John Ivison: Ottawa’s border justice for Russia’s riches sets a dubious example

Canada is the first G7 country to seize assets belonging to Russia and pass legislation to auction them off, and profits will then be diverted to rebuild Ukraine

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Canada’s Ukrainian community is gathering on Parliament Hill this Sunday to protest the “dangerous precedent” of Canada loosening sanctions on Moscow to allow the return of a turbine to Russia.

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Ottawa’s decision was made because Russia claims it cannot operate Nordstream’s full – capacity natural gas pipeline without the turbine, and Germany, the recipient of the gas, is trying to fill storage tanks ahead of the winter.

Trudeau defended what he said was a difficult decision because the sanctions are not designed to “harm our allies and their peoples.”

Strange as it may sound from someone who has been highly critical of the lackluster Canadian response to the invasion of Ukraine, the Prime Minister has a point.

The precedent that Ukrainians should be much more focused on is the Canadian government’s adoption of legislation in the budget implementation proposal that allows finance and foreign ministers to turn to a Canadian judge to order property held by foreign individuals. or units to be forfeited and the proceeds sold to rebuild a foreign state or pay compensation to the victims.

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Canada is the first G7 country to seize assets belonging to Russia and has enacted legislation to auction them off, and profits will then be diverted to rebuild Ukraine.

At an international conference in Switzerland earlier this month, Ukraine presented a $ 750 billion recovery plan, indicating that it wanted to see Russia’s foreign assets confiscated to help pay for what British Foreign Secretary Liz Truss called a “new Marshall. level.”

Russia has billions of dollars in the West in foreign exchange, bonds and gold – US $ 585 billion in 2021, according to Russia’s Central Bank, which is a sanctioned entity. About three percent of these frozen assets – $ 17 billion or so – were held in Canadian currency and bonds at the time (although it is not clear how much is physically left in Canada).

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In theory, the new legislation allows the government to confiscate these assets. But simply seizing them can cool international markets, as states like China withdraw assets instead of seeing them confiscated in the future. In particular, the U.S. Treasury Department is said to be cautious about extending the loss to central bank assets for that reason.

Proceeds from already frozen assets from sanctioned individuals in Canada are far more modest: $ 123 million, according to the RCMP. There is little doubt that this revenue will be forwarded to Ukraine, although it has not been revealed exactly how it will work.

It’s the first daring thing Canada has done to frustrate Vladimir Putin.

In fact, it is so bold that it may not be legal under Canadian or international law.

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Clifford Sosnow, co-chair of the international trading and investment group at Fasken law firm, called the move “unusual and very aggressive.”

He said the deeper issue is that the legislation gives the state the power to take property and not provide any compensation, even though it does not specify that the owners have violated Canadian criminal law. “It’s a very quick one-to-two step to disposing of property,” he said.

Justice Minister David Lametti has pointed out that there is no absolute right to own private property in Canada, where the government already has the power to seize the proceeds of crime.

However, there are legal loopholes in the law that you can ride horse and carriage through, and the process will no doubt be challenged in court (the law allows affected persons to apply in writing to a judge to explain why the forfeiture must be overturned).

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On the international front, the UN is clear that states responsible for “wrongful acts” are obliged to provide full compensation. But it also says that the guilty state must be able to participate in the “resumption of execution” once these acts have ceased. It would be difficult for Russia to “resume its performance” if billions of dollars of its assets had already been sold. In Sosnow’s legal view, the legislation may not only be in conflict with Canadian law and Canada’s bilateral trade agreement with Russia, but also with international customary law.

Either way, Canada is unlikely to be the last country to adopt such legislation. British Foreign Secretary Truss said earlier this month that she is looking closely at Canada’s example.

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As Rachel Ziema, an adjunct senior fellow at the Center for a New American Security in Washington, DC, pointed out, the Trudeau government is not acting in a vacuum. “Canada is a long way ahead, but it is in an area where many G7 counterparts want to have powers,” she said, pointing to a package of measures proposed by President Joe Biden to seize Russian oligarchs’ property and transfer the proceeds to Ukraine. .

If the United States followed Canada’s clue, it would begin redirecting serious money to Ukraine – the Treasury’s Russian elites, proxies and oligarchs (REPO) task force said that by the end of June, $ 30 billion of Russian assets. had been frozen.

“Using these powers opens up a legal can of worms,” ​​Ziema said. “But there are two challenges – one is a brutal war that can drag on; the other is a major rebuilding and rebuilding bill. Politicians seek to have powerful tools in their pockets.”

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There was not much second-order thinking involved in the new legislation. Chrystia Freeland, the federal finance minister, said she could not “think of a more appropriate source of funding (to rebuild Ukraine) than confiscated Russian assets.” Fair enough. But this legislation will be on the books long after this conflict is over.

There will be no tears for the Russians, who have already started confiscating foreign assets without compensation, starting with the Sakhalin 2 project owned by Shell, Mitsui and Mitsubishi.

But as satisfying as it may be, the new legislation of border justice smells, and it always makes me think of the epitaph engraved on a tombstone at Boot Hill Cemetery in Arizona: “Here lies George Johnson, hanged by mistake in 1882. He was right / We were wrong / But we tensed him up / And now he’s gone. ”

jivison@postmedia.com

Twitter.com/IvisonJ

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