On April 7, 2022, the Government of Canada introduced the federal budget (the Budget)ⁱ, which included a number of legislative amendments to various laws via the Budget Implementation Act¹, including amendments to Canada’s economic sanctions regime.²

The Budget amends various legislation, including the Special Economic Measures Act (SEMA) and the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) (the Magnitsky Act). The key amendments in SEMA and the Magnitsky Act relate to the inclusion of a broader definition for “property”, which now includes money, funds, and digital assets, among others, and the Government’s power to not only seize foreign assets, but also allow for the forfeiture of these assets, which can then be redistributed as compensation to victims, restoration of international peace and security or to help in rebuilding a foreign state from war. The Budget also outlines requirements for banks to provide lists of foreign assets frozen by Canadian government sanctions so that the Government has an inventory of what has been seized.

Canada is reportedly deploying efforts to convince other countries in the G7 to adopt similar measures.a id="_ftn3">³

SEMA

The proposed amendments include a new section 5.4(1) of the SEMA that provides a framework for the forfeiture of assets of designated parties. The proposed section reads as follows:

“Forfeiture

5,4(1) On application by the Minister, a judge shall order that the property that is the subject of the application be forfeited to Her Majesty in right of Canada if the judge determines, based on the evidence presented, that the property

• is described in an order made under paragraph 4(1)(b); and
• is owned by the person referred to in that order or is held or controlled, directly or indirectly, by that person.”

Further, the proposed amended section 5.6 of SEMA empowers the Government to pay out the net proceeds from the disposition of the forfeited property under section 5.4, for the purposes of (a) reconstructing a foreign state affected by a grave breach of international peace and security; (b) the restoration of international peace and security; and (c) the compensation of victims of grave breaches of international peace and security and human rights violations.

In brief, through these amendments, goods of designated persons and entities may be seized, forfeited and the proceeds of such forfeiture can be remitted for reconstruction purposes, restoration of international peace and security or to victims. Notably, the SEMA already included authority for a Minister to consider claims of compensation from Canadians, if a Minister is designated by the Governor for that purpose. To date, there has not been such a designation. In addition to military assistance and other assistance, Canada has authorized the Minister of Finance to provide up to a CA$1 billion to Ukraine to stabilize its economy through to March 31, 2026. Any payments made to Ukraine under Canadian sanctions laws would be in addition to this commitment. 

In the case of both forfeiture and payment, the specific mechanics will be later detailed in the relevant regulations.

Magnitsky Act

Similarly to SEMA, the Magnitsky Act will also be amended to allow for the forfeiture of assets and compensation of victims. Much like the proposed amendment to SEMA’s section 5.4(1), the Bill provides that the Magnitsky Act will have the same provision allowing for the forfeiture of property.⁴The Magnitsky Act will also include a payment of proceeds section, but it is strictly focused on the compensation of victims based on the same circumstances that the Governor in Council can make an order under (i.e., if a foreign national is responsible for, or complicit in, extrajudicial killings, or other internationally recognized human rights)⁵.

Similar to the SEMA, the specifics of how the amendments will be implemented will be outlined in a specific regulation.

Implementation

As we have seen with the ongoing conflict between Russia and Ukraine, the Government of Canada can enact regulations quickly and without notice. The amendments provides legislative authority for the Government to not only require seizure of a designated party’s property but also to move for forfeiture. This marks a broader shift in the operation of sanctions, across jurisdictions, which previously prescribed limited asset freezes. As noted above, the Bill does not contemplate the specifics of how victims, whether they be individuals, organizations, or a foreign state itself, can be compensated or benefit from any proceeds of any forfeited property. Further, it remains to be seen whether the Government of Canada will move to provide Global Affairs and the RCMP with enhanced resources to administer and enforce existing sanctions and the new forfeiture powers.

The Dentons International Trade team keeps abreast of leading global developments. If you have any questions, please feel free to reach out to Paul Lalonde, Anthony Cole, Sean Stephenson or Daniela Acevedo with any inquiries.