Foreign Affairs Committee on June 8th, 2023

[The Chair, Liberal, Ali Ehsassi]

I call the meeting to order.

Welcome to meeting number 70 of the Standing Committee on Foreign Affairs and International Development.

Today's meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Members are attending in person in the room, as well as remotely through Zoom.

I'd like to make a few comments for the benefit of the members.

Please wait until I recognize you by name before you speak. For those participating by video conference, click on the microphone icon to activate your mike, and please mute yourself when you are not speaking. Interpretation for those on Zoom is at the bottom of the screen. You have a choice of either the floor, English or French.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Wednesday, September 21, 2022, the committee is resuming its study of Canada's sanctions regime.

Now, we're very grateful that we have three distinguished witnesses before us. We have Senator Andreychuk, who needs no introduction to anyone in Ottawa. She is a distinguished jurist, a distinguished diplomat and a senator. Anyone who is familiar with foreign affairs is very familiar with her. In addition, we have Professor Cardwell with us today—we're very grateful, Professor Cardwell—and Mr. Benjamin Schmitt, who has appeared before us previously and is a senior fellow in the Department of Physics and Astronomy as well as being at the Kleinman Center for Energy Policy, both at the University of Pennsylvania.

You will each be provided with five minutes for your opening remarks, after which we will open it to the members for questions.

As I understand it, Professor Cardwell, you will be going first, followed by Professor Schmitt and then Senator Andreychuk.

[Professor Paul James Cardwell, Professor of Law, The Dickson Poon School of Law, King's College London, As an Individual]

Thank you, Mr. Chairman and members of the committee, for the invitation to speak. It's a great honour for me to be in Ottawa with you today.

If I may, I will briefly present an outline of my research interests and expertise in relation to sanctions. I am an EU law academic, working at the interface of law and politics in the EU. My specific focus is on the external relations of the European Union, which is "EU-speak" for what's generally covered by the foreign policy of a nation-state.

I've been particularly interested in the institutional questions and the place of law in what's generally assumed to be a political domain. There has been, since the EU's treaty of Maastricht, 1992, a growing amount of EU law relating to external relations as the EU has attempted to gain a greater voice in international affairs. There's been a gradual, partial move away from the characterization of EU foreign policy from intergovernmental to supranational.

My interest in sanctions is thus as an expression of the EU's foreign policy. I published an article entitled “The Legalisation of European Union Foreign Policy and the Use of Sanctions” in 2015 in the Cambridge Yearbook of European Legal Studies. I argued there that the EU is far from being ineffective as a foreign policy actor, which is a claim that's frequently been applied to the EU since its inability to respond to the breakup of Yugoslavia in the early 1990s.

The willingness that the EU has shown to put in place autonomous sanctions demonstrates its ability to do things as well as say things, most notably, of course, on Russia, since 2014. The process of imposing sanctions, which cover internal market aspects of the EU and thus the legal competence of the EU institutions, is one that fuses legal and political aspects but often has gone unnoticed. The institutional difficulties in seeking agreement between 27 member states should also not be understated. If there is agreement, the EU is capable of being powerful, but if there's no internal agreement, much less so.

My most recent work on sanctions was published in 2022, with Dr Erica Moret, whom you met earlier this week. It focused on a trend since the mid-2000s to invite third states around the EU's borders to align with EU sanctions. Such states include closely integrated but non-EU members, including Iceland, Norway, Liechtenstein, applicants for membership in the western Balkans, Turkey, Ukraine, Moldova and Georgia, and other members of the EU's eastern partnership, Armenia and Azerbaijan.

We looked at the EU's 30-plus sanctions regimes and the hundreds of instances where sanctions have been imposed or built upon. We found that typically five to 10 additional states that are not EU members undertake publicly to align themselves. EU sanctions regimes, therefore, cover not only the 27 member states but also up to 35 to 40 states altogether, almost a third of the UN members.

Leaving aside the key question of whether sanctions do in fact make a difference, the place of autonomous, non-UN sanctions as the go-to foreign policy instrument of the EU demonstrates its success in putting together foreign policy. We also found some evidence that the potential weight of EU sanctions provides an opportunity for strengthened co-operation with other countries such as Canada, and groupings, including the Arab League.

Finally, as a U.K.-based academic, I've had to confront the reality of Brexit and the requirement to pass legislation and policy independently of the EU. The U.K. now has no formal institutionalized framework for foreign and security policy with the EU. It has its own post-Brexit sanctions regime, the Sanctions and Anti-Money Laundering Act 2018. The early signs here are that there is little difference in practice between U.K. and EU sanctions in terms of content or geographical scope, though this might be changed in the future.

I apologize in advance that my expertise does not extend specifically to Canadian law and policy, but I hope I will be able to answer your questions relating to my research.

Thank you.

[The Chair, Liberal, Ali Ehsassi]

Thank you very much, Professor Cardwell.

Next we will go to Professor Schmitt.

Professor Schmitt, you have five minutes. The floor is yours.

[Benjamin Schmitt, Senior Fellow, Department of Physics and Astronomy and Kleinman Center for Energy Policy, University of Pennsylvania, As an Individual]

Thank you.

I should just say that I have a Ph.D., but I'm not a professor, so thank you for the promotion.

Hello, distinguished members of the Canadian Parliament. Thank you for the opportunity to testify today on the vital need to continue to expand and tighten export controls against the Russian Federation in response to its ongoing brutal invasion of Ukraine.

My name is Dr. Benjamin L. Schmitt. I've previously served as European energy security adviser at the U.S. Department of State. I'm currently a senior fellow at the University of Pennsylvania, a fellow for democratic resilience at the Center for European Policy Analysis in Washington, and a co-founder of the Duke University Space Diplomacy Lab.

We meet today less than 48 hours after the very latest unthinkable terror was unleashed by Putin's Kremlin against the Ukrainian people: the destruction of the Nova Kakhovka dam and hydroelectric power plant in Russian-occupied Kherson. This act unleashed widespread energy and water insecurity and ecological disaster, and sharply exacerbated the Russia-fabricated humanitarian nightmare that is unleashed across Ukraine.

Although shocking, Moscow's latest attack on Ukrainian critical infrastructure shouldn't take us by surprise. It is just the most recent example in its campaign of kinetic strikes against Ukrainian energy facilities over the past 16 months and a clear extension of Russia's years-long policy of weaponizing energy supplies against the European democracies.

We also meet here at a historic inflection point during Russia's war in Ukraine, a moment in which heroic Ukrainian defenders are already in the opening stages of a highly anticipated military counteroffensive aimed at ending Russian military occupation within Ukraine's internationally recognized sovereign territory.

The success of the counteroffensive will not just come down to the unparalleled bravery of Ukrainian service personnel. It will also be the military hardware and materiel that we, as western democracies, have been able to supply that will play a decisive role. This is why countries like Canada must continue to rapidly improve the pace and supply and scope of military systems it's sending to Ukraine, and ensure that increasing Canada's technical capacity for defence manufacturing and procurement is prioritized in Ottawa's highly anticipated defence policy update.

However, while supporting the success of Ukraine's military counteroffensive is essential, global democracies supporting Kyiv have the duty to lead a counteroffensive of their own, a counteroffensive of sanctions to further ratchet up economic and supply-chain pressure to degrade Russia's capability to wage war against its democratic neighbour.

With this in mind, we can look at three critical lessons that we've learned over the past year or so on the Russian sanctions regime.

First, the answer to the perennial question “Are Russian sanctions working?” is yes, but given the wide range of measures deployed, we need to also consider the proper time scales required for these various classes of sanctions to have their desired impact. For example, while banking restrictions and energy sanctions might take longer to result in broad macroeconomic failures in the Russian economy, technology export controls on component and systems-level military and dual-use hardware have resulted in more immediate impediments to Russia's military industrial capacity, forcing it to seek equipment from countries like Iran. Regardless, both sanctions tracks must be strengthened and held in place for the long term to live up to the transatlantic pledge of increasing costs on Putin's Kremlin in support of Ukrainian victory.

Second, the transatlantic community can never again be fooled by dubious Kremlin schemes and disinformation campaigns to waive existing prudent sanctions measures. Both during the run-up to the Kremlin's large-scale invasion of Ukraine and during its first year, sanctions measures either already enforced or on the books to be enforced were waived, avoided or otherwise unutilized. This includes the Biden administration's July 2021 decision to waive sanctions on the Kremlin-backed Nord Stream 2 pipeline, sanctions that were legally mandated by an overwhelming bipartisan majority in both chambers of U.S. Congress for years.

It also includes the Biden Administration's decision later in 2021 to avoid sanctioning a vessel called Blue Ship. This vessel was engaged in sanctionable activities in the construction of Nord Stream 2, but sanctions were waived, citing the ship's ownership by an entity that was quasi-owned by the German state government of Mecklenburg-Vorpommern, though principally funded by the Gazprom-owned Nord Stream 2 consortium, an entity cynically called a “climate foundation”. The ship and its owner remain unsanctioned today.

It, of course, also includes last year's decision by the Canadian government to waive Russian technology export controls measures on a set of Siemens gas turbines that the Putin regime erroneously claimed were technically needed to end its politically motivated cuts of Nord Stream 1. Thankfully the Trudeau government ultimately reversed its decision, in part due to the great work of this very committee.

Strategic errors like these, along with many further examples, will only serve to embolden Putin's Kremlin to set up schemes to undermine the western sanctions consensus, and if left uncorrected could cause grave harm to broad counter-threat financing programs developed by global democracies.

Third, and finally, simply announcing strong sanctions measures without equally strong tracking and enforcement action of would-be sanctions evaders will not get the job done. The wide array of Russian sanctions and export control measures that have been announced by the G7, European Union and beyond over the past 16 month are commendable, but must be rigorously increased and enforced until the Kremlin relents in its war of choice against Ukraine. It's no exaggeration that the scale and scope of sanctions already in place against the Russian Federation represents perhaps the largest single sanctions regime ever undertaken in history, in large part due to the sheer size of Russia's landmass, economic activity and global connections.

[The Chair, Liberal, Ali Ehsassi]

Mr. Schmitt, could I ask you to conclude in the next 20 seconds, please.

[Benjamin Schmitt]

Yes.

There are many sanctions measures that need immediate rollout. I will provide a menu during this hearing.

In closing, the biggest lesson we should have learned over the past 16 months is that the cycle of incrementalist measures to support Ukraine, whether it be on the supply of weapon systems urgently needed by Kyiv or on sanctions measures, needs to be broken. The time for incrementalism is over. A western sanctions counteroffensive with stronger and wider restrictions on the Russian Federation can and must be deployed immediately. Global democracies must do this, not only to support the future resiliency of a free Ukraine, but also to make it abundantly clear to the realist “it's just a commercial deal” bloc, that there cannot be a return to business as usual with the Putin regime. It's a vital message that authoritarian regimes around the world will need to hear as well.

Thank you for your attention and I look forward to your questions.

[The Chair, Liberal, Ali Ehsassi]

Thank you, Mr. Schmitt.

We now go to Senator Andreychuk.

[Raynell Andreychuk, Former Senator, As an Individual]

Thank you, Mr. Chair. I will look to you to cut me off, because the clock is behind me, and having served in Parliament, I know it's a danger to go over the time.

I want to start by thanking the committee for accepting to hear from me again on the issues of the Magnitsky bill and the sanctions in general. It was from the hard work of parliamentarians in Canada over numbers of years in trying to increase attention on sanctions and particularly human rights abuses that the Magnitsky bill came to fruition. I was very pleased to introduce the bill and have both houses of Parliament pass it unanimously. It is to your credit that we are at least at the stage we are now. Hopefully, this committee will continue to build on that.

Much has been said.... You can read what I've said over at the Senate. I recently testified before them on the same issue. I'm not going to talk about Russia—I think it's been adequately covered—and will say why the Magnitsky bill was important.

We had SEMA, the Special Economic Measures Act, but it was really geared for trade violations and economic sanctions, when in fact there was a feeling in the view of many Canadians that we needed human rights to be raised to an equal status in foreign policy and that the rights of those who have to defend their countries deserve the same attention as those who are working within the trade field, so the Magnitsky bill came to.... What I want to talk about is that it was intended to entrench human rights as an equal pillar with the foreign policy aspects.

Secondly, it was to be universal. There was much talk even then about Russia and that threat, but those of us who worked in foreign policy knew that the threats could come from anywhere at any time and that we should be ready with a regime that can be easily accessed by the government. The universality is very important.

It was also intended to support human rights defenders in general. Mr. Magnitsky was certainly the example, but he's an example of so many others around the world who have sacrificed their lives, been jailed and tortured and have suffered innumerable losses—and their families—due to the fact that they stood up for what was right and just in their country. These human rights defenders need to be supported. That was one other reason for the Magnitsky bill.

The thrust of the bill is to ensure first and foremost—and that gets lost because of the Russia issue—that we are not aiders of and abettors to any of the crimes that are committed by these perpetrators in other countries and have it spill over to us. We do not want their money parked in banks in Canada. We do not want it parked in real estate in Canada. We do not want them to be in our countries. The part that has been missing in the Magnitsky bill and should have more attention paid to it is the fact that we can limit their access to coming to Canada. There's also the question of whether that should include their families or not, but that would take a further inquiry, I would say.

What we want, as Mr. Kara-Murza said, who languishes now in one of the worst jails with none of the attention that he requires medically and otherwise, testified before all of our committees is.... If we don't take these steps within our own borders, how can we then issue sanctions and talk to others?

What the gap was in our sanction regime up to this point was that we didn't look to what we do in this country to ensure they are not within our borders. That would be the first step to protecting the human rights defenders and having credibility on this sanctions issue.

I agree that sanctions take a long time. The other reason for having the Magnitsky bill and the SEMA bill together, I should say, is that it was a compromise. It was intended to be the first stage. It was not intended to be a fait accomplibill. It was to be an all-inclusive look at sanctions and to see where the Magnitsky bill fits and where SEMA fits but also to see what else we need in the sanctions area.

Further, we should not look only at sanctions. We have many levers in foreign policy that we should exert and utilize in these cases. How sanctions fit into that has not really been studied by me and many others as much as we should, and I think we will do so.

Just to finish, the government has leaned on SEMA because it has been there for quite some time. It has a definition to do, but it is about international issues, not specific in the way the Magnitsky is. What those of us who have worked in the human rights field were hoping for and still appeal to the government for are the policies and the practices known to Canadians and internationalists so that we could work more co-operatively with others. We would also be in the ready when an issue erupts.

It isn't just Russia. We know we're in a very interesting world, and perhaps sanctions or other foreign policy are necessary elsewhere. If a broad-based look at foreign policy is done, we can then see if we should use sanctions or not, and we have a scheme ready to go rather than being behind and trying to catch up.

Thank you.

[The Chair, Liberal, Ali Ehsassi]

Thank you very much, Senator.

We will now go to the members for questions. We start off with MP Chong.

You have four minutes.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you, Mr. Chair.

Through you, Mr. Chair, I first of all want to thank my former colleague Madam Andreychuk for appearing in front of our committee today.

We miss you in Parliament and the work that you do, but your legacy lives on in the bill you introduced that is now law, the Magnitsky act. Thank you for your opening remarks.

I'd like to focus my questions on enforcement. Just three months ago, The New York Times had a headline on their social media platforms that said that “Canada is such an attractive place for money laundering that there's even a special name to describe the activity here: 'snow washing'.”

I make that as my opening remark so that we can focus on what I think is a major problem, which is the lack of enforcement. We can announce all the sanctions we want, but if we're not enforcing them, they're of no use.

At the last meeting, we focused on the U.S. enforcement of sanctions through OFAC in the Department of the Treasury. This meeting, I'd like to talk a little about U.K. enforcement, because we have very similar systems of government.

The United Kingdom, like Canada, announced a U.K. financial crimes agency. I'd like to ask Professor Cardwell about that.

Can you tell us when this agency will be operational? Do you know when it's going to be stood up?

[Prof. Paul James Cardwell]

No.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Okay.

There have been indications from the U.K. government that a sanctions enforcement unit will be housed within that agency. Do you know anything about where the U.K. government is at with the establishment of this agency?

[Prof. Paul James Cardwell]

My understanding is that “soon” is the official word. It has been complicated by other things going on, and, of course, the clock is light, because we are expecting an election, without doubt.

I don't think this is an issue where there would be a great difference between whichever party is next in power. I think there is a certainly a question of resourcing, as well, against the background of some of the institutional changes we've had, given the changes in prime ministers and ministers, which has generally slowed down the process of creating things like this in a number of areas.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

In Canada, it's clear that the lead within the Government of Canada for making a decision about designating individuals or entities for sanctions is the Department of Foreign Affairs. That's clear. Where there is ambiguity is regarding who the lead is within the Government of Canada for the enforcement and administration of sanctions. “Administration” is probably the better word to use. There's ambiguity about who the lead is within the government for the administration of sanctions that have been applied to individuals and entities.

In the U.K. government, who is the lead for the administration of existing sanctions for interdepartmental and agency co-operation? Who is the lead within the U.K. government for that?

[Prof. Paul James Cardwell]

My understanding—but I can check, as I am not a U.K. expert on this—is that it is the foreign office.

Again, there have been institutional changes and ways in which parts of departments are being shifted, particularly relating to trade, which of course this impacts directly.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

If you wouldn't mind, once this meeting is done, consulting with your colleagues and providing the chair of the committee with that answer over the next couple of weeks, that would be very helpful for us.

I'd like to ask a few questions—

[The Chair, Liberal, Ali Ehsassi]

I'm afraid you're out of time.

We next go to MP Sarai.

You have four minutes.

[Randeep Sarai, Liberal, Surrey Centre, BC]

Thank you, Chair.

Senator Andreychuk, thank you for joining us today. You've been a tireless advocate for human rights and the Ukrainian people for many years now.

Given your important work on behalf of the Ukrainian people, and your experience most notably as Canada's permanent representative to the United Nations Commission on Human Rights, can you please discuss the importance of holding the Russian regime and Putin accountable through sanctions and other means, how it's been effective and how do you think it will affect the Russian regime going forward?

[Raynell Andreychuk]

I'll start midstream. I think from the start, any sanctions that have been imposed anywhere take time, as has been said. They, in themselves, will not move a marker on any autocratic leader who decides to go a certain way. It should be noted that there's a military response, and there's a sanctions response. The most important response is from within the country.

Building on that, the sanctions have been successful in the sense that they have brought attention to the fore of human rights defenders within Russia and what has happened to them. As the war evolves, you can see the pressure come forward more and more, but that's the risk for the people who want the war to stop within. I'm not going to speak any further about that.

My concern in Canada has been that we should look at the sanctions. Sanctions are the step that you take as an imposition against another country. But as has been pointed out by Mr. Chong, we have all kinds of activities that lead to the sanctions—there's are the problems of illicit money coming into Canada and human trafficking. Then there's the confusion that comes when you deal with some of these foreign actors, if you're in business, is how do you know whether they're in compliance or not? How do you comply?

This is where the attention of the government really has to be on putting out a generic—that's using the term loosely—principle that they are going to follow, or principles or policy when they look at sanctions, so that it isn't targeted to a specific country but has some relevance for any situation.

What is then the basis of that? Evidence. You need to have those pieces in place. You need a lead agency, but you need to work with your intelligence, and you need to lead with your citizens too. Some of the best information that comes forward on sanctions comes from groups and individuals who know the countries. You've pointed out Ukraine; I also know Russia, Belarus, etc. You can weigh what would work, what might not work, and you might be able to provide evidence.

Using your resources within the community, which are great.... Particularly in a country like Canada we all have links somewhere—we travel, we're mobile, we get information. But we have a lot of NGOs and a lot of professional groups and businesses working around the world who need to feed in. They need to know what is legit or not.

In one of the previous hearings, someone said to give us the rules and make them clear because when we're dealing with a foreign business we need to know whether we're within bounds or without bounds. Giving advice, for example, as a lawyer is what you do, but you need to know how the sanctions are going to be implemented. If we don't know that, we're at risk. There has been a plea from many quarters to have more exchange and dialogue, but also to set in place some terms that will be understood, and a place to go to seek advice.

[Randeep Sarai, Liberal, Surrey Centre, BC]

Are there any cases or scenarios you know of that Canada is missing sanctioning, for example, in the Russia—

[The Chair, Liberal, Ali Ehsassi]

Mr. Sarai, you're considerably out of time.

Next we go to MP Garon. You have four minutes.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Mr. Chair.

Thank you to the witnesses for being here today.

I'll start with you, Senator Andreychuk.

If I understand correctly, you're among those who supported the Magnitsky act. You did a lot of work on the legislation. It hasn't been used by Canada since 2018. You told the Senate committee studying the sanctions regime that the government should explain why it's hardly used the legislation. You also said that the reason it's not being used enough is a lack of information needed to apply it.

This is my question: Is Canada transparent and accountable enough when it comes to the effectiveness of the sanctions? I have to tell you that I was rather surprised, because these are things that can be measured. When you look, though, you find very little in the way of measures for sanctions effectiveness.

Don't you find that troubling?

[Raynell Andreychuk]

I think it's being studied, to answer your question directly. This is the field that I and others are starting to look at in terms of how we can make sure there is accountability. I'd refresh everyone's memory that in some of the original bills that came through and did not pass, it was a reporting mechanism directly to Parliament—disclosure and involvement. Sanctions will not work if all Canadians are not involved, and particularly all parliamentarians. The bill came in with all-parliamentary support, and I think there needs to be more transparency—the word we use often these days—and openness to share the experience.

We need to know how we can support the government better, how we reach for the information, whom we talk to, how we can ensure that those who talk to us are not then targeted, because that is another factor. You've hit the nail on the head—what we need is more information for the government. I'm going one step further in saying that the government should put in place certain aspects of sanction-dealing that would be generic, and that needs to be known by all of us.

My final point on that is that the evidence is easier I think in SEMA. I noticed that all of the Russian ones talk about violations of “international peace and security”. That's a phrase that needs to be defined more. Whereas in Magnitsky, we're reaching for internationally recognized human rights abuses. Corruption is more defined. In that sense, I would think it would have been easier for the government to deal with it, particularly if you're going into forfeitures, which is a whole different difficulty and has yet to be tested. If you go into forfeiture, where's the evidence, how is it applied, and are you only using your own skill as a foreign minister and your government, or are you really trying to build a coalition for those who want to abide by human rights?

[Jean-Denis Garon, Bloc, Mirabel, QC]

Very quickly, I have one last question for you. I have just a few seconds left.

You said that information was missing. What specifically do you recommend to bring about the institutional changes to improve that dimension? What exactly do you have in mind?

[Raynell Andreychuk]

When this bill started—l'll go back to that, and I'm not a psychologist—I know there was resistance to the Magnitsky bill, because it was a whole new topic, a whole new area that would need to be explored. There is a hesitancy to start new ventures.

That is why this bill.... All the people who helped me sat down and said it's a starting point. We know what we want: we want to stop the abusers. We don't want them in Canada, but we don't want them.... We want the right signals to go to our partners and to the broader community and to those who really suffer on the ground in other countries. I said that's the part we know. How to apply it is within the domain of civil servants, within the domain of the government. Surely with the fine minds and expertise there, that is where they could tell us how they could accomplish the ends we want.

They may be doing it now to a certain extent, and I think they are, but they could do more in relaying it to the general public, because it is not the kind of information that is confidential. In some cases, it might be, if it's in money laundering or something else; but in other cases, we have talked about what we do want to further human rights, and we could do that here. We need to report, and we need to have Parliament involved.