the major Ukrainian port city of Mariupol in the oblast of Donetsk’s southern portion. This development has increased fears that the Russian and pro-Russian forces will try to take Mariupol next, with a view to opening a direct passage between Russia and occupied Crimea. According to Ukrainian authorities, the concentration of Russian armed forces is steadily increasing in the north of Crimea.

In the weeks before the ceasefire agreement, Russian intervention in the conflict escalated significantly in an attempt to reverse gains made by the Ukrainian armed forces. According to the North Atlantic Treaty Organization (NATO) reports, well over 1 000 Russian troops have been operating illicitly in Ukraine. According to international sources, the weeks before the ceasefire saw direct clashes between Ukrainian and Russian troops, and an acceleration of the flow of weapons and other forms of support from Russia to separatist fighters, leading to a worsening of the violence and a rise in casualties.

Another relevant fact remains that on July 17, 2014, a Malaysia Airlines flight carrying 298 passengers and crew crashed in eastern Ukraine, killing all on board. Evidence suggests the airliner was brought down by a surface-to-air missile fired from an area controlled by pro-Russian provocateurs. There is also evidence of an increased flow of heavy weaponry — including rocket launchers, into Ukraine from Russia in the weeks before the crash — and evidence that the Russian Federation provided training on air-defense systems to the fighters. In the immediate aftermath of the tragedy, pro-Russian militants in the region of the crash impeded investigative and forensic work by international and Ukrainian authorities, as well as efforts to recover the remains of the victims.

In recent weeks, the numbers of internally displaced persons and persons fleeing eastern Ukraine have continued to rise alarmingly. According to the United Nations, over 1 million people have been displaced, over 3 000 killed, and over 6 000 wounded since the Russian-backed militants launched their violent campaign in April 2014.

Canada, along with its partners and allies, continues to collaborate in imposing additional coordinated sanctions on Russia, including sanctions on specific companies operating in key sectors of the Russian economy. These actions have been taken to demonstrate to the Russian leadership that it must end its support to militant separatists in eastern Ukraine and tangibly participate in creating the necessary conditions for the political process to advance peacefully. This includes successful implementation of the ceasefire agreement and other items identified in the 12-point peace plan.

Objectives

The proposed Regulations Amending the Special Economic Measures (Russia) Regulations (the Regulations) amend the Special Economic Measures (Russia) Regulations (the Russia Regulations) by adding four individuals and five entities to Schedule 1, adding one entity to Schedule 2 and shortening the period of maturity for loans, bonds or debentures under subsection 3.1(1). The proposed Regulations also remove two entities from the list of designated persons in Schedule 1 of the Russia Regulations.

Description

The proposed Regulations add four entities and five individuals to the list of designated persons under Schedule 1 of the Russia Regulations. Any person in Canada and any Canadian outside Canada are prohibited from

Exceptions to the above-noted prohibitions are available for the following:

The Regulations also add one entity to the list of designated persons in Schedule 2 and amend subsection 3.1(1) to reflect a shorter period of maturity for loans, bonds or debentures for Schedule 2 designated persons. It is now prohibited for any person in Canada and any Canadian outside Canada to transact in, provide or otherwise deal in a loan, bond or debenture of longer than 30 days’ maturity in relation to

The prohibition noted above does not apply in respect of a loan that was made or a bond or debenture that was issued before the designated person was listed in Schedule 2.

It is also prohibited for any person in Canada and any Canadian outside Canada to transact in, provide or otherwise deal in capital funding through the transaction of shares in exchange for an ownership interest in relation to

The prohibition noted above does not apply to capital funding that occurred before the designated person was listed in Schedule 2.

Finally, the Regulations also remove two entities from the list of designated persons in Schedule 1 of the Regulations.

“One-for-One” Rule

The “One-for-One” Rule applies to this proposal, as there are minimal administrative costs to business, because of the reporting requirement. However, the administrative burden associated with these Regulations is carved out from the “One-for-One” Rule, as they address unique, exceptional circumstances.

Small business lens

The small business lens does not apply to this proposal, as there are no costs (or insignificant costs) on small business and small businesses would not be disproportionately affected.

Consultation

Foreign Affairs, Trade and Development Canada drafted the Regulations in consultation with the Department of Justice and Citizenship and Immigration Canada.

Rationale

The measures contained in the Regulations demonstrate Canada’s concern about the continuing violation of Ukraine’s sovereignty and territorial integrity.

Implementation, enforcement and service standards

Canada’s sanctions regulations are enforced by the Royal Canadian Mounted Police and the Canada Border Services Agency. In accordance with section 8 of the Special Economic Measures Act, every person who wilfully contravenes these Regulations is liable upon summary conviction to a fine of not more than $25,000 or to imprisonment for a term of not more than one year or to both, or upon conviction on indictment, to imprisonment for a term of not more than five years.

Contact

Kevin Hamilton
Director
Eastern Europe and Eurasia Division
Foreign Affairs, Trade and Development Canada
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Telephone: 343-203-3603
Fax: 613-995-1277
Email: Kevin.Hamilton@international.gc.ca