Canada is expected to take its first steps towards expropriating assets held by the Russian government and sanctioned Russian citizens to help finance Ukraine War effort – Measures that could test the limits of international law.
Ottawa promises a promising action soon, after years to direct an international thrust to use Moscow’s own financial assets to help Ukraine respond to large -scale invasion Russia Launched in February 2022.
“Canada is really at the forefront,” said William Pellerin, a commercial lawyer based in Ottawa within the McMillan LLP firm who advised its customers to sail in Ottawa sanctions against Russia.
Western countries have moved to isolate Russia by sanctioning, among other things, the accused of helping the war to continue or to take advantage of it.
States tend to sanction individuals and freeze their accounts in order to modify their behavior. But a new idea has appeared in the G7 capitals in recent years – using the money of frozen accounts, or interests earned on these accounts, to help finance the defense of Ukraine.
Supporters of the idea say that it offers a cheaper way to help Ukraine repel the Russians and rebuild its damaged infrastructure.
They also hope to inflict financial pain on Russia to convince him to stop or slow down his deadly air strikes and dissuade other countries from launching similar wars.
But criticism warns that such a decision could violate international law and give opponents an excuse to steal private property.
Ottawa led the thrust among the allies to expropriate Russian cash for Ukraine, even if Russian assets are rare in Canada.
The vast majority of assets held by the sovereign fund of Russia and the central bank are in European banks – the same is probably intended for sanctioned Russian citizens. The drawing of these funds would require measures both by the European Union and the individual countries and there is no international consensus on how to proceed.
Pellerin said Ottawa wanted to take funds from people who were sanctioned but who are not confronted with criminal charges.
“The EU has never been ready to go so far,” he said, adding that the Allies of Canada are more likely to redirect the interests won by these accounts in Ukraine.
The Global Refugee and Migration Council called on countries to use Russian species expropriated to fuel Ukraine’s war effort and published analyzes explaining how Ottawa could do so.
The president of the group, the professor of the University of Carleton, Fen Osler Hampson, said that former Deputy Prime Minister Chrystia Freeland had played a “critical role” in obtaining American and European officials to mobilize on the idea.
“She deserves a lot of credit for working hard on this file, and it was not easy,” he said.
Canada should follow a three -step process to put Russian assets to work for Ukraine: freeze, grasp and lose the crown.
The active gel is quite simple. Ottawa simply orders the banks to stop transactions involving accounts belonging to people listed for sanctions – in particular Russian oligarchs – under federal powers that have existed for decades.
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The powers of seizure and confiscation are relatively new – and not tested.
“Canada has given itself a new tool where they can then grasp, then permanently broke into the crown, the assets of individuals simply because they were themselves sanctioned,” Pellerin said.
This process would see Ottawa deliver an order from the cabinet to seize assets, then ask a provincial superior court to make the assets lose the crown. At this stage, the federal government could send funds to Ukraine.
Mark Kersten, professor of international law at the University of the Valley to Fraser, said that it was “remarkable” that Canada had still not initiated such legal proceedings and had still not explained the delay.
“We have … listened to the government to say regularly, including in kyiv, that they will do this, that they will get these assets,” said Kersten, who has been doing research on the process for years.
“The government speaks of a big match and apparently moves at a glacial rate – and not being transparent with the public as to what it really does and where things are. And I find it quite frustrating.
How much money are we talking about?
In its latest update, the RCMP said that it had frozen $ 140 million in Canada’s sanctions in Russia on January 15 and blocked $ 317 million in transactions.
It is not clear how much money the government of Russia and its sanctioned citizens hold in Canada.
The start of the Central Bank of Russia, at the start of 2022, included around $ 24 billion denominated in Canadian dollars, including bonds, titles and deposits.
Pellerin said that there is a general belief that Russian officials anticipated the sanctions – which would explain why the RCMP seized such a modest quantity.
“The conclusion you can draw from it and that I had confirmed by various market players is that Russia was able to move its assets from Canada before being sanctioned,” he said.
Most Russian assets abroad are in European banks. Canada has helped design a system, announced last summer, which allows Ottawa to use the income generated by these accounts in Europe to obtain $ 5 billion in Loan.
“This funding is indeed a loan, guaranteed by the interests that arise on all these frozen funds everywhere,” said Pellerin, adding that Ottawa could receive income from these frozen accounts for the years to come.
“If Ukraine cannot reimburse (the loan), we will take this interest that these investments win to reimburse us,” he said.
Prime Minister Justin Trudeau announced last week to kyiv that Ottawa would spend half of the $ 5 billion in loans “in the coming days”, with the rest to follow later.
Kersten said Ottawa’s entire plan is testing the limits of international legal doctrine of countermeasures – the idea that non -violent reprisals which are normally illegal can become legal when used in response to an evil perpetrated by another state.
He said that allied governments are much more comfortable with the idea of taking accumulated interests in frozen accounts than emptying the accounts.
“States have really hesitated to try to take state assets and put them back to the Ukrainians,” he said.
Russian ambassador Oleg Stepanov said that Ottawa violates international standards and noted that there were few Russian participations in Canada.
“The statements saying that Ottawa could derive income from frozen Russian assets are pure disinformation,” he wrote in a statement. He said that any money sent to Ukraine “will either be burned or stolen.”
Kersten said that there were “very important” legal sanctions against the seizure of private assets held by a person or a company that do not apply to assets belonging to the government.
And this plane in Toronto?
On the tarmac at Pearson airport near Toronto is a Massive Russian freight aircraft This has been parked there since Moscow launched its large -scale invasion in February 2022.
In June 2023, Ottawa officially seized the plane of Volga-Dnepr.
In mid-February, the Government re-entered the office orders to clarify the ownership of the plane, pointing to foreign subsidiaries and affiliates of the Russian company thought of the aircraft.
Pellerin said that these steps bring Canada closer to fully take possession of the plane and he thinks that it will happen “imminently”. The company has launched an official dispute under the bilateral investment agreement signed by Moscow and Canada.
Meanwhile, Ottawa was committed at the end of 2022 to try to grasp around $ 36 million which, according to him, is detained by the Roman oligarch Abramovich, an ally of Russian President Vladimir Putin.
Canada has never launched a legal case to obtain these funds. Kersten media reports suggest that money really belongs to an investment fund in the Cayman Islands.
The Liberals promised last spring to introduce legislation which would allow Ottawa to receive an accusation against the “profits of the manna generated on frozen assets held in Canada”, similar to existing European laws.
But the political extension and the extension of the Parliament blocked these efforts and killed a Senate bill which aimed to strengthen the powers of Ottawa to access the money held by foreign sanctioned states.
Meanwhile, reports – which the Canadian press could not confirm – suggest that Moscow is open to the use of US $ 300 billion in Europe to finance the reconstruction of Ukraine – if part of this money goes to the regions occupied by Russia that Moscow wants to absorb.
Pellerin said Canada’s restrictions on Russia largely have implications for business business in the world, given the intertwined nature of the world economy.
“It has commercial effects and considerations for Canadian businesses,” he said. “This forces us to be particularly cautious, because sometimes our sanctions regime is more aggressive than those of other jurisdictions.”