Foreign Affairs Committee on Oct. 19th, 2016

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

Thank you very much, Mr. Chair.

Professor Eckert, first I have to say that I was interested in your element of making a difference between willful and unintended consequences. I think that's something we should take into account as we're reviewing those laws.

I was also quite interested in your comments about over-compliance and the need for capacity-building assistance.

I'm sorry, I'm asking all my questions in English because all my notes are in English, but normally I would speak French.

We've seen it, for example, with sanctions on Iran, where there were students who would see their bank accounts frozen, and there were all kinds of complications. We're just beginning this study, but we've heard things that, as a neophyte, are a bit troubling, like not having a readily available list of the people who are targeted by sanctions.

The first impression I think most of the committee got was that we could do a lot more in helping, as you say, the private sector to implement effectively, and in limiting risk factors for them. I was just wondering if there are best practices, or models, or something we could learn from.

[Sue Eckert]

On the whole question of compliance, it is undoubtedly true. Take, for example, the Libyan sanctions. When the UN sanctions on Libya were first applied, a number of us who'd been working in the area—because it was the first time that we had imposed sanctions in the context of R2P, responsibility to protect the citizens—were very happy that this had taken place, that the UN was using sanctions in such a way. But with regard to the impact of imposing those sanctions, they immediately went after the central bank and the oil company. In doing so, it virtually froze any students who were studying.... I know there were some examples in Canada. It had very significant consequences on individuals.

When you're talking about targeted sanctions, there's a range of targeted sanctions: freezing one's bank account, limiting the ability to travel. Those are the most targeted, the most individual ones. Then you go up in terms of sectoral sanctions, and here they can be sanctions on oil, on the financial sector, etc. Then you can go all the way up to full-fledged comprehensive sanctions. Those that are on broad sectors of the economy are less targeted and have more of an impact on the population, so it's those things that we need to be concerned about.

With the new UN Security Council resolution on North Korea, granted it's been very important that the UN respond to the increased belligerence of North Korea on the proliferation front, but some of the measures are actually raising some questions about how broad they should be. Again, it's almost like a recomposition of sanctions. They're targeted sanctions, but they apply in such a broad way. When that happens, the private sector needs a kind of guidance.

I think that you also have a situation where government needs the resources. I was just in the U.K., and there is a new unit out of Her Majesty's Treasury that is focused on sanctions. Part of the response here is to try to provide greater guidance and greater support for private sector implementation. I think that's important. You have to devote the resources. I know that everyone is concerned about budgets, but when you're putting the compliance on the private sector, you have to provide the guidance, and that doesn't always happen. I think that's an important thing that has to be taken into account.

The other is on sanctions lists. With the UN, I believe it was last year, or maybe the year before, that it was the first time they had ever had one consolidated list of all the sanctions regimes. Now, if the UN can do that, why can't, on a national government basis, they be able to do that?

I know that OFAC divides it according to the different programs, and they do have a consolidated list. However, firms are spending an enormous amount of money on it.

I'll tell you that the only growth area in banking right now is in compliance. They are hiring people away from government in order to understand the complexity of the regulations, and then to be able to comply.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

Thank you very much.

Thank you very much, indeed.

Professor Charron,

do you speak French?

[Dr. Andrea Charron]

Yes.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

Okay. In any case, the interpretation service is available. We are two francophones, so we will still talk to each other in French.

You are talking about sanctions, about the idea of recovering goods and the risk of affecting people, first and foremost. At the same time, isn't the opposite also true?

I will use an example I care about, that of Ben Ali. The Tunisian government is saying that the members of his regime robbed the country for years. One of them has a house, money and goods in Canada. The Tunisian government is imploring our country to seize them and send them back to Tunisia. Isn't that the other side of the coin?

[Dr. Andrea Charron]

No.

I completely agree.

I will answer in English, as my French vocabulary when it comes to sanctions is insufficient.

I think you're right, but the FACFOA is very different from sanctions because it is driven by Tunisia asking us to seize assets in Canada, which I believe we've done. I think there were questions about that on Monday, and then the question was how much do we give back to Tunisia.

I think that is very useful, but as we see from the number of times the FACFOA has been invoked it doesn't happen very often. Canada should probably keep it on the books, but it's not one I would expect we're going to use often because Canada is not where people hide their money. They hide it elsewhere.

Property may come up. Right now our definitions of property, on the one hand, are very open, which is good for us, but on the other hand it's very difficult for companies, for banks, to understand. This real estate deal is going to go through. Is this something I should be worried about? That could also affect the housing market, which was never the purpose of the FACFOA when it was first brought in.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

Thank you.

[Sue Eckert]

A country that has the sophistication and the legal basis regulatory system that it does and the confusion that exists.... Think about another member state of the UN, say an African country; trying to understand what the sanctions are intended to do and how to implement them can be overwhelming.

In the past, the African Union has become a regional organization that has imposed its own sanctions aimed at the unconstitutional changes of government. It has asked the UN for help. How do you put a system in place? How do you implement targeted sanctions?

The comprehensive response, the guidance, the types of documents, and how you put in place an implementation and an enforcement mechanism have been very slow in coming.

I suggest if we're struggling in the U.S. and Canada to figure out exactly how to implement, think about other countries. They may not be as sophisticated, but particularly on an arms embargo the number of arms awash in various African countries and contributing to conflict is quite significant, and trying to implement an arms embargo is something that requires...or proliferation-related goods.

These are challenges. I think we've contributed a lot for counterterrorism assistance in the aftermath of 9/11. That has all been very important, but for most countries the only legal basis upon which they implement sanctions is the UN Security Council mandate. It's a chapter 7 mandate. It's required of all member states.

If we're serious about multilateral implementation I think we need to put some support into training and capacity building. In the past, I think the Canadian foreign ministry funded some capacity-building programs.

[The Chair, Liberal, Bob Nault]

Thank you very much.

Mr. Saini, please.

[Raj Saini, Liberal, Kitchener Centre, ON]

Ms. Eckert, I want to take you back to the past, because I know you've written extensively on the Interlaken process. The manual that was produced during that process has been used by many different states to guide them in implementing their own sanctions regime.

During the first process one of the things that came out in that meeting is that one of the preconditions necessary for targeted sanctions to be effected was clear identification of the target. I want this for more clarification so I can enhance my own knowledge, especially because we're at the outset of the study.

It was written that the targeting depends to a large extent on the characteristics of the targeted country. Can you help me understand the characteristics, what was meant by that stipulation in the first part of the process?

[Sue Eckert]

Yes. That goes back quite some time.

It's good to know that people are still looking at the Interlaken manual. Beyond Interlaken is the Bonn-Berlin...focusing on arms embargoes, aviation sanctions, and individual bans on travel; and then the Stockholm process, which I would commend to you as well.

In the early days, back at the time that was written, there was actually a case in which the UN listed “Big Freddy”— no identifying information, nothing more than the country and the name “Big Freddy”. We've come a long way since then. The UN actually has identifiers to the extent that there's passport...date of birth. Whatever information they can, they put out. I think that's important.

At the time, what we were looking at was that in order to determine the target, you would have to look at the structure within the individual country. It's not a one-size-fits-all, just get the head of the military or just get the head of state. In fact, we don't target the head of state very often. Should you go after families' members, for example, who are travelling, who may be studying in Canada or in the United States? You have to look at the individual circumstances, and that requires effort to understand the country.

Very often the Security Council is reacting to emergency situations. There is not as much forethought. At the particular time we wrote Interlaken, maybe you wanted to capture a broader range at the outset...freeze and release. Freeze a greater number of assets, and then clarify. You don't have the flight of assets that you might have had, had you taken too long to actually implement them.

Those are some of the inherent issues in that. That actually was written, I'm almost embarrassed to say, almost 20 years ago—15, 16 years ago. There's been a lot of advancement in the development of sanctions since then. But it's clearly a situation in which we need to define what it is you're trying to achieve in order to determine the targets. That has gotten better over time with the UN.

[Raj Saini, Liberal, Kitchener Centre, ON]

The reason I bring that up is that I think it was somewhat the first step taken to create a platform that other countries could use in determining how to implement their own regime.

When you had Interlaken I and you had Interlaken II, a manual was produced. Something was written in there that I would like further clarification on, because I think it speaks to domestic politics and our domestic economy.

One of the clauses that was put into that manual was “to enable implementing States to ensure non-liability for compliance”. This is a question I have for you, and it is somewhat hypothetical. Let's say that now you have a lot of countries that have sovereign wealth funds or you have a lot of countries where you might target an individual who may have a subsidiary, or an interest in a subsidiary, in Canada, which has a lot of jobs. There's a domestic.... How do we do that now? I don't understand how that would work.

If you target somebody, or you target a country, with investments in this country.... When you talk about freezing assets, if it's an account, that would be easy. But what if it's a domestic industry or a company, or something, where jobs are on the line? You freeze the assets, or you freeze the travel of executives back and forth who are actually working in that company to run the company. How do we adjust the sanctions to mitigate the losses domestically?

[Sue Eckert]

That's a good question.

I think the provision you're talking about is in the model legislation. This was, in particular, to protect banks. When you freeze assets and you're relying on the government's action, they get what's called a “safe harbour” from being sued. That has been an important measure in terms of banks being able to implement sanctions.

Now it's far more complicated. You had sovereign wealth funds, for example, that we went after in the context of Libya. I think what it argues for is this. You can put in place sanctions, but there are exemptions. There is a process both with unilateral sanctions, I would imagine, that Canada has with the U.S.... Even in the context of UN sanctions, there are exemptions. There are exceptions that you can go to the committee.... In the case of Libya, they were almost overwhelmed with the number of requests for exemptions, because the sanctions were so broad.

Again, it's complicated. There is no easy answer. They have to actually be tailored to the specific circumstances and allow for some flexibility, but not so much so that each individual country is interpreting entirely on its own.

I don't know if that addresses your question. I'd be happy to go back and look at the provisions you're talking about in Interlaken and provide some additional information.

[Raj Saini, Liberal, Kitchener Centre, ON]

Sure. That would be great.

I have one more question.

I will give this one to Dr. Charron. On metrics, how do we actually know sanctions are working? When we look at UN sanctions, which are mandated to include every country, as opposed to sanctions from the EU or the African Union, as Professor Eckert has stated, how do we know that our sanctions are working, and if it's not a broad-based global sanctioning regime, is there any point to it?

If a few countries have sanctions against one country or state but the sanctions can be overridden by other countries...for me, it has to be either all or none. If every country is involved, sometimes that's through the UN, and as Professor Eckert stated, UN politics are involved at the Security Council level. If you don't have a global regime to impact a state, then if you have smaller blocs, how would that work? Is there a reason for it, or is there any effectiveness?

[Dr. Andrea Charron]

That's a good question. It depends often on trying to figure out what would catch the attention of the decision-makers. For example, one of the really innovative things the UN did regarding North Korea was, when they realized that Kim Jong-un's father had a penchant for Hollywood movies, scotch, and luxury goods, they left it up to each member state to define what was a luxury good. The great thing about that was that Canada could look and ask, what's going from Canada to North Korea that would make his life a little bit more uncomfortable?

You're right. On the one hand, if Canada were to say to Kim Jong-un, “That's it, no more Seagram's whisky,” I doubt very much that it would change North Korea tomorrow—

[Raj Saini, Liberal, Kitchener Centre, ON]

No.

[Dr. Andrea Charron]

—but if everybody does that, yes, it does have a chance. Sometimes if you're lucky enough, you're a state that has something that they need absolutely. If you cut it off, that's going to work. Sometimes you need collective action.

[Raj Saini, Liberal, Kitchener Centre, ON]

I'd just make one quick point on that. There's a travel ban on Kim Jong-un right now, isn't there?

[Dr. Andrea Charron]

On Kim Jong-un? We don't put sanctions in place on sitting heads.

[Sue Eckert]

Not as a leader.

[Raj Saini, Liberal, Kitchener Centre, ON]

There is not. Okay.

Let's say he wanted Seagram's whisky. It could come via China, couldn't it?

[Dr. Andrea Charron]

It could very well.

[Raj Saini, Liberal, Kitchener Centre, ON]

Then where is the effectiveness?

[Dr. Andrea Charron]

Going back to what Sue Eckert said, sanctions are not just about saying, if x, then y, that if I put in place a sanction, that's going to create a change in behaviour. It's also saying to the world, we collectively disagree with these policies, and to show that in the most tangible way we are going to target whisky. It may not actually create the change in opinion, but it starts a norm of everybody saying, this is unacceptable and here's proof it's unacceptable.

You are right, there is no guarantee that 10 years from now we're going to look back and say it was those sanctions that made the difference. We never just apply sanctions. It's a panoply of efforts, diplomatic missions, the six-party talks, and so on. There is no way to tease out the actual effect of the sanctions.

[Sue Eckert]

Could I add two quick points to that? One clearly is, you're absolutely right, the effectiveness of the UN measures depends on how, for example, China is interpreting “luxury goods” and whether they interpret that and then enforce it. That's all the more reason that we need to work multilaterally.

There are situations, for example, in Iran, in which we had a base level of sanctions, but it was not those sanctions that provided the pressure. It was the coordinated U.S., Canada, and in particular, EU sanctions on oil and the financial sanctions that were decisive, that really turned the screws to the point that it really hurt the Iranian economy.

They may be complicated. There may be some confusion at times between whose sanctions, but I think it was the combination of sanctions and it was like-minded states that decided to work together to use the UN sanctions as a base but go beyond it that was really decisive in the case of Iran.