Foreign Affairs Committee on Nov. 30th, 2016

[Melissa Hanham]

In large part, I agree with Dr. Walsh. I do think that blanket sanctions almost always have negative consequences, simply because they punish those people who are already suffering the human rights violations themselves.

For example, in North Korea, when food aid came in, it would be sold among the elites on the black market. Different activities are used to circumvent aid efforts, so those people at the bottom are the ones who are facing the brunt of it.

I do think targeted financial sanctions and travel bans may be of use and may be of interest, if they target those people who are controlling the flow of funding. However, I don't think that there is enough intelligence in North Korea, for example, about which companies or who those individuals are, to do it in the targeted way that people truly want to.

I do think that you could adjust, but it would almost always be a game of catch-up.

[The Chair, Liberal, Bob Nault]

I'm going to go Madame Laverdière, s'il vous plaît.

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

Thank you very much, Mr. Chair, and thanks to the witnesses for their presentations which were different but all very interesting.

I would like first to make a comment about human resources.

Mr. Barutciski, I was not surprised by what you said. In this committee, we have even heard that the RCMP is not prosecuting. In 25 years, there has been just one prosecution. Since it does not have the necessary resources, it is at the bottom of their list.

This does not happen very often, but I will tell you a short story from my own experience.

I spent 15 years at Global Affairs Canada. In a unit that I headed, there was a small group of three people responsible for liaison with Parliament and cabinet, while other departments had 15 people doing that. Yet we produced the most memos to cabinet. The legacy I left behind was the creation of a special unit responsible for those matters. There is no doubt that I understand the shortage of human resources very well.

That said, the mandate is also important, especially for lawyers when they cannot get one for one thing or another. Is there something specific that our committee should recommend regarding mandates?

[Milos Barutciski]

Thank you for your question, Ms. Laverdière.

I will take the opportunity to add my comments to those of Professor Walsh and Professor Hanham regarding the purpose of sanctions. I will also talk about human resources and the mandates that you and others have talked about.

First of all, the purpose of sanctions is quite simple.

I will speak in English for a minute and will then continue in French.

Professor Hanham and Professor Walsh made it perfectly clear. We didn't touch it. We looked at it from a purely business perspective of the costs being imposed on our client, but they made it perfectly clear that the objective of the sanctions, when they're targeted at the kinds of abuses of human rights that go on in North Korea or the proliferation issues that were going on in North Korea and in Iran until the agreement was signed and so forth—there are really important issues at stake.

What happens with the sanctions regime is that we do a bit of what Professor Walsh said. We, as the administration, the government, impose sanctions and then move on.

In a sense, you've outsourced the enforcement to the business community, but our clients, and neither Vince nor myself, have the resources to figure out whether so-and-so in Tehran or in Bandar Abbas is somehow related to the Iranian national guard or some other person with sanctions. We really are spinning the wheel here.

The other point that Professor Walsh made was that once you've committed to the sanctions, it's a really tough political act to ratchet them down or ratchet them up. It's a political tool that's very difficult to meter to specific articulated objectives.

I will get back to your question about mandates now.

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

First, I would like to clarify the situation, for public servants in particular.

[Milos Barutciski]

That is exactly the question. Whether we have a mandate and ...

if we have an objective and a purpose, a mandate

derives from the objective of a particular sanction. Public servants must understand what the objective of Parliament or the government is in enacting legislation or regulations.

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

Let me clarify this.

I was thinking in particular about the issue of the mandate.

The answer could be, for instance, that we do not provide a legal opinion, or something like that. As to the mandate that public servants have to meet your needs, my question is the following. What do they have the right to do or not do?

[Milos Barutciski]

That is not a new question. It is a question that arises for any federal public servant at the Competition Bureau, Canada Revenue Agency, or the Canada Border Services Agency. These are regulatory agencies.

If you don't mind, I will continue in English.

A regulatory agency is exactly that. It administers and enforces a regulatory regime and that's what this is. Administration isn't just we promulgate it and if we happen to catch you, whether we blunder into it by error or accident, we enforce you, but it also involves administration of an act. When you talk about mandate it's important that.... And that's what I was complaining about; I was whining, to be honest, about my friends at Foreign Affairs who feel...it's not that they don't feel they have a mandate because their sister agency in the export controls understands that and deals with that. It's a resource problem. Every administrator, every agency that administers a law of Canada or of any of the provinces, understands that it needs to engage with the people the law impacts.

We're not asking for legal opinions, we're asking for guidance on how you do it, which links to the point I was trying to make earlier. It links to the objective of what you're trying to achieve and some of the objectives are extremely important. On proliferation of weapons of mass destruction, I'm hard pressed to think of a more important issue than that from a geopolitical perspective, but you can't deal with that by saying we're going to pass on that, now let's move on to pipelines, or let's move on to human rights and whatever, and you guys sort it out. You know what? Even the biggest multinational is doing the kinds of things Vince was talking about, trying to figure out what this is. The guidance from the administrators that Vince and others have talked about is fundamentally important.

There are public servants who can indeed give information, provide guidance, and administer the act.

The guidance is based on the objectives of the act and the objectives have to be tied to the kinds of things Professor Walsh was talking about.

[Vincent DeRose]

Could I add two very quick points? First of all, I have not come across a client, a Canadian company, that does not want to comply with the law. They want to comply, and if they are calling me it's because they are unable to figure it out on their own. When we talked about my recommendations, we were very careful. I used the wording “give them the mandate and the resources”, and from my perspective it is the mandate to give not legal advice, but regulatory interpretive advice, and to give them the resources to be able to do it so you can help Canadian companies that want to be in compliance, ensure they are in compliance, and allow those Canadian companies to go abroad and enter into legal business deals. That's what they want; and at the moment, to be honest, many Canadian companies are hitting a roadblock.

It's too bad because we are losing competitive advantage to countries such as the United States or the EU because if you can't buy from Canada, you go to the United States or the EU.

[The Chair, Liberal, Bob Nault]

Thank you, Mr. DeRose. We have time for one more question

[Michael Levitt, Liberal, York Centre, ON]

Is it a short question?

[The Chair, Liberal, Bob Nault]

Not necessarily short but the usual time and then we have a vote. The bells started to ring a while ago. Our vote is at 5:45, so we have five minutes for Mr. Levitt or Mr. Miller, and then we'll have to call it a day or the whip will do us all in and we'll never be here again. I move over to Mr. Levitt.

[Michael Levitt, Liberal, York Centre, ON]

I have a question for Ms. Hanham, but there's a disconnect that I want to ask Mr. DeRose about. We've heard there have been about a dozen investigations, and I think two or three findings or prosecutions under SEMA in the whole time. Given the lack of clarity, given that companies are not sure what's going on, how do you account for that, even with all of that and the lack of information? Is it because companies are risk-averse and they're just backing away entirely? It's not as if they're falling into the black hole; are they just staying away from it?

[Vincent DeRose]

I would say that there are three reasons. Some simply back off because they are risk-averse. Some will determine what they believe to be compliant, and they will proceed. In terms of why there have been so few prosecutions, again, I would personally suggest that it is more because of a lack of investigations, a lack of resources, and the lack of an ability to investigate. If you look at our allies, take the United States as an example, they have prosecutions every day. Those companies are not acting in a different manner than Canadian companies, but there is not the same level of prosecution. There is no doubt.

[Michael Levitt, Liberal, York Centre, ON]

Do you think on the pecking order of what the RCMP feels is probably priority in their domain, that this is probably way down the list? Given the sorts of investigations on the sorts of issues that have come up, there haven't exactly been earth-shattering reaches.

[Vincent DeRose]

You're putting me into the shoes of the RCMP commissioner. I'm going well beyond that of a lawyer, but I'll say this. If I was the RCMP commissioner, and I was told I could only conduct one investigation a year across all of Canada, would I pick this area? Probably not. Is it important that economic sanctions be investigated and enforced in Canada if you want them to have meaning? They have to be.

[Milos Barutciski]

I agree with what Mr. DeRose said, but very simply, enforcement and compliance go hand in hand, and to convince companies that they need to comply, it's not just saying we've got a law. You need to actually be able to engage them, and if the administrator, the agency, doesn't engage, which is what the problem is in the sanctions area, then it's a vacuum. Large public companies with deep compliance cultures, like Canadian banks, just walk away. They don't want to touch it. They will not go anywhere near Iran, even though the sanctions have been fundamentally eased, essentially.

On the other hand, you have a lot of very compliant but ignorant companies, and they see that there's no enforcement. They see they don't have the resources, especially SMEs. They see an opportunity in the oil and gas services sector—not the big producers; I'm talking about the service guys, which are often smaller companies—and off they go. Unfortunately, off they go in a very ill-informed way, and part of the reason is that there's no guidance. So it's not a chicken-and-egg issue; the compliance needs to go with resources and engagement.

I like to talk about engagement more than I talk about enforcement or regulation.

[Michael Levitt, Liberal, York Centre, ON]

I'm just going to stay with this because I don't think I have time to go to the other part of the question. Sorry about that. You mentioned help for small and medium-sized business, which obviously, in terms of the economy, is important. What other jurisdiction do you feel is handling this well and effectively? Who's doing a good job on this front?

[Vincent DeRose]

Let me give you one example that builds on one of our recommendations, which was the consolidated list. If you're in Europe or if you're in the United States, if you're an individual, if you're an SME, you can go to the government website, and you can click on one link, and you can put the name of the person that you are about to enter into a transaction with, and you can hit “enter”, and much like Google, it will pop up, and it will give you a list telling you whether there's a red flag, and it will let you know whether you need to investigate further.

That does not exist in Canada, so if I have an SME, I have to make a decision about going through all the regulations myself, which is extremely complicated and no one will do, or I risk it, or I try to go out and pay a third party service provider, which is incredibly expensive.

So in my experience, lots of SMEs, particularly in the oil and gas service industry, of which we have so much knowledge that we can offer the world, just sort of shrug their shoulders and say it's just not worth the risk.

[The Chair, Liberal, Bob Nault]

Michael, thank you.

Thank you very much, colleagues. We've now have a grand total of about 15 minutes or so to hustle up for the vote.

I want to thank all four of our witnesses today. Again I want to apologize for our tardiness. Unfortunately, things do happen this time of year in the House, and we're into a multi-vote kind of process this week.

This was very informative. I want to encourage you to give us some recommendations, as Mr. DeRose has done. I think it's very useful and very helpful in the discussion.

On behalf of the committee, thank you very much for spending this time with us.

Colleagues, the meeting is adjourned.