Canada’s Magnitsky Act is not yet law. Bill S-226 “Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law)” started as a Senate bill and has passed third reading in Canada’s Senate on April 11, 2017. On April 13, 2017, Bill S-226 passed first reading in Canada’s House of Commons and passed second reading on June 13, 2016. Bill S-226 was sent for Committee review.
The review is complete. On June 22, 2017, Canada’s Standing Committee on Foreign Affairs and International Development unanimously agreed to report the Bill S-226 “Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law)” back to the House of Commons with amendments. The Standing Committee issued the following press release:
“Today, the House of Commons Standing Committee on Foreign Affairs and International Development examined Bill S-226, the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law), and unanimously agreed to report the bill back to the House of Commons with amendments.
The purpose of Bill S-226 is to provide the government with the authority to impose sanctions against foreign nationals who have committed gross violations of internationally recognized human rights or “acts of significant corruption.” The bill also proposes related amendments to the Special Economic Measures Act and the Immigration and Refugee Protection Act, including making those targeted by the new sanctions inadmissible to Canada.
As part of its clause-by-clause consideration of Bill S-226, the Committee agreed to several technical amendments aimed at strengthening, among other things, the sections of the bill related to criminal offences for sanctions violations and due process for persons subject to sanctions measures.
The Committee’s consideration of Bill S-226 follows on the release of its recent report, A Coherent and Effective Approach to Canada’s Sanctions Regimes: Sergei Magnitsky and Beyond. That report was the culmination of the Committee’s statutory review of the Freezing Assets of Corrupt Foreign Officials Act and the Special Economic Measures Act.
The full text of the Committee’s report relating to its clause-by-clause consideration of Bill S-226 is available on its website.”
The Committee Report contains a number of amendments, which will be incorporated into the next draft of Bill S-226. The good news is that the Committee does not gut the effectiveness of Bill S-226. One change is the addition of “foreign public official” into the definitions section and the definition is tied to section 2 of the Corruption of Foreign Public Officials Act. The definition of “property” is removed from the definition section and section 2(2) is deleted. Section 4(1) is amended such that the Governor in Council must form an “opinion that any of the circumstances described in subsection (2) has occurred” rather than being satisfied based on evidence. Clause 4(2)(ii)(c) is amended such that foreign nationals and “associates of such an official” are covered rather than “senior associates”. Other amendments are made to strengthen the language clause 4(2)(ii)(c). Paragraph 4(4)(c) is amended to remove “related services in respect of property of the foreign national” and add “other services to, for the benefit of or on the direction of order of the foreign national”. New paragraphs 4(4)(d) and (e) are added:
“(d) the acquisition by any person in Canada or Canadian outside Canada of financial services or any other services for the benefit of or on the direction or order of the foreign national; and
(e) the making available by any person in Canada or Canadian outside Canada of any property, wherever situated, to the foreign national or to a person acting on behalf of the foreign national.”
New subsections (5), (6) and (7) are added (but misidentified as (4), (5) and (6)):
(4) The Governor in Council may, by order, authorize the Minister to
(a) issue to any person in Canada or Canadian outside Canada a permit to carry out a specified activity or transaction, or class of activity or transaction, that is restricted or prohibited under this Act or any order or regulations made under this Act; or
(b) issue a general permit allowing any person in Canada or Canadian outside Canada to carry out a class of activity or transaction that is restricted or prohibited under this Act or any order or regulations made under this Act.
(5) The Minister may issue a permit or general permit, subject to any terms and conditions that are, in the opinion of the Minister, consistent with this Act and any order or regulations made under this Act.
(6) The Minister may amend, suspend, revoke or reinstate any permit or general permit issued by the Minister. ”
Section 5 is deleted with respect to duration.
A new disclosure provision is added as section 7.1:
7.1 (1) Every entity referred to in section 7 must disclose, every month, to the principal agency or body that supervises or regulates it under federal or provincial law, whether it is in possession or control of any property referred to in that section and, if so, the number of persons or dealings involved and the total value of the property.
(2) Every person in Canada and every Canadian outside Canada must disclose without delay to the Commissioner of the Royal Canadian Mounted Police or the Director of the Canadian Security Intelligence Service
(a) that they have reason to believe that property in their possession or control is owned, held or controlled by or on behalf of a foreign national who is the subject of an order or regulation made under section 4; and
(b) any information about a transaction or proposed transaction in respect of property referred to in paragraph (a).
(3) No proceedings under this Act and no civil proceedings lie against a person for a disclosure made in good faith under subsection (1) or (2).”
Section 8 is amended:
“Rights of Foreign Nationals Who are the Subject of an Order or Regulation
8 (1) A foreign national who is the subject of an order or regulation made under section 4 may apply in writing to the Minister to cease being the subject of the order or regulation.
(2) On receipt of the application, the Minister must decide whether there are reasonable grounds to recommend to the Governor in Council that the order or regulation be amended or repealed, as the case may be, so that the applicant ceases to be the subject of it.
(3) The Minister must make a decision on the application within 90 days after the day on which the application is received.
(4) The Minister must give notice without delay to the applicant of any decision to reject the application.
(5) If there has been a material change in the applicant’s circumstances since their last application under subsection (1) was submitted, he or she may submit another application.”
Section 9 is amended:
“9 (1) Any person in Canada or any Canadian outside Canada whose name is the same as or similar to the name of a foreign national who is the subject of an order or regulation made under section 4 may, if they claim not to be that foreign national, apply to the Minister in writing for a certificate stating that they are not that foreign national.
(2) Within 45 days after the day on which the application was received, the Minister must,
(a) if he or she is satisfied that the applicant is not the foreign national, issue the certificate to the applicant; or
(b) if he or she is not so satisfied, provide a notice to the applicant of his or her determination.”
New Section 10.1 is an offence provision that adds more teeth to the bill:
10.1 Every person who knowingly contravenes or fails to comply with an order or regulation made under section 4
(a) is guilty of an indictable offence and is liable to imprisonment for a term of not more than five years; or
(b) is guilty of an offence punishable on summary conviction and is liable to a fine of not more than $25,000 or to imprisonment for a term of not more than one year, or to both.”
Paragraphs 16(2)(c) and (d) are amended and replaced with the following:
“(c) gross and systematic human rights violations have been committed in a foreign state; or
(d) a national of a foreign state who is either a foreign public official, within the meaning of section 2 of the Corruption of Foreign Public Officials Act, or an associate of such an official, is responsible for or complicit in ordering, controlling or otherwise directing acts of corruption — including bribery, the misappropriation of private or public assets for personal gain, the transfer of the proceeds of corruption to foreign states or any act of corruption related to expropriation, government contracts or the extraction of natural resources — which amount to acts of significant corruption when taking into consideration, among other things, their impact, the amounts involved, the foreign national’s influence or position of authority or the complicity of the government of the foreign state in question in the acts.”
There are a few other amendments.
The amendments made by the Standing Committee on Foreign Affairs and International Development are important and significant and create a more powerful sanctions tool. Bill S-226, when passed, will have a significant impact on Canada’s economic sanctions laws. Bill S-226 is not an anti-Russia law, it’s coverage includes Iran, Syria, Sudan and other countries. Arguably, Canada could list members of China’s government for the purposes of imposing economic sanctions or freezing assets.
Canada’s House of Commons has risen for summer recess – that means the MPs (Members of Parliament) are home in their ridings. The next step is third reading and Royal Assent. The MPs must be recalled to pass Bill S-226 at third reading or we will have to wait until September. It will be seen whether these changes will be accepted by the Hose of Commons at third reading and the Senate (where the Bill was initially tabled). My guess is that the amendments will be accepted.
When the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) receives Royal Assent, Canadian corporate counsel will need to consider its implications. Corporations must add to their compliance programs the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) and to risk assessment criteria, human rights violations. Canadian companies engage in business in many countries with human rights abuses. We can no longer turn a blind eye to these abuses while seeking rewards in foreign nations.
For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or Heather Innes at 416-350-1234 or at firstname.lastname@example.org or email@example.com.