On February 5, 2016, Canada announced amendments to its two statutory regimes restricting or prohibiting trade with Iran. These amendments lift the broad economic sanctions imposed against Iran in response Iran's nuclear activities, as described in detail below.
Background to the Amendments
On July 14, 2015 five permanent members of the UN Security Council plus Germany and the European Union concluded the Joint Comprehensive Plan of Action ("JCPOA") with Iran on its nuclear program.
On January 16, 2016, as a result of Iran meeting the nuclear commitments necessary to start the implementation of JCPOA ("Implementation Day"), the United States and the EU lifted nuclear-related sanctions on Iran under the terms of the JCPOA. The Implementation Day also triggered the UN Security Council to terminate its existing resolutions imposing sanctions on Iran's nuclear proliferation activities. The UN still imposes and maintains sanctions related to Iran's proliferation-sensitive nuclear activities, but has removed twenty individuals and seventeen entities from the UN Security Council's Consolidated List of Individuals and Entities.
JCPOA Impact on Canada's Regime
To give effect to these UN Security Council mandated changes, Canada amended the Regulations Implementing the United Nations Resolutions on Iran under the United Nations Act.
Canada also amended its autonomously imposed sanctions on Iran under the Special Economic Measures (Iran) Regulations ("Regulations"). In making these amendments, Canada claims that it is acting consistently with the EU's own autonomous sanctions relief, and further claims these amendments better position Canadian businesses to compete globally.
The key changes to Canada's autonomous sanctions against Iran include:
1. Prohibitions of Transactions with "Listed Persons"
Schedule 1 to the Regulations lists persons or entities − previously named "designated persons", now called "listed persons" − with whom it is prohibited for any person in Canada and any Canadian outside of Canada to either deal in any property held or controlled by a listed person or facilitate any transaction related to, or provide any financial service in respect of, this dealing. The Regulations further prohibit making goods available, or providing financial services, to such persons.
The amendments change the language of the prohibitions regarding listed persons and raises serious questions of their scope. For example, the previous wording of section 3 prohibited the provision of any "financial or financial-related service […] for the benefit of a designated person". The new wording prohibits the provision of "any financial or related service […] to a person acting for the benefit of a listed person" (emphasis added).
Canada has also modified the actual "listed persons" contained in Schedule 1 to the Regulations. The number of "listed persons" has been significantly reduced, with approximately 66% of the individuals or entities previously on the prohibition list removed, and six individuals and one entity directly linked to Iran's ballistics program added.
2. Trade Embargo Lifted
Previously, the Regulations imposed a comprehensive prohibition on trade with Iran, and the provision or acquisition of financial services involving Iran, subject to a limited number of exceptions. There was also a prohibition on investing in entities in Iran. Canada imposed a trade embargo on a list of 80 goods and technology, contained in Schedule 2 to the Regulations, that Canada considered contributed to Iran's nuclear proliferation activities.
While the embargos have essentially been lifted, trade sanctions still apply to Schedule 2 goods and technology. But the number of sanctioned items has been reduced by approximately 50%. For these remaining items, the Regulations prohibit their sale to any person for the purpose of a business carried on in Iran. The Regulations also prohibit the transfer of any technical data related to these Schedule 2 goods and technology.
Concurrent with the amendments to Canada's sanctions regime, the Government issued a Notice to Exporters indicating that items previously sanctioned falling within Canada's Export Control List will require a permit prior to any authorized export. Canada has indicated that all applications for export permits will be considered on a case-by-case basis but permits to export the most sensitive items on the Export Control List will likely be denied. For example, Canada notes that it will likely deny a permit for all items on Canada's Nuclear Non-Proliferation List.
The Government continues to emphasize caution in doing business in Iran. It considers Iran a state-sponsor of terror. Canada will maintain strict export controls to Iran of goods and technologies considered "sensitive" from a national and international security perspective. While there are significant changes to Canada's sanctions regime as it applies to Iran, sanctions still exist and their violation could result in criminal liability. Accordingly, those seeking to take advantage of new business opportunities in Iran should do so cautiously and with a full understanding of what Canada's sanctions regime not only permits but prohibits.
The authors wish to thank Cynthia Wallace for her assistance in the present publication.