THE STANDING SENATE COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE
EVIDENCE
OTTAWA, Thursday February 2nd, 2023
The Standing Senate Committee on Foreign Affairs and International Trade met with videoconference this day at 11:29 a.m. [ET] toundertake a comprehensive review of the provisions and operation of the Sergei Magnitsky Law, and the Special Economic Measures Act; and, in camera, to consider a draft budget.
Senator Peter M. Boehm (Chair) is presiding.
[Translation]
The Chair: Good morning, I am Peter Boehm and I am a senator for Ontario. I chair the Standing Senate Committee on Foreign Affairs and International Trade.
[English]
Before we begin, I wish to invite committee members participating in today’s meeting to introduce themselves.
Senator Coyle: Mary Coyle, representing Nova Scotia.
[Translation]
Senator Gerba: Amina Gerba, Quebec.
[English]
Senator Greene: Steve Green, Nova Scotia.
[Technical difficulties]
Senator MacDonald: Michael MacDonald, Nova Scotia.
Senator Harder: Peter Harder, Ontario.
Senator M. Deacon: Marty Deacon, Ontario.
Senator Boniface: Gwen Boniface, Ontario.
Senator Richards: Dave Richards, New Brunswick.
The Chair: Thank you very much.
I also want to welcome Chantel Cardinal, our new clerk of this committee, to her first meeting. Welcome.
I also welcome everyone watching us across the country on SenParlVu.
Today, we’re going to continue our review of the provisions and operation of the Justice for Victims of Corrupt Foreign Officials Act, also called the Sergei Magnitsky Law, and the Special Economic Measures Act, pursuant to section 16 of the Sergei Magnitsky Law.
For the first part of our meeting today, we’re pleased to welcome, by video conference, Paul James Cardwell, Professor of Law and Vice Dean (Education), The Dickson Poon School of Law, King’s College London in the United Kingdom; and Elisabeth Braw, Senior Fellow, Foreign and American Defence Policy, from the American Enterprise Institute in Washington. It’s a pleasure to have you both with us today. Thank you for joining us.
Before we hear your remarks and proceed to questions and answers, I wish to ask members and witnesses in the room to please refrain from leaning too close to your microphone or remove your ear piece when you do that. That will avoid any sound feedback that could negatively impact the committee staff and others in the room who might be wearing an earpiece for interpretation purposes.
We’re now ready to hear opening remarks, which should be about five minutes each. Those will be followed by questions from members. Professor Cardwell, you have the floor.
Paul James Cardwell, Professor of Law and Vice Dean (Education), The Dickson Poon School of Law, King’s College London, as an individual: Thank you, chair and members of the committee, for the invitation to speak to you today. It is a great privilege to do so.
I will first present a brief outline of my research interests in relation to sanctions. I am an EU law academic. I work at the interface of law and politics in the EU, and my specific focus is on the external relations of the European Union, which is EU-speak for what is generally covered by foreign policy of a nation state. I’ve been particularly interested in institutional questions and the place of law in what is generally assumed to be a political domain. Since the Maastricht Treaty in 1992, there has been a growing amount of EU law relating to external relations and a gradual but partial move away from the characterization of EU foreign policy from intergovernmental to supranational.
My interest in sanctions is as an expression of EU 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, and that is a claim that has frequently been applied to the EU since its inability to respond to the breakup of Yugoslavia in the early 1990s around the same time as the Treaty of Maastricht. The willingness the EU has shown to put autonomous sanctions into place demonstrates, in my view, its ability to do as well as to say things, and we’ve seen this most notably with Russia since 2014. The process of imposing sanctions, which covers internal market aspects of the EU and, thus, the core legal competences of the EU institutions, is one which fuses the illegal and political aspects, but it had often gone unnoticed. More recently, sanctions have become recognized as the go-to instrument, given the extensiveness in the way in which the EU has put them in place.
My more recent work was published in 2022 with Dr. Erica Moret, with whom you spoke in December. It focused on a trend since the mid-2000s to invite third states around the EU’s borders to align with EU sanctions. Those states include closely integrated but non-EU members, such as Iceland, Norway and Liechtenstein; applicants for EU membership in the western Balkans, Turkey, Ukraine, Moldova and Georgia; and other eastern partners such as Armenia and Azerbaijan. We looked at the EU’s 30-plus sanctions regimes until 2020 and the hundreds of instances where sanctions were imposed or built upon. We found that, typically, between 5 and 10 of those additional states that are not EU members undertake publicly to align themselves. The levels do vary from state to state. EU sanctions regimes therefore cover not only the 27 member states but up to 35 to 40, even, almost a third of the total membership of the UN.
Leaving aside the question of whether sanctions actually make a difference, the place of autonomous non-UN-derived sanctions as a go-to foreign policy instrument of the EU demonstrates, in this sense, its success. It also shows the potential for the EU to coordinate with allies beyond the states that are invited to align.
A final point to mention is that, as a U.K.-based academic, I’ve had to confront the reality of Brexit and the consequences. The U.K., as you’ll be aware, no longer has a formal institutionalized framework for foreign and security policy with the EU. That may change in the future. Although the U.K. has its own act in place, the Sanctions and Anti-Money Laundering Act 2018, the evidence so far suggests that although there is much more limited cooperation between the U.K. and EU, the sanctions between the two remain remarkably similar in practice.
I apologize in advance that my expertise does not extend to Canadian law, but I hope I will be able to answer your questions. Thank you.
The Chair: Thank you very much, Professor Cardwell.
I’d like to acknowledge that Senator Woo of British Columbia has joined the meeting.
We’ll go to Dr. Braw for her statement.
Elisabeth Braw, Senior Fellow, Foreign and American Defence Policy, American Enterprise Institute, As an Individual: Thank you, chair, for the invitation.
My expertise is in the use of sanctions as a deterrent and, indeed, as a punishment if that deterrent fails. That is the use of sanctions that has been prevalent over the years — sanctions used against another country whose behaviour the sanctioning country is trying to correct. That behaviour is of interest to the sanctioning country as it relates to that country itself. We have seen it when countries have engaged in various aggressive actions toward their neighbours and toward the sanctioning countries.
The most creative use of sanctions was surprisingly by Switzerland in 2009. We should remember that the most frequent application of personal sanctions is the withdrawal or suspension of visas. In 2009, one of the Gaddafi sons, Hannibal Gaddafi, was staying at a hotel in Zurich, and he and his wife assaulted a number of staff at that hotel. Swiss police arrested Hannibal Gaddafi and his wife and put them in jail awaiting investigation. But that was not to Libya’s liking so, all of a sudden, two Swiss businessmen who happened to be in Libya were seized by the Libyan authorities. That was a classic case of hostage diplomacy. What could Switzerland do to get those two Swiss businessmen released without making any concessions to the Libyan government? That is where Switzerland made very creative use of visa suspensions. The Swiss government suspended every visa issued to a Libyan citizen. I haven’t seen that sort of blanket use of personal sanctions used since, but it shows how sanctions can be and are used to influence and steer the security foreign policy conduct of an offending country.
The Magnitsky Act applications are different. It doesn’t try to steer the foreign policy of any offending country; it tries to improve the behaviour of that country within the country vis-à-vis its own citizen. That’s what makes the Magnitsky act so different. What we’ve seen until now is several hundred people sanctioned under Magnitsky Act by Canada, the U.S., the EU and by the U.K. In some very few cases, those individuals have been sanctioned by everybody, all four of these entities. Usually, it’s one country sanctioning individuals, or at maximum, two countries doing so together.
So far, the application of the Magnitsky Act has been heavily skewed towards Russia, and in some cases China, whereas there have been almost no cases of Magnitsky sanctions imposed on officials in, for example, Southeast Asia. I want to raise that to the committee because, with the Magnitsky Act being so different from traditional personal sanctions that are imposed to steer the foreign policy of a particular country, if you’re going to sanction individuals because they violate their own citizens’ human rights, then I think in order for the Magnitsky Act to be respected around the world, it’s got to apply to every country where officials violate their own citizens’ human rights and not skewed towards countries with which the west has some sort of geopolitical beef, for lack of a more formal word. If that happens, i.e. if the sanctioning countries begin imposing sanctions on human rights violators all over the world, I think the Magnitsky Act stands to gain great respect. If, however, it’s used as one of several tools vis-à-vis countries whose foreign policy and security policy the West is trying to steer or influence, then it’s seen as a geopolitical tool rather than as a human rights tool.
With that, over to you, chair.
The Chair: Thank you very much, Dr. Braw, for your comments.
[Translation]
Colleagues, you each have a maximum of four minutes for the first round, which includes both questions and answers. If you wish to ask a question, please raise your hand to indicate your interest.
[English]
Since we only have four minutes per segment, I’m just going to encourage, as I always do, both the members of the committee and witnesses to please be concise. We can always go to a second round if there is time.
Senator Ravalia: Thank you very much to our witnesses.
I would appreciate your opinion on “freeze don’t seize” versus “freeze and redistribute” sanctioned assets. We’ve heard the pros and cons on both sides of the equation. Canada has taken the latter position. Your take on that would be much appreciated. That’s for both of you, thank you.
The Chair: We’ll perhaps start with Dr. Braw on this one, because you’ve written an article with that very title.
Ms. Braw: I have, and thank you for your attention to this really crucial issue. In fact, just today an EU official proposed that the EU should use the around $300 billion Euros the European Union member states have frozen in Russian assets to pay for Ukraine’s reconstruction. As you indicated, senator, I think that is a very dangerous path to take, to seize assets that the West has frozen as part of our sanctions.
We should remember that freezing an asset is very easy. As you all know on this committee, it’s part of sanctions, and personal sanctions imposed on officials and others in foreign countries don’t have to imply criminal activity by those individuals. We freeze sanctions to steer the foreign policy and other conduct of that country. If we then take those frozen assets and simply seize them, that means that we are seizing assets of people without proving any crime on their behalf or any crime involving those assets. That’s an extremely dangerous path to take because it would mean that we’re saying the rule of law, of which we are so proud in our liberal democracies, doesn’t apply to everybody, doesn’t apply to geopolitical adversaries, and we would choose to suspend the rule of law for certain people when it suits us and when it suits our foreign policy. I think that would be extremely dangerous. It would remove the moral high ground that we have worked for so long to establish for ourselves.
It would also, on top of that, put our companies operating abroad in a very dangerous position because those governments, whether they are adversaries or not at the moment, could then randomly, depending on when they saw the need to do so, freeze assets and seize them. Our companies would have no legal protection against it, and our governments would be able to do nothing to try to convince those governments to not seize those assets.
Mr. Cardwell: I agree with that point. Certainly within the case of the EU and going back before the most recent regulation in 2020, there’s been a long-running saga about legal challenges and how someone who is placed on, in the case of the EU, a list of those suspected of involvement in terrorism and so on can challenge and get off. This was known as the Kadi Saga. I think the points raised by Dr. Braw are entirely valid.
The Chair: Thank you very much.
Senator MacDonald: This week we heard that when Russia invaded Ukraine last February, the Canadian government initially froze several hundred million in Russian bank assets, but since about June, it started sanctioning hundreds of additional individuals but hardly any additional accounts were frozen. This stands in marked contrast to the United States. U.S. Deputy Attorney General Lisa Monaco recently commented:
We’ve grounded planes in Switzerland and the Middle East. We’ve arrested smugglers in Italy, in Germany, in Latvia. And we’ve charged money launderers in the U.K. So basically, what we’ve shown is there’s no place to hide …
For both of our witnesses: What is the international and American view of Canada’s performance, and do you believe that Canada has a serious enforcement problem when it comes to implementing Magnitsky sanctions?
Ms. Braw: It’s easier to implement Magnitsky sanctions when the perpetrators have some sort of connection to your country. For the U.K., it’s clearly easier to issue and implement Magnitsky sanctions against Russian individuals because there are so many of them with some sort of connection to the U.K. Canada is a little bit more isolated.
With regard to what Lisa Monaco said, I think she was taking a little bit too much credit for those various arrests because the arrests and other law enforcement activities in Latvia and Italy and so forth are obviously not by the U.S. government but by local law enforcement.
If I can just highlight some of the excellent work that’s going on in various European countries to identify — outside the Magnitsky sanctions but as part of individual sanctions — criminal behaviour which would then allow that government to seize the assets from the individual as opposed to keeping it frozen. A really good example of that is the Italian Guardia di Finanza, which works on identifying criminal behaviour by the architect of Putin’s palace, who is an Italian with Russian citizenship. Italian authorities have now established criminal activity relating to funds owned by this architect of Putin’s palace. They have seized those assets, and the architect is now going on trial in absentia in Italy. So it is possible to go after criminal activity and, as a result, seize assets.
But to your question, senator, I think Canada shouldn’t be too embarrassed by its lower number of Magnitsky sanction cases. In a recent report by Human Rights First, Canada didn’t have an embarrassingly low number of cases. However, again, the implementation and the links between the sanctioned individuals and, perhaps, other sanctions that can be imposed on them beyond Magnitsky sanctions — I think that’s where maybe Canada can do more work in going after their assets in Canada.
The Chair: We’re almost at time here, but I did want to give Professor Cardwell a quick chance to comment.
Mr. Cardwell: Thank you. I’ll be brief. In doing my preparation for today’s hearing, I did ask about the view of Canada, which relates directly to this question. I certainly didn’t hear any criticism of Canada’s approach. I may have missed this, but that’s not the evidence I found.
Senator Woo: Thank you to the witnesses. I have a question for both of you.
First to Professor Braw: Is it your assessment that the Magnitsky sanctions supplied by the countries that have this tool are, in fact, currently used as a geopolitical instrument rather than as a way of promoting human rights? Are you then, in effect, saying there are double standards at play in the application of Magnitsky sanctions?
Ms. Braw: That is an excellent question. I don’t think the intention of the countries that use Magnitsky sanctions at the moment is to use them as a geopolitical tool. Of course, the intention is not the decisive part; it’s the interpretation that’s the decisive part. If countries around the world see Magnitsky sanctions as a geopolitical tool used by powerful Western countries, then the reputation of the Magnitsky sanctions as a human rights tool will suffer dangerously. Unfortunately, senator, I think we’re on the path toward such a situation.
There is an almost complete lack of Magnitsky sanctions imposed on Southeast Asia where the U.S. and Europe don’t really have very strong geopolitical interests. The lack of Magnitsky sanctions there suggests that Magnitsky sanctions are really primarily used against Russia and, in some cases, China — our main geopolitical adversaries. I think it’s unintentional, but it needs to change. If we’re going to hold human rights abuses to account, the same standard has to be applied to all countries.
If I may add, senator, it also has to be applied to countries that are our friends. I think this is where it will become really tricky for Western governments, because we have some geopolitical partners and indeed allies that are not particularly respectful of human rights. If we are going to use these sanctions, we’re going to have to impose them on individuals in those countries as well, and that could become a real dilemma for Western governments.
Senator Woo: Thank you, Dr. Braw. I would conclude from your comment that the double standard extends well beyond Southeast Asia.
Professor Cardwell, you parenthetically uttered the phrase, “setting aside the effectiveness or the efficacy of sanctions and the UN” and went on to talk about implementation. I’m always asking about the efficacy because that seems to me to be the most important question. Would you comment on efficacy? I’m talking about deterrence rather than punishment.
Mr. Cardwell: Certainly. The reason I said that phrase, senator, as you quite rightly picked up on, is that it hasn’t been the focus of my research. That means I’m not best placed to comment as to whether the sanctions work, which is, of course, the key question about sanctions. My interest in this came from what EU sanctions tell us about the EU as a foreign policy actor. That’s why I was coming at it from this, which informs my position there. I will leave the question of efficacy — although it’s so important to us — to others who are better able to comment.
What I can say from the research and looking at the way in which sanctions put in place by the EU have evolved — and this also relates to Dr. Braw’s comments about where they are applied — is that we do see a trend that, yes, the EU found it much easier to place sanctions on smaller countries — let’s say smaller countries in Sub-Saharan Africa — than on large and more economically powerful states. All of these things come into the mix in terms of what we expect in the lack of uniformity in approach.
Senator Harder: My questions are very much in the spirit of Senator Woo’s. I’d like to expand and give the opportunity for our witnesses to give their reflection.
I was struck, Professor Cardwell, by your comment that sanctions have become the go-to instrument. I think we’ve seen that. I would posit that some of the reason for it being a go-to instrument is that it’s easily done and it makes it look as though we’re taking a situation seriously. It also is a very easy way of getting geopolitical coordination in the face of an aggressor. I wonder if your research confirms that the reason the European Union has had coordinated sanctions is that it is done in areas in which there is a geopolitical coordination of action as opposed to a human rights concern. Does your research confirms Professor Braw’s concern about the double standard?
Mr. Cardwell: Thank you very much, senator. That is a very good question.
The go-to comment referred in particular to the European Union, but you’re right that sanctions are the go-to the world over. They’re easy to put in place, although they do have a cost. They can have an economic cost as well, particularly if they’re placed on a larger trading partner. This is certainly one of the implications of the sanctions on Russia for Europe and others.
What informs my research is a particular case of the European Union compared to the other acts that we’ve seen in Canada, the U.S. and the U.K. because the EU is not a single actor in the same way. I think what is key here are the actual difficulties the EU experiences. Unlike in other areas of EU law where the EU essentially has the competence, member states cannot legislate in areas relating to, for example, internal markets. The powers — the sovereignty, if you like — has been transferred to the EU. That’s not the case in foreign policy at all, and hence much of the criticism about the EU was that this requirement of unanimity for a position made any one member state able to block a position. In an enlarged EU of 27, this is a potential difficulty.
I think what is surprising and the reason I would hold that the EU has been successful is that getting 27 — well, formerly 28 — members around the table to agree and translate that into the legal process is something that is an achievement. Certainly on Russia, given the importance and given the nervousness there might be in capitals, it shows something that they have managed to do so. I think the go-to has a particular resonance with the European Union context.
Of course, that’s not necessarily always going to be the case. If sanctions were proposed against another country, then it is possible that a member state might try to block it even if it was nothing to do with the issue at hand but because of leverage on some other issue. There are examples of that, too.
I think here, really, it’s a rather different position, but you are absolutely right about the go-to. This is the state that we’re in.
The Chair: We’ve run out of time on that segment, but I’m sure Dr. Braw might want to comment — maybe a little later on.
Senator Coyle: Thank you very much to both of our witnesses today. I have two questions; I’ll put them right out there, and either of you are welcome to answer them.
We’ve been talking about the purpose of sanctions to influence and steer the conduct of a particular country. We’ve been talking a lot about Russia and the illegal and brutal invasion of Ukraine. I’d be curious to hear from either or both of you on the following: As you look at ways to influence and steer the conduct of an offending country, where do you see sanctions like the ones we’re studying here sit in relation to other instruments and other measures? That’s my first question.
Second, in the case of sanctions for offences related to human rights, do either of you have anything to say about the benefits and opportunities for more in-depth cooperation between civil society organizations and government in that realm?
Ms. Braw: Thank you for those questions, senator. Can I just ask a clarification on your second question? Do you mean cooperation between civil society and governments in our own countries or between our governments and civil society in the country that we are concerned about?
Senator Coyle: I mean in the country that we’re concerned about.
Ms. Braw: I’ll start with that question. That’s something that Western governments, as you know, have been trying to do for decades. As the West, especially since the end of the Cold War but before that as well, we have tried to foster democracy and support democracy activists, human rights activists and religious minorities in various unfree countries. It started with things like Radio Free Europe/Radio Liberty, and in more recent years and the past few decades, incredible financial support from private donors and governments in the West for democracy groups in Russia and so forth. That has been done with the best of intentions.
My concern is that if you are the government of a country where Western governments and other donors support groups in your civil society, you won’t take kindly to it and will view it as interference. That is where I think we have inadvertently contributed to a situation where those countries feel they can interfere in our societies because we have interfered in theirs. It’s a deliberate misinterpretation of what we were trying to do. We had the best of intentions, but that’s how it was perceived.
It is really a difficult situation because we do want to support the people who are doing brave and diligent work to improve the human rights situation in their own countries, but if we are seen as interfering, then it will trigger a backlash both against those people, as we have seen with Russia’s foreign agent legislation, and against our own countries. That matters a great deal when the country is a powerful one like Russia or China. Various countries in sub-Saharan Africa, where we have done it over the years, are not in a position to retaliate against us, but Russia and China are.
Your first question was about how the Magnitsky sanctions sit within our foreign policy tools, if I understood correctly.
The Chair: I’m going to intervene and say that we have hit four minutes. However, looking to Senator Coyle, I think she will probably want to pick this up in round two. Am I right?
Senator Coyle: I sure would.
The Chair: We will come back to it.
Senator M. Deacon: Thank you to our witnesses for being here today.
I’m torn between carrying on with what Senator Coyle was doing and building upon Senators Woo’s and McIntyre’s questions. I don’t want this to be repetitive, since it’s similar to something that has been addressed. I am going to try a different tack and address this to Professor Cardwell.
One of the criticisms we continue to read about regarding our sanctions regimes is that we are pretty good and quick to identify a group or an organization but have some ground to make up when it comes to enforcement, which was addressed earlier. I want to use the Wagner mercenary group as an example. We imposed sanctions against them. It could be seen as a bit of a nebulous group composed of any number of individuals, corporations and other private entities. It’s been suggested, without being too much more specific, that our sanctions against Wagner are symbolic. From your perspective, is that a fair assessment? I ask that because the EU and the U.S. have sanctioned the Wagner group as well, and I wonder if those jurisdictions have taken a more targeted approach.
Mr. Cardwell: Thank you. That’s a very good question, and it is, again, one of the key questions about the effects of sanctions, because enforcement is one of the main problems. We also think about the juxtaposition of making a system that’s just and making sure that there’s the ability to challenge but also acting quickly so that things like freezing assets, et cetera, happen quickly so that people aren’t able to move them.
This answer actually builds upon the previous senator’s question, but one of the main issues that underpins all of this is that we know that we can impose sanctions and that we can maintain them, but then what happens? Then we’re faced with a choice of eventually lifting them. The aim is that we lift them because there’s been a change in behaviour, but how often does that happen? We might question that.
We are also faced with the possibility that, due to commercial interests or simply fatigue, we remove the sanctions anyway, which means that the overall impact of them may or may not have been great. Plus — and this is less on the Magnitsky sanctions but more on the countrywide sanctions — it may be hurting the more vulnerable populations rather than the people they were actually targeting.
It’s extremely difficult in that sense, especially when the situation is nebulous. You saying “nebulous” is a great way to describe something like the Wagner group because of the question of who we are actually targeting. Certainly, one of the main issues that we see in trying to constantly update lists and individuals concerned is the way in which we’re not necessarily talking about tangible assets but assets that are moving about rather than on, say, travel bans that are perhaps slightly more easily put in place.
The Chair: One minute for Dr. Braw.
Ms. Braw: I thought the question was directed to Professor Cardwell. If you’d like me to add something, I’m happy to. In that case, I will follow up quickly on the previous discussion, which is where the Magnitsky sanctions sit within the hierarchy of foreign policy and sanctions.
The dilemma is that they are not supposed to sit anywhere; they’re supposed to be imposed for the sake of the human rights of the people in those countries. They’re not supposed to be a foreign policy tool. However, to date, the ones that have been imposed give the impression of having been imposed as a foreign policy tool, maybe apart from the case of some sanctions imposed in Bangladesh. But by and large, they have been accompanying foreign policy objectives of the countries imposing the sanctions.
I know your minute is up, senator, and I know you asked a slightly different question to Professor Cardwell, but I hope that helps.
[Translation]
Senator Gerba: My first question is for Professor Braw.
I would like to come back to your article, titled “Freeze—Don’t Seize—Russian Assets.” You argue that preliminary investigations should be carried out before confiscating assets and that these investigations would ensure that the owners of the assets in question are indeed involved in criminal acts.
Could you explain how this is currently done? What is the process for confiscating assets? Are these procedures adequate or inadequate? How can this be addressed?
[English]
Ms. Braw: Thank you, senator.
At the moment, and indeed in the past, the way it works is that if you impose sanctions on a particular person or company, if that person or company has assets, whether it be money or fiscal assets in your country, you can freeze them. The objective is to, first of all, make life uncomfortable for those individuals and companies so that they will be minded to influence their friends in the government to change its policy. It’s also to stop money going into whatever the hostile activity is that you’re seeking to end, or at least limit. Those assets remain frozen until the sanctions are lifted, and then they belong to that person or the company again.
The proposals that are being made now are that instead of just holding those assets until the hostile activity has ended, Western governments should simply take the money and use it for the reconstruction of Ukraine. I can see the point of that argument because Western taxpayers shouldn’t have to pay for the reconstruction of Ukraine.
It remains fundamental to our liberal democracies that the rule of law applies to everybody. I think that the way forward, if you want to seize some of those assets, is to conduct thorough investigations to try to determine, in as many cases as possible, whether those funds are linked to criminal behaviour. In those cases, we can seize the assets, just as the government in Canada and elsewhere seizes assets when ordinary citizens in our countries are involved in illegal behaviour.
Senator Richards: I’ve asked this question of other witnesses, and I don’t know if there is any real answer at the moment, but is there any way to know how these strictures damage or hurt the ordinary populations? If so, how can we tell that? These could be placed on the backs of the innocent, and we have had these sanctions in place in Russia for a while now. There seems to be little rule of law in Russia except the rule of oppression. I wonder if there is any way to understand how this is hurting the ordinary population. I’m sure it’s not helping them.
Mr. Cardwell: It’s something that’s been discussed by all kinds of policy-makers and scholars going back many years. Of course, there was the move to smart sanctions, which was supposed to avoid exactly that problem of hurting the population.
I think one of the issues that I referred to earlier was about when sanctions are in place, and particularly over a long time for the country, then there is an adaptation. Of course, if we look simply at levels of wealth in a country, we know that if you have more money, then you are able to get around things, and if goods become more expensive because of the sanctions, then it is the less well off in society who suffer the most. Obviously, this doesn’t apply to all sanctions that are placed. Things like travel bans and so on can be targeted more effectively to individuals, but obviously, with trade and economic sanctions, we definitely see that it’s almost inevitable that the negative consequences will be felt by those who are the least responsible for the policy of the government.
Senator Richards: Thank you. My only comment about that is that I don’t think we’re going to have a change in philosophy from Mr. Putin until we have a change in government there, and I don’t think that’s going to happen simply through sanctions. I guess I’m just making a comment.
Ms. Braw: I’ll make a quick observation about your question, senator. Your question was about sanctions more generally, but I think what will be really interesting, and indeed crucial, is to find out, as the Magnitsky sanctions continue to make their way through the countries whose behaviour we are trying to change, whether it will, first of all, change the behaviour of those officials for the better. Let’s see what happens.
I think there is the risk that for ordinary citizens in those countries, instead of getting a more liberal society, there will, in fact, be more oppression because the people who are sanctioned will retaliate against our countries, perhaps, but also against ordinary citizens in their own country. They won’t change their philosophy simply because they’ve been sanctioned. They may simply become even more brutal. I think this is where some really important work needs to be done on the ground in those countries, as difficult as it is to get to the ground and speak to ordinary people.
Senator Richards: Thank you very much.
Senator Woo: I want to ask about the nuclear weapon of sanctions that has recently emerged, which is to use the financial system as a tool of sanctioning countries, including seizing central bank assets. I think of Afghanistan — Russia, of course, but Afghanistan before Russia — essentially, subjecting all transactions in U.S. dollars that have to be cleared through the United States to one form of sanction and another. Could you comment on the extent to which this nuclear weapon in sanctions is consistent with the rule of law? Perhaps our colleague from the EU can comment on whether the EU sees this as a tool to be also adopted by the European Union and what the prospects are for a further escalation of these kinds of sanctions.
Mr. Cardwell: Thank you very much. It’s a very good question for which I don’t have a very good answer, I’m afraid. Given the range of sanctions that we’ve seen applied, given that we do have the new 2020 regulation as well, I don’t think anything is excluded from doing this. Obviously, it’s a very serious step to do so, and of course, we’re not privy to the discussions that take place between the member states, for obvious reasons. Unfortunately, I can’t give a better answer than that. I’m sorry.
Ms. Braw: I’m happy to come in on that question, senator, which is a really crucial one, especially as the world moves away from the undisputed supremacy of the dollar towards a greater Chinese financial power in the world with more commercial transactions being carried out in the Chinese currency, whatever name one wants to use for it.
The reason the U.S. has been able to sanction companies in the past as a tool for foreign policy has been that almost all companies in the Western world — and, indeed, beyond the Western world — conduct their financial and commercial transactions in dollars. For example, in 1982, when West Germany and the Soviet Union wanted to build a pipeline and various European companies were contracted to build that pipeline, Ronald Regan imposed sanctions on those companies simply because he didn’t like the idea of this pipeline from the Soviet Union to West Germany. We saw the same thing happen with Nord Stream.
People can make the argument that it’s legitimate for the U.S. to sanction companies when such companies are involved in activities that, while not illegal, are detrimental to U.S. interests, but it only works when the U.S. is the absolute predominant power in the world of commercial transaction and finance and when the dollar rules uncontested. That is not going to be the case for much longer. We will see many more transactions being carried out in alternative currencies, including that of China. That’s when U.S. companies will face the prospect of China imposing similar sanctions without there being any illegal behaviour but simply as a foreign policy tool. That’s something that policy-makers in the U.S. should take to heart. The days of being able to conduct foreign policy through sanctions on companies that haven’t violated any laws won’t last for much longer.
Senator Coyle: I know that Professor Braw started to answer my second question, but I would like to put it back out there.
I will quote you again when you spoke about sanctions being in place to influence and steer the conduct of an offending country around human rights abuses, and that could be in their own country, abusing their own citizens, but in the case of Russia, we are also seeing that they’re abusing the rights of the citizens of their neighbour.
I want to hear from both of you. Where we have sanctions, we’re trying to look at how effective they are. That’s one of the big questions we’re looking at. When we look at the effectiveness of these and other measures or instruments that the international community can take to try to influence and steer the conduct of an offending country, where do you see sanctions in a hierarchy, if you like, or a plethora of instruments that could be used to actually influence those kinds of changes we want to see so that human rights are respected?
Ms. Braw: Globalization was supposed to take care of all of this — the idea of change through trade. That’s why we admitted China to the World Trade Organization. We thought if we embraced them, they will become more like us. That was clearly not the case. It wasn’t the case with Russia either. But we thought we would try the carrot approach and then the stick approach after, which is sanctions. We’re seeing an increasing use of sanctions because the warm embrace of capitalism didn’t work.
The dilemma of where we are now is that if we use sanctions as a tool to try to steer the conduct of another country, how long is the time period after which we measure whether those sanctions have been successful? Is it one year or ten years?
Also, what are the factors we are trying to measure? Are we measuring the thinking of the decision makers in those countries? Do we want them to say, “Well, I suppose that was wrong, and we will try to change our behaviour,” or is it, for example, ending the war in the case of Russia? Is it ending human rights violations?
Then on top of that is the dilemma that human rights are an absolute good and that we shouldn’t impose sanctions just in certain cases. If we are concerned about human rights, we should impose sanctions wherever those rights are violated.
Again, with Magnitsky sanctions, the question is this: How do we measure the success? Is it in the thinking of the leaders or individuals whom we have sanctioned? How do we collect the evidence of success, and after how long a period of time?
[Translation]
Senator Gerba: I will continue with Professor Braw, with whom I completely agree. I share your opinion: We need to look at sanctions, but also at the repercussions of such sanctions in the daily lives of the populace and in the daily lives of the companies that do business in countries that are sanctioned.
So I wanted to come back to the preliminary investigations that you suggest should take place before confiscating or seizing assets. You expressed a concern that the absence of such investigations would expose companies to retaliation. Have you witnessed this kind of retaliation, and what would you suggest we do in such cases?
[English]
Ms. Braw: Thank you, senator. It’s the act of seizing frozen assets that I was referring to and the need for proper investigations.
We haven’t seen countries seize frozen assets yet, although I’m aware that Canada has been floating such proposals as well. The moment countries begin to seize frozen assets, which I think would be unadvisable, is when we would have to be very concerned about the effects on our own companies and, indeed, individuals operating and living internationally, including in countries with imperfect rule of law.
Estonia is apparently working on a proposal for what it says is a legal path from freezing to seizing. I will be very curious how they square that circle of seizing assets without identifying criminal activity linked to those assets. If that does happen and if Western countries do begin to seize frozen assets, we will need to keep a very close eye open and ear to the ground to see how it affects our own companies. Indeed, we’ll have to conduct some very serious self-examination about what it means for Western countries as beacons of rule of law.
The Chair: Thank you. We have a minute left. Perhaps we could ask Professor Cardwell to finish off this segment.
[Translation]
Mr. Cardwell: Thank you. If you don’t mind, I will respond in French.
I agree with Professor Braw on these issues. I believe that this is rather dangerous — I am also thinking of Estonia, the example mentioned by Professor Braw — because it can also cause problems within the European Union’s sanctions regime.
Finally, in terms of the freezing process, there is in fact a balance to be struck between the need to act swiftly — because the transfer of money can be done quite quickly and easily —, and the rule of law, the option or the possibility for individuals to file a complaint, to use the justice system to overcome the challenge created by these sanctions.
[English]
The Chair: Thank you very much.
We’ve reached the end of our time in this meeting, so on behalf of the committee, I would like to thank Dr. Braw and Professor Cardwell for their interesting testimony today. It’s always great to get some expertise that is “offshore,” and this will help us very much in our continuing review. Thank you very much for joining us.
Colleagues, we will now proceed in camera.
(The committee continued in camera.)
(The committee resumed in public.)
The Chair: Senators, is it agreed that the budget application for travel to Europe, London, Oslo and Berlin for a fact-finding mission for the fiscal year ending March 31, 2024, be approved for submission to the Standing Committee on Internal Economy, Budgets and Administration?
Hon. Senators: Agreed.
The Chair: Thank you, senators. This budget will now be submitted to the Committee on Internal Economy, Budgets and Administration to be reviewed by the Subcommittee on Senate Estimates and Committee Budgets at their next meeting.
Colleagues, we’ll reconvene next Wednesday at 4 p.m. to hear from witnesses to mark International Development Week. If there are no other items, colleagues, we will adjourn this meeting. Thank you.
(The committee adjourned.)