Vol. 148, No. 11 — May 21, 2014
SOR/2014-103 May 4, 2014
SPECIAL ECONOMIC MEASURES ACT
Regulations Amending the Special Economic Measures (Russia) Regulations
P.C. 2014-512 May 4, 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
1. Part 2 of the schedule to the Special Economic Measures (Russia) Regulations (see footnote 1) is amended by adding the following after item 3:
- 4. Aquanika
- 5. Avia Group LLC
- 6. Avia Group Nord LLC
- 7. CJSC Zest
- 8. InvestCapitalBank
- 9. JSB Sobinbank
- 10. Sakhatrans LLC
- 11. SMP Bank
- 12. Stroygazmontazh
- 13. Stroytransgaz Group
- 14. Stroytransgaz Holding
- 15. Stroytransgaz LLC
- 16. Stroytransgaz OJSC
- 17. Stroytransgaz-M LLC
- 18. The Limited Liability Company Investment Company Abros
- 19. Volga Group
APPLICATION PRIOR TO PUBLICATION
Statutory Instruments Act
2. 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
3. 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.)
Russia’s military aggression in eastern Ukraine is a clear violation of Ukraine’s sovereignty and territorial integrity. Further destabilization efforts are occurring as government and public buildings across eastern Ukraine continue to be occupied by heavily armed pro-Russian separatists and militants, with the support of the Russian government. Russian forces continue to mass and conduct drills near the Ukrainian border, while media reports Russian aircrafts entering into Ukrainian airspace. Increasing violence and hostage taking in eastern Ukraine imply that Russia is mobilizing, supporting and organizing the militants with the aim of continuing to destabilize Ukraine in advance of the May 25, 2014, elections.
On March 16, 2014, a purported referendum was held in Crimea while the province was under the control of an illegal and coercive Russian military presence, resulting in an announced vote of 97% in favour of Crimea becoming part subject of the Russian Federation.
On March 22, 2014, President Putin finalized the legal process of Crimea’s annexation to the Russian Federation with the signing of a treaty into Russian law. President Putin also signed a decree which established Crimea as the ninth federal district of the Russian Federation and appointed Oleg Belavintsev, a close associate of Sergei Shoigu, the Russian Minister of Defence, as the President’s representative in Crimea. President Putin then ordered the confirmation of plans for the creation of the territorial executive bodies of the Russian Federation in Crimea and Sevastopol by March 29, 2014.
These events and actions resulted in widespread criticism from the international community. On March 27, 2014, the United Nations (UN) General Assembly passed resolution A/68/L.39, which overwhelmingly affirmed Ukraine’s territorial integrity and declared the illegality of the referendum that led to Russia’s annexation of the Crimean peninsula. In a decisive rebuke to Russia, 100 UN member states voted in favour of the resolution, 58 abstained and only 11 voted against the resolution.
In April 2014, a series of coordinated events took place reminiscent of events that preceded Russia’s annexation of Crimea less than a month before. Unidentified gunmen stormed police stations, seized government buildings and set up checkpoints in several cities in eastern Ukraine, particularly in Donetsk Oblast. The Ukrainian government asserts that Russian intelligence officers are directly involved in orchestrating these actions and that some of the gunmen have uniforms and weapons similar to those of Russian soldiers.
The Donetsk basin is Ukraine’s coal-mining heartland and, apart from Kyiv, is the most densely populated part of Ukraine. The towns targeted by the militants are close to the Russian border and have traditionally voted for “pro-Russia” politicians such as Viktor Yanukovych.
Russia’s actions seem to be aimed at severing Kyiv’s control over this economically vital area, in order to further destabilize the government led by Prime Minister Arseniy Yatsenyuk, undermine its legitimacy, provoke armed clashes, and prevent the presidential elections planned for May 25, 2014. Russia could also potentially use its de facto control over the Donetsk region to cut off revenue flows to Kyiv and attempt to force the government to devolve power to the provinces.
Presently, armed pro-Russian militants continue to occupy government and public buildings across eastern Ukraine, with separatist activities spreading to cities, such as Slovyansk and Kostyantynivka. Pro-Russian insurgents have become increasingly ruthless and have turned to kidnapping. Approximately 40 people are reportedly being held hostage in makeshift jails in Slovyansk, including journalists, pro-Ukraine activists and seven military observers from the Organization for Security and Cooperation in Europe. There are also media reports that Russian aircrafts have entered into Ukrainian airspace on several occasions. As further evidence of increasing violence and instability in eastern Ukraine, in late April 2014, the Mayor of Kharkiv was shot and critically injured, a Ukrainian serviceman was reportedly killed and another injured when an improvised explosive device detonated in the Donetsk region, and a body was found in Slovyansk indicating signs of torture.
Ukraine’s acting government and the international community have accused Russia of orchestrating the unrest, and fears continue that Moscow could use this violence and unrest as a pretext for an invasion. Russia is accused of violating the April 17, 2014, agreement made in Geneva where diplomats from Russia, Ukraine, the United States and the European Union decided on a number of steps to de-escalate the situation in eastern Ukraine, including refraining from further violence and provocative acts. In late April 2014, the G7 nations and the European Union announced further targeted sanctions in an attempt to intensify the pressure on Russia to take meaningful steps to de-escalate the situation.
On March 17, 2014, finding that the situation with respect to Crimea constituted a grave breach of international peace and security that has resulted or is likely to result in a serious international crisis, and acting in coordination with the United States and the European Union, the Governor in Council passed the Special Economic Measures (Russia) Regulations. Two days later, on March 19, 2014, the Governor in Council amended the Regulations by adding an additional 11 individuals to the list of designated persons. On March 21, 2014, the Governor in Council amended the Regulations again by adding an additional 14 individuals to the list of designated persons, as well as one entity (a Russian bank). On April 28, 2014, the Governor in Council amended the Regulations again by adding an additional nine individuals to the designated persons, as well as two entities (Russian financial institutions).
The proposed Regulations Amending the Special Economic Measures (Russia) Regulations (the Regulations) add 16 entities to the schedule to the Special Economic Measures (Russia) Regulations.
The proposed Regulations add 16 entities to the list of designated persons under the Special Economic Measures (Russia) Regulations. Any person in Canada and any Canadian outside Canada are prohibited from
- dealing in any property, wherever situated, held by or on behalf of a designated person;
- entering into or facilitating, directly or indirectly, any transaction related to such a dealing;
- providing any financial or related service in respect of such a dealing;
- making goods, wherever situated, available to a designated person; and
- providing any financial or related service to or for the benefit of a designated person.
Exceptions to the above-noted prohibitions are available for the following:
- Payments made by or on behalf of designated persons pursuant to contracts entered into prior to the coming into force of the Regulations, provided that the payments are not made to or for the benefit of a designated person;
- Pension payments to any person in Canada or any Canadian outside Canada;
- Transactions in respect of accounts at financial institutions held by diplomatic missions, provided that the transaction is required in order for the mission to fulfill its diplomatic functions under the Vienna Convention on Diplomatic Relations, or, transactions required in order to maintain the mission premises if the diplomatic mission has been temporarily or permanently recalled;
- Transactions by international organizations with diplomatic status, agencies of the United Nations, the International Red Cross and Red Crescent Movement, or Canadian non- governmental organizations that have entered into a grant or contribution agreement with the Department of Foreign Affairs, Trade and Development;
- Transactions necessary for a Canadian to transfer to a non-designated person any accounts, funds or investments of a Canadian held by a designated person on the day on which that person became designated;
- Financial services required in order for a designated person to obtain legal services in Canada with respect to the application of any of the prohibitions in the Regulations; and
- Loan repayments made to any person in Canada or any Canadian abroad in respect of loans entered into before the coming into force of the Regulations, enforcement of security in respect of those loans, or payments by guarantors guaranteeing those loans.
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.
Foreign Affairs, Trade and Development Canada drafted the Regulations in consultation with the Department of Justice and Citizenship and Immigration Canada.
The measures contained in the Regulations demonstrate Canada’s concern about Russia’s 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.
East/Southeast Europe Bilateral and Commercial Relations
Foreign Affairs, Trade and Development Canada
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