Foreign Affairs Committee on March 7th, 2011

[The Chair, Conservative, Dean Allison]

This meeting is pursuant to the order of reference of Thursday, March 3, 2011, Bill C-61, An Act to provide for the taking of restrictive measures in respect of the property of officials and former officials of foreign states and of their family members.

I want to welcome both of our ministers here today. We have Minister Nicholson and Minister Cannon. Thank you very much for being here today to talk about the bill. We also have Ms. Nölke who's going to talk, if we have any follow-up questions, for the department, along with Mr. Kessel and Ms. McKey. So thank you very much for being here.

I don't know who's going to go first, but, Minister Cannon, if you'd like to start, you have 10 minutes.

Mr. Nicholson, are you going to speak as well?

[Rob Nicholson, Conservative, Minister of Justice]

I'm going to have a few words to say as well.

[The Chair, Conservative, Dean Allison]

All right. We'll do that, and then, as is our custom when we have ministers here, we'll have 10-minute first rounds and then we'll go to clause-by-clause after that.

Minister Cannon, thank you for being here. The floor is yours, sir.

[Lawrence Cannon, Conservative, Minister of Foreign Affairs]

Thank you, Mr. Chair.

Colleagues, I am here to speak today on Bill C-61, the Freezing Assets of Corrupt Regimes Act. Recent events in North Africa and the Middle East have brought home again how quickly the political landscape can change and how important it is that we have the tools in place to be able to respond quickly and effectively to those changes.

In order to be able to support efforts at democratic reform, it is critical that Canada has the ability to ensure that misappropriated property may be frozen to allow for its return to the new authorities and people of the state concerned. It is also critical that we support efforts to hold accountable foreign officials who have misappropriated state funds or inappropriately acquired property as a result of their public office or family, business, or personal connections.

Colleagues, this legislation responds to those needs by creating a new and effective means to allow us to respond to requests from foreign states to freeze the assets of corrupt former officials.

The draft legislation would permit the government to freeze the assets or restrain property of foreign politically exposed persons upon receipt of a request from a state, and where the Canadian government has determined that the state is in turmoil or political uncertainty. Assets would be frozen for a five-year period, which would provide the foreign state with an opportunity to initiate the necessary proceedings to allow for seizure and forfeiture of assets situated in Canada. The time period is open to renewal.

Colleagues, it may be asked why we are creating new legislation instead of imposing sanctions under existing Canadian law or simply proceeding with existing criminal law instruments. If the United Nations Security Council has not imposed sanctions, then Canada can use the Special Economic Measures Act to impose unilateral sanctions. This tool, however, requires a high threshold to be met, namely that there has been a grave breach of international peace and security leading to a serious international crisis.

Another possible tool at the government's disposal is the Mutual Legal Assistance in Criminal Matters Act. This act however requires a foreign state to produce evidence of criminal activity or the existence of legal proceedings or a court order in order for Canadian authorities to be able to act on assets situated in Canada. In the case of a newly emerging governing authority, it may be difficult to come by such evidence on short notice.

The time required to meet the procedural steps under the existing criminal law-based framework in situations where speed is of the essence could potentially allow the foreign national in question to conceal or deplete the assets in question.

Our existing sanctions legislation, while effective in addressing states of concern, is not the appropriate mechanism when the state in question is in the process of democratic transformation. In these cases, using the sanctions tool would punish the whole state and not solely the corrupt former regime. This would not be an appropriate response at a time when the Government of Canada and the international community wish to express their support for democratic transition.

Both sanctions in criminal law-based proceedings will remain available for use in appropriate circumstances. However, it is clear that we need a nimble legislative regime that will permit asset freezes in circumstances where our existing tools are not sufficient.

This new legislation includes a number of procedural and substantive safeguards. It provides that freezes are imposed for a limited period of time and automatically expire if they are not removed. It provides authority to the Minister of Foreign Affairs to recommend the revocation or repeal of an order or regulation if the person does not meet the definition of a politically exposed foreign person. It also provides authority to the Minister of Foreign Affairs to issue permits for dealing with certain property, exempt certain persons and property, issue certificates in cases of mistaken identity, and provide exemptions for reasonable expenses.

It is important to note in this context that this bill is about assets preservation, not seizure. The bill allows the government to help a foreign state, without bypassing ordinary due process in relation to asset restraint or forfeiture.

We encourage the move toward political, economic, and social reforms to create more free and open societies. We are working with other states to promote freedom and democracy in the region, and we stand ready to support peaceful and legitimate aspirations for democracy and justice.

Tyranny and corruption cannot go unchallenged. The Government of Canada does not want to say no to requests for help from emerging foreign democracies, especially when speed is of the essence to avoid allowing a former dictator to conceal or deplete assets that rightfully belong to his people and are needed to assist the state in its recovery from misrule. The government also wants to ensure that individuals who have misappropriated state funds can be held accountable for their ill-gotten gains.

This bill will allow us to meet these important objectives. We hope the committee can swiftly return this bill to the House so we can put this important new tool into place as quickly as possible.

Merci. Thank you.

[The Chair, Conservative, Dean Allison]

Thank you, Minister Cannon.

Mr. Nicholson.

[Rob Nicholson, Conservative, Niagara Falls, ON]

Thank you very much.

I'm pleased to be here today to speak to you about Bill C-61, the Freezing Assets of Corrupt Regimes Act.

As you know, the Government of Canada is strongly committed to working with emerging democracies. These countries in turmoil need assistance, not sanctions. We must work together to ensure that states emerging from repressive regimes are given the assistance they need.

This bill, if passed, will allow Canada, at the request of a foreign state, to take rapid action to freeze the assets of persons who have been in positions of power in their home states and may have misappropriated state assets or illicitly acquired funds by virtue of their office or family connection and moved these to Canada. The capacity to restrain assets would extend to the family and close associates of such people.

This new legislation is designed to assist states experiencing political turmoil by allowing for the rapid preservation of assets. As such, the legislation would allow a country that finds itself in difficult circumstances the time and opportunity to make a request to Canada for the recovery of assets using existing Canadian laws. Due to the situation these states may find themselves in, their authorities may not be able to gather the evidence required to use existing Canadian legal mechanisms that govern asset restraint and recovery.

The proposed legislation is about preservation so the assets are not dissipated during the time it may take a state to put itself in a position to take legal measures in Canada. Bill C-61 will close a gap in Canada's existing capacity to assist a foreign state that finds itself in a position of turmoil with the restraint of assets.

The law in Canada, as enacted by Parliament, requires that certain preconditions be met before alleged criminal proceeds located in Canada may be restrained at the request of a foreign state. In particular, the Mutual Legal Assistance in Criminal Matters Act, which governs such requests, requires that a foreign state provide Canada with a restraint or seizure order issued by their criminal court ordering the freezing of specified property as proceeds of crime. The foreign order may then be filed with the Canadian courts and executed as if it were an order issued in Canada. The Mutual Legal Assistance in Criminal Matters Act also requires that charges be laid in the foreign state against the person whose property is sought to be restrained and/or frozen.

Canada's laws on mutual legal assistance reflect our commitment to assisting our treaty partners in fighting criminality while at the same time protecting the interests of individuals.

As I am sure you will agree, these legal safeguards are fundamental to Canada's criminal justice system. In requiring that a foreign state provide Canada with sufficient information to meet these safeguards, we are protecting the rule of law, a principle that is paramount in a free and democratic society.

Canada's proceeds of crime regime, as set out in our Criminal Code, also allows for the seizure and restraint of alleged proceeds of crime and their subsequent forfeiture. However, our domestic proceeds of crime regime also incorporates preconditions to seizure and restraint. Under our domestic proceeds of crime regime, assets may only be restrained if the following conditions are met: the assets to be restrained and/or frozen are identified; there is evidence linking the Canadian assets to an alleged criminal offence in Canada or in the foreign state; and there is evidence that the Canadian assets are the proceeds of crime.

Generally speaking, our criminal forfeiture system is conviction based. In order to obtain a forfeiture order, the law requires a successful criminal prosecution unless the offender has absconded or died. In those cases an application for criminal forfeiture of the tainted property is possible.

The preconditions of our domestic laws may be difficult for a transitioning state that is still in turmoil to meet. The information and evidence required by Canada may simply not be made available in time to prevent the assets from being diverted or depleted. The Freezing Assets of Corrupt Regimes Act would permit a freezing order without requiring the evidence of criminality or specific identification of assets that now exist under current law.

The freezing of assets would automatically expire after five years, although the period could be extended if circumstances warrant.

To ensure that companies are not put out of business while assets are subject to restrictive measures, the legislation would incorporate safeguards that would permit persons to carry out specified activities or transactions. Where necessary, it would also ensure that affected persons and their dependants have access to reasonable expenses.

We believe that the Freezing Assets of Corrupt Regimes Act will address the existing gap in our laws. We want to ensure that any misappropriated property or illicitly acquired assets are preserved in order to provide a foreign state with the time that is necessary to seek their return and make them available to the new authorities and the people of the states in turmoil.

Thank you, Mr. Chair.

[The Chair, Conservative, Dean Allison]

Thank you, Ministers.

Before we get started, I want to clarify our time. I believe we have you two ministers for an hour.

[Lawrence Cannon, Conservative, Pontiac, QC]

Until 4:30.

[The Chair, Conservative, Dean Allison]

Thank you. I wanted to clarify that.

We're going to start with Mr. Rae, for 10 minutes.

The floor is yours, sir.

[Bob Rae, Liberal, Toronto Centre, ON]

I thank the ministers for being here. I will be sharing my time with my colleagues.

I want to say to both of the ministers that as far as our party is concerned, we support the objectives of this legislation. We still have some questions about it, but we do not intend to throw any huge monkey wrenches into the works.

We are concerned about the speed with which this legislation has been produced and also the speed with which it is expected to be carried. But I can say from my experience, both provincially and federally, that I know there are times when this has to be done because of the urgency of the situation and the nature of the assets in question.

We will be suggesting in the course of the clause-by-clause that there be a provision in the act that provides a sunset for the legislation and for the establishment of a committee that would look at the relationship between this legislation and the other pieces of legislation that both ministers have referred to. I think there should be a way to simplify what is being put forward.

I hope the government can consider that proposal. I certainly will be discussing it with my colleagues in committee as we go forward.

Anybody can answer the questions I have. The definition of a foreign state, under clause 2, obviously means a country that isn't Canada, but also any of its political subdivisions or agencies.

To deal with this sort of situation, you're dealing with a period of transition, in which case some of these states won't necessarily have stable governments. Are there any other criteria you can think of applying that would somehow define what the state of the government making this request would have to be?

Do you see what I'm getting at, Mr. Kessel?

[Alan H. Kessel, Legal Adviser, Department of Foreign Affairs and International Trade]

Thank you.

I think the important aspect of this particular clause is first of all to understand that we are being requested by a foreign state that is not in turmoil, as such. We have a state that is engaging in normal activities--it's not a Libya, for instance, which is falling apart--in which case we could have local officials who are functioning in the same way as when our authorities in Canada deal with local authorities in other countries on mutual legal assistance issues.

I think we should distinguish clearly that we're not dealing with a country that is a failed state. We're dealing with a country that is functioning and that is in the process of reviewing its own books to determine whether former officials, current officials, are asking us, Canada, for assistance. We're dealing with a functioning state.

[Bob Rae, Liberal, Toronto Centre, ON]

Let me give you a couple of hypothetical examples. You can help me out as to which door we would knock on—whether we knock on the SEMA door or whether we knock on another door or this door.

You have a situation, let's say, in Egypt or Tunisia, where essentially provisional governments have been formed. You might say the state is not in turmoil, but neither you nor I are in an exact position to determine the degree to which that's the case.

Let me just see if I'm correct. Essentially what the law says is that you “may” make regulations. There's nothing in this act that requires the Government of Canada to act upon a request of anybody who calls himself the government of a state. Is that correct? You can assure me on that front, at least?

[Sabine Nölke, Director, United Nations, Human Rights and Economic Law Division, Department of Foreign Affairs and International Trade]

Yes, that's quite correct. One of the conditions under which the orders or regulations can be made requires the Governor in Council to consider if the making of the order or regulation is in the interests of foreign relations. That, of course, includes an element of considering who is asking the question and is it in the interest of foreign relations to respond to that question. That is precisely the kind of consideration you are looking at that would come into play. Is the authority making the request an authority the Government of Canada and its allies and the international community are prepared to deal with?

[Bob Rae, Liberal, Toronto Centre, ON]

Just one more question and then I'm going to switch to mon collègue. Is it your view that a decision that is made under clause 4, or other decisions that are made by the minister, are reviewable by the Federal Court?

[Alan H. Kessel]

Yes.

[Bob Rae, Liberal, Toronto Centre, ON]

Thank you.

[Bernard Patry, Liberal, Pierrefonds—Dollard, QC]

Thank you very much.

Minister, thank you for being here today.

Mr. Cannon, if I have understood your opening remarks, you said that assets would be frozen, first, at the request of a foreign state and, second, if our government determined that the state is in turmoil or political uncertainty.

It looks like a non-evidence-based rule, in a sense. In the end, they say it's at the request of the foreign country. For sure, when you have a state like Tunisia, it's safe to say now it's going well and there aren't that many problems. But Egypt did not request to freeze the assets of the former president. With this bill, would you be entitled to freeze the assets without the request of the new government of Egypt? Can you do it on your own?

[Lawrence Cannon, Conservative, Pontiac, QC]

No, a request needs to be made. We cannot do it on our own.

[Bernard Patry, Liberal, Pierrefonds—Dollard, QC]

You cannot act on your own.

In Libya's case, was there a United Nations Security Council resolution that enabled you to freeze Colonel Gadhafi's assets? With this bill, would you have been able to do so without the Security Council's approval?

[Lawrence Cannon, Conservative, Pontiac, QC]

Yes, we could have done so under this bill. If the bill had already been adopted, it would have enabled us to freeze those assets.

[Bernard Patry, Liberal, Pierrefonds—Dollard, QC]

So that means that, in Yemen's case, which is also...

a failed state in a certain sense, you will be able at that time in Yemen--if there are major problems there--to freeze their assets without the request of a new government there?

[Lawrence Cannon, Conservative, Pontiac, QC]

Yes, but this would always be done in the interest of Canada's international relations with that state. That is the key guiding principle.

[Bernard Patry, Liberal, Pierrefonds—Dollard, QC]

You talk a lot about safeguards in Bill C-61. What about the safeguards for...? Can you give me the definition of a family? Where does it stop? You could have cousins, you could have.... Where does the family stop?

My second question is this. Let's say you have someone in Tunisia who is co-owner of a hotel, a big...une chaîne d'hotels. I don't want to name any one of them, but let's say it's 50-50. What's going to happen? You freeze the hotel? What's going to happen about safeguards?

[Lawrence Cannon, Conservative, Pontiac, QC]

I will ask our experts to field that question.

[Sabine Nölke]

Concerning the family members, there's no precise definition in there. It will be as prescribed in the regulations. In other words, the family members will be specifically listed. If regulations are made under this legislation, they will come attached to a list of names, and the family members will be defined through that list, so there's no doubt as to which people the legislation applies to.

If I understand the question about the ongoing business correctly, and please correct me if I am wrong, the legislation would permit the minister to issue a permit that would allow the ongoing running of a business to ensure two things: that the asset is not unduly depleted or run down because it's not able to function, but also so that Canadian interests in question would not be unduly affected. In other words, if it's an ongoing business, Canadians will still be able to be employed by the business, would be able to receive their salaries, would be able to work for the business.