The First WTO Appeal Arbitration is Initiated, Although Not Directly Under the MPIA

On 28 April 2022, Turkey notified the WTO Members that is was appealing the report of the panel in the Turkey – Pharmaceutical Products dispute (DS583) using the arbitration procedures under Article 25 of the Dispute Settlement Understanding (DSU). Although similar in procedure, this appeal was not initiated under the recently established Multi-Party Interim Appeal Arbitration Arrangement (MPIA).

The MPIA was established on 30 April 2020 between 19 Members, including Australia, Brazil, Canada, China, Chile, Colombia, Costa Rica, the European Union, Guatemala, Hong Kong (China), Iceland, Mexico, New Zealand, Norway, Pakistan, Singapore, Switzerland, Ukraine, and Uruguay. Subsequently, Ecuador, Nicaragua, Benin, Montenegro, Macao (China), and Peru also joined the MPIA (see JOB/DSB/1/Add.12 and its seven supplements). The MPIA establishes a framework for appeal arbitration procedures on the basis of Article 25 of the DSU, which provides for “resort to arbitration” by mutual agreement of the disputing parties “as an alternative means of dispute settlement”.

While Turkey has not formally joined the MPIA, it agreed with the EU on a similar appeal arbitration arrangement under Article 25 of the DSU for the purposes of this dispute (WT/DS583/10) (and also for another dispute between the EU and Turkey, European Union – Safeguard Measures on Certain Steel Products (DS595) (WT/DS595/10). The agreed arbitration procedures are very similar to those in the MPIA, although they have been adjusted to reflect the circumstances of each dispute.

This is the first appeal to get underway using an alternative appeal arbitration mechanism under Article 25 of the DSU. The panel proceeding that led to the report was first suspended in December 2021 and, pursuant to the arbitration agreement between Turkey and the European Union, it will remain suspended indefinitely. The panel report has not been formally “circulated” to the WTO Members (the normal procedural step) and, instead, was attached to the notification of appeal and made public in that alternative manner.

As is the case in the MPIA, paragraph 16 of the agreed procedures provides that the “parties agree to abide by the arbitration award, which shall be final”, and that the award shall be notified to the DSB (pursuant to Article 25.3 of the DSU), but not adopted. Also, as with the MPIA, paragraph 17 provides that, pursuant to Article 25.4 of the DSU, the compliance requirements and procedures under Articles 21 and 22 of the DSU will apply the arbitration award.  This means that even though the arbitration award and the panel report will not be formally adopted, prompt compliance with any recommendations or rulings in the award will be required, and the enforcement tools of compliance proceedings under Article 21.5 of the DSU and/or countermeasures authorized under Article 22 of the DSU will be available.

In contrast to the initiation of an appeal arbitration process in Turkey – Pharmaceutical Products, neither Turkey nor the EU decided to file a Notice of Appeal in European Union – Safeguard Measures on Certain Steel Products. Although the Panel’s work was suspended by agreement of the parties to accommodate the possibility, the agreed procedures provided that the Panel would resume its work if neither party took steps to initiate an appeal arbitration process by 25 April 2022. Neither party filed a Notice of Appeal, so the Panel resumed its work and issued its report on 29 April 2022.

Tereposky & DeRose LLP regularly provides advice and acts as counsel in international trade disputes, including WTO dispute settlement proceedings. If you have any questions about the foregoing subject, please do not hesitate to contact us.

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

Canada’s Sanctions Against Russia Undergo Further Expansion

On April 19, 2022, Canada further amended the Special Economic Measures (Russia) Regulations to list an additional 14 individuals, including President Putin’s alleged daughters, Katerina Vladimirovna Tikhonova and Maria Vladimirovna Vorontsova. This takes the number of “designated persons” under the Regulations up to a total of 743. According to Global Affairs Canada, additions to the list of designated persons schedule are “close associates of the Russian regime, including Russian oligarchs and their family members, who were sanctioned for their complicity in Russia’s unjustifiable invasion of Ukraine.”

By way of summary of the current prohibitions, Canada has according to Global Affairs Canada imposed sanctions related to Russia under the under the Special Economic Measures Act in order to “respond to the gravity of Russia’s violation of the sovereignty and territorial integrity of Ukraine, and grave human rights violations that have been committed in Russia.”

The Special Economic Measures (Russia) Regulations (“the Regulations”) first came into force on March 17, 2014, in relation to activity related to Crimea. The Regulations have undergone a flurry of recent amendments relating to Russia’s invasion into Ukraine, namely on March 19, March 21, April 28, May 4, May 12, June 21, July 24, August 6, September 16, December 19, 2014, February 17 and June 29, 2015, March 18, 2016, March 4 and 15, 2019, March 21 and 29, 2021, February 24 and 28, March 4, 6, 10, 14, 23, and 24, April 5, 8, and 19 2022.

The Regulations impose an asset freeze and dealings prohibition on “designated persons” which include individuals and entities. It is prohibited for any person in Canada and any Canadian outside Canada to:

  • deal in any property, wherever situated, held by or on behalf of a designated person whose name is listed in Schedule 1
  • enter into or facilitate, directly or indirectly, any transaction related to such a dealing
  • provide any financial or other related services in respect of such a dealing
  • make any goods, wherever situated, available to a designated person listed in Schedule 1
  • provide any financial or related service to, or for the benefit of, a designated person listed in Schedule 1

The individuals listed in Part 1.1 of Schedule 1 to the Regulations are also barred by Canada under the Immigration and Refugee Protection Act.

The Regulations also:

  • impose restrictions on a number of specific sectors, including the financial and energy sectors
  • prohibit any person in Canada and Canadians abroad from dealing in new debt of longer than 30 days maturity in relation to persons listed in Schedule 2-, or 90-days maturity in relation to persons listed in Schedule 3
  • prohibit any person in Canada or Canadians abroad from dealing in new securities in relation to persons listed in Schedule 2
  • prohibit any ship that is registered in Russia or used, leased, or chartered, in whole or in part, by or on behalf of or for the benefit of Russia, a person in Russia or a designated person from docking in Canada or passing through Canadian waters
  • prohibit the export, sale, supply, or shipping of goods listed in Schedule 4, to Russia or to any person in Russia for their use in offshore oil (depth greater than 500m), shale oil or Arctic oil exploration and production. This includes a ban on the provision of any financial, technical, or other services
  • prohibit the import, purchase, or acquisition by any person in Canada and any Canadian outside Canada, of specific petroleum products listed in Schedule 5, from Russia or from any person in Russia
  • prohibit any person in Canada and any Canadian outside Canada from exporting, selling, supplying or shipping any good, wherever situated, or to provide any technology, to Russia or to any person in Russia, if it is described in the Restricted Goods and Technologies List
  • prohibit individuals and entities in Canada from providing any and all insurance, reinsurance, and underwriting services for aircraft, and aviation and aerospace products either owned by, controlled by, registered to, chartered by, or operated by entities and individuals resident, incorporated, or domiciled in Russia.
  • prohibit “causing, assisting or promoting prohibited activities”

The Regulations provide a review mechanism to remove names from the “designated person” Schedule through an Application to the Minister of Global Affairs Canada. Under that Application mechanism, the Minister is required to provide a written decision within 90 days.

As well, the Regulations provide exceptions to the asset freeze and dealings prohibition on “designated persons.” Those include:

  • payments made by or on behalf of designated persons pursuant to contracts entered into prior to the coming into force of the Regulations, provided that the payments are not made to or for the benefit of a designated person
  • pension payments to any person in Canada or any Canadian outside Canada
  • transactions in respect of accounts at financial institutions held by diplomatic missions, provided that the transaction is required in order for the mission to fulfill its diplomatic functions under the Vienna Convention on Diplomatic Relations, or transactions required in order to maintain the mission premises if the diplomatic mission has been temporarily or permanently recalled
  • transactions by international organizations with diplomatic status, agencies of the United Nations, the International Red Cross and Red Crescent Movement, or Canadian non-governmental organizations that have entered into a grant or contribution agreement with Foreign Affairs, Trade and Development Canada
  • transactions necessary for a Canadian to transfer to a non-designated person any accounts, funds, or investments of a Canadian held by a designated person on the day on which that person became designated
  • financial services required in order for a designated person to obtain legal services in Canada with respect to the application to the Minister of Foreign Affairs of any of the prohibitions in the Regulations
  • loan repayments made to any person in Canada or any Canadian abroad in respect of loans entered into before the coming into force of the Regulations, enforcement of security in respect of those loans, or payments by guarantors guaranteeing those loans

It is also worth note that the Special Economic Measures (Russia) Permit Authorization Order, made pursuant to subsection 4(4) of the Special Economic Measures Act, authorizes the Minister of Foreign Affairs to issue to any person in Canada or any Canadian outside Canada a permit to carry out a specified activity or transaction, or any class of activity or transaction, that is otherwise restricted/prohibited.

Our team will continue to monitor the sanctions measures related to Russia, Belarus, and Ukraine, providing updates that may impact Canadian business operations. The lawyers at Tereposky & DeRose LLP have significant experience in assisting clients with navigating the parameters of sanctions as well as the design and implementation of sanctions-related compliance programs, including policies, procedures, employee training, and internal control mechanisms. They also regularly assist both Canadian and international businesses, financial institutions, and individuals with internal investigations when “red flags” appear and provide advice on compliance in these areas. Where breaches have occurred, they have worked closely with their clients in making voluntary disclosures and in engaging with the ensuing investigations conducted by the RCMP and Global Affairs Canada.  We also regularly assist clients with the application for delisting process as well as applications for exemption permits.

Jennifer Radford
613.237.9777
jradford@tradeisds.com

Vince DeRose
613.237.8862
vderose@tradeisds.com

Canada Targets Russian Defence Sector in New Round of Sanctions

On April 8, 2022, Canada further amended the Special Economic Measures (Russia) Regulations to list an additional 33 entities that it has identified in Russia’s defence sector.

In a related News Release, the Honourable Mélanie Joly, Minister of Foreign Affairs, announced that Canada is adding these entities to the designated list under the Regulations on the grounds that they “have provided indirect or direct support to the Russian military and are therefore complicit in the pain and suffering stemming from Vladimir Putin’s senseless war in Ukraine.”

These measures result in the Regulations assets freezes and prohibitions now being applicable to these additional 33 entities.  Since February 24, 2022, Canada has rapidly imposed sanctions upon over 700 individuals and entities from Russia, Ukraine, and Belarus.

Our team will continue to monitor the sanctions measures related to Russia, Belarus, and Ukraine, providing updates that may impact Canadian business operations. The lawyers at Tereposky & DeRose LLP have significant experience in assisting clients with navigating the parameters of sanctions as well as the design and implementation of sanctions-related compliance programs, including policies, procedures, employee training, and internal control mechanisms. They also regularly assist both Canadian and international businesses, financial institutions, and individuals with internal investigations when “red flags” appear and provide advice on compliance in these areas. Where breaches have occurred, they have worked closely with their clients in making voluntary disclosures and in engaging with the ensuing investigations conducted by the RCMP and Global Affairs Canada.

Jennifer Radford
613.237.9777
jradford@tradeisds.com

Vince DeRose
613.237.8862
vderose@tradeisds.com

Canada Expands Sanctions Targeting Russia

On April 5, 2022, Canada further amended the Special Economic Measures (Russia) Regulations to prohibit the provision of all insurance, reinsurance, and underwriting services for aircraft, aviation and aerospace products either owned by, controlled by, registered to, chartered by, or operated by entities and individuals resident, incorporated, or domiciled in Russia. This amendment also listed an additional nine individuals as designated persons.

In a background News Release on April 4, 2022, Global Affairs Canada announced the new round of sanctions justification as follows:

“What the world witnessed this weekend in Bucha is abhorrent. Canada will not stand by as the senseless murder of innocent civilians by Russian forces in Ukraine continues. We will not spare any effort to ensure that violations of international law in Ukraine are investigated and that perpetrators are held to account. Canada continues to work with its international partners to uphold the rules-based international order and push for a full investigation into the reports of war crimes in Bucha and elsewhere in Ukraine, including by the International Criminal Court (ICC).”

Our team will continue to monitor the sanctions measures related to Russia, Belarus, and Ukraine, providing updates that may impact Canadian business operations. The lawyers at Tereposky & DeRose LLP have significant experience in assisting clients with navigating the parameters of sanctions as well as the design and implementation of sanctions-related compliance programs, including policies, procedures, employee training, and internal control mechanisms. They also regularly assist both Canadian and international businesses, financial institutions, and individuals with internal investigations when “red flags” appear and provide advice on compliance in these areas. Where breaches have occurred, they have worked closely with their clients in making voluntary disclosures and in engaging with the ensuing investigations conducted by the RCMP and Global Affairs Canada.

Jennifer Radford
613.237.9777
jradford@tradeisds.com

Vince DeRose
613.237.8862
vderose@tradeisds.com