Canada giving itself power to turn over sanctioned Russian assets to Ukraine

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As Russia’s assault on Ukraine enters its third month, the Canadian government says it plans to give itself the power to sell off assets of foreigners seized under sanctions law, and then turn them over to affected victims or pay for rebuilding war-torn countries.

This could mean, for instance, that funds or property seized from Russia could be paid out to help reconstruct Ukraine or to compensate those affected by Moscow’s military assault on its neighbour.

The change would make Canada the first among Group of Seven countries to allow such actions.

Ottawa would also require banks to provide lists of foreign assets frozen by Canadian government sanctions so that Ottawa has an inventory of what has been seized.

The information is contained in a ways and means motion tabled Tuesday. A ways and means motion is a precursor to a budget bill, which the government will introduce after the motion is approved.

“We are seeking the capacity to not only seize but to allow for the forfeiture of the assets of sanctioned individuals and entities and to allow us to compensate victims with the proceeds, Foreign Affairs Minister Mélanie Joly said in a statement.

“Already, sanctions are crippling Russia’s economy and are depleting the resources Putin has to continue his illegal war. We will continue to apply maximum pressure on the Putin regime and impose severe costs for this war of choice.”

The dollar value of assets frozen in Canada as a result of Russia’s war on Ukraine is in the tens of millions of dollars, a senior government official said. The Globe and Mail is not identifying the source because they were not authorized to speak on the matter publicly.

Ottawa is also expanding the definition of assets that can be seized by sanction to include cryptocurrency and non-fungible tokens.

The measures will be part of the budget implementation bill, and the minority Liberal government has a confidence agreement with the NDP that includes voting for budget bills so they pass the House of Commons.

The government has sanctioned more than 1,100 individuals and entities in connection with Russia’s aggression against Ukraine.

Deputy Minister Chrystia Freeland discussed this new sanctions measure with G7 finance ministers last week. She also discussed the proposal with U.S. Speaker of the House Nancy Pelosi and the Prime Minister of Ukraine at a dinner last Thursday in Washington.

Adrienne Vaupshas, press secretary for Ms. Freeland, said Canada hopes other countries will follow its lead on these measures.

The proposed legislation would give the minister of foreign affairs broad powers to compel banks and others to produce lists of assets under sanction and which could be forfeited.

The ways and means motion says the minister can compel “any person to provide … any information” deemed necessary for the seizure of the assets, and those asked are obliged to “comply with the requirement within the time and in the form and manner specified by that minister.”

It would be up to a superior court judge, however, to grant an order allowing the forfeiture of assets seized under sanction.

Michael Nesbitt, a University of Calgary law professor who previously worked in the federal government’s sanctions division, said there have been calls for the past decade for legislative changes that would allow foreign assets seized through sanction to be redistributed as compensation.

“It’s Canada’s way of saying: Could we seize the yachts?” he said of Tuesday’s announcement. “The answer now appears to be yes.”

Prof. Nesbitt said the measures are laudable but some details appear “a little rushed” and could be vulnerable to a legal challenge as a violation of Section 8 of the Charter of Rights.

Russia targets 61 Canadians with sanctions, including politicians, journalists and soldiers

He said the proposed wording that would require “any person to provide ... any information” to the foreign affairs minister would seem to allow the government to collect information without a warrant.

The measures announced Tuesday are very similar to what is proposed in Senate Bill S-217, sponsored by Senator Ratna Omidvar, an “act respecting the repurposing of certain seized, frozen or sequestrated assets.”

Senator Yuen Pau Woo on Tuesday questioned whether it’s wise to sell off assets by those Canada has hit with sanctions.

He argued in the Senate chamber that it would remove any incentive for the owners of the assets to comply with the behaviour change urged by Canada or its allies.

“One could in fact argue that with Russia continuing to wage war in Ukraine, this is possibly the wrong time to be thinking about repurposing seized Russian assets,” Mr. Woo said in the Senate.

“A sanctioned asset that is frozen has the potential for the asset to be returned if the owner changes his or her behaviour in accordance with the objective of the sanction. On the other hand, a sanctioned asset that is repurposed removes any incentive for the owner to change.”

He said Canada should focus on seizing more assets rather than how to repurpose already seized assets.

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