Written By Jessica B. Horwitz
On Friday, March 15, 2019, the Government of Canada amended its Russia economic sanctions regulations to add a number of new individuals and entities to the restricted party list. See Regulations Amending the Special Economic Measures (Russia) Regulations (SOR/2019-71).
Canadian businesses should carefully review the list of new designations and assess whether they include any current or prospective business partners.
The Canadian Government's Regulatory Impact Analysis Statement explaining the policy rationale behind the new designations will be published in next week's edition of the Canada Gazette, along with the official amending regulations. However, it is likely that the designations are in response to an escalation of tensions over a November 2018 incident in which the Russian coast guard fired on and captured three Ukrainian navy vessels in the Kerch Strait between the Black Sea and the Sea of Azov on Crimea's eastern peninsula.
Most of the new designations are to Schedule 1, which is the most restrictive of the schedules under the Special Economic Measures (Russia) Regulations (SOR/2014-58, as amended, and again amended) (Russia Regulations). The designations include a number of high-ranking Russian businesspeople, including Andrei Akimov, Chairman of Gazprombank, Igor Sechin, Chairman and CEO of Rosneft, and Andrey Kostin, President and Chairman of VTB Bank.
Gazprombank, VTB Bank and Rosneft remain listed on Schedule 2, Schedule 2, and Schedule 3 of the Russia Regulations, respectively, and are subject to more limited restrictions than their chairmen. Schedule 2 entities are subject to a restriction on equity financing and debt financing with a maturity of greater than 30 days, and Schedule 3 entities are subject to a restriction on debt financing with a maturity of greater than 90 days.
While the designation of individual directors of a company does not necessarily impair ability to do business with the broader corporate entity, businesses should be cautious to not have any contact with designated individuals in the course of otherwise permissible business with the corporation they represent. For example, in 2017, the U.S. Office of Foreign Assets Control issued a USD $2 million penalty to ExxonMobil Corp. for entering into eight legal documents with Rosneft that were countersigned by Sechin, who is a U.S. Specially Designated National, in his capacity as CEO. Although there have not been equivalent enforcement cases in Canada, it is prudent to assume that Canadian authorities could take a similar approach.
The new designations are as follows:
Schedule 1 Individuals:
- Andrey (Andrei) Igorevich AKIMOV (born on September 22, 1953)
- Andrey (Andrei) Vladimirovich CHEREZOV (born on October 12, 1967)
- Alexey (Alexei, Aleksei) Gennadyevich DYUMIN (born on August 28, 1972)
- Sergey (Sergei) Aleksandrovich FURSENKO (born on March 11, 1954)
- Oleg Markovich GOVORUN (born on January 15, 1969)
- Evgeny (Yevgeny, Yevgeni, Evgeni, Evgeniy) Petrovich GRABCHAK (born on July 18, 1981)
- Konstantin Iosifovich KOSACHEV (born on September 17, 1962)
- Andrey (Andrei) Leonidovich KOSTIN (born on September 21, 1956)
- Igor Arkadyevich ROTENBERG (born on May 9, 1973)
- Igor Ivanovich SECHIN (born on September 7, 1960)
- Vladimir Vasilyevich USTINOV (born on February 25, 1953)
- Timur Samirovich VALIULIN (born on December 20, 1962)
- Vladimir Ivanovich YAKUNIN (born on June 30, 1948)
- Aleksandr (Alexander) Aleksandrovich (Alexandrovich) ZHAROV (born on August 11, 1964)
- Viktor Vasiliyevich ZOLOTOV (born on January 27, 1954)
- Gennady (Gennadiy) Nikolayevich (Nikolaevich) MEDVEDEV (born on September 14, 1959)
- Sergey (Sergei) Nikolayevich (Nikolaevich) STANKEVICH (born on January 27, 1963)
- Andrey (Andrei) Borisovich SHEIN (born on June 10, 1971)
- Aleksey (Aleksei, Oleksii) Mikhailovich SALYAEV (SALYAYEV, SALIAIEV) (born on December 4, 1975)
- Andrey (Andrei, Andrii) Olegovich SHIPITSYN (born on December 25, 1969)
- Ruslan Aleksandrovich ROMASHKIN (born on June 15, 1976)
- Sergey (Sergei, Serhii) Alekseyevich SHCHERBAKOV (SHERBAKOV)
- Vladimir Vladimirovich YERYGIN (ERYGIN) (born on November 25, 1955)
- Aleksandr (Alexander) Vladimirovich DVORNIKOV (born on August 22, 1961)
- Andrey (Andrei) Vyacheslavovich YUDIN (born on April 2, 1962)
Schedule 1 Entities:
- AO Institute Giprostroymost – Saint-Petersburg
- PJSC Mostotrest
- Stroygazmontazh Most OOO
- CJSC Interavtomatika (also known as ZAO Interavtomatika (IA))
- LLC Foreign Economic Association Technopromexport
- PJSC Power Machines
- Oboronlogistika OOO
- Sukhoi Aviation JSC
- JSC Russian Aircraft Corporation MiG
- Tupolev CJSC (also known as PJSC Tupolev)
- Stroygazmontazh LLC
- Ugolnye Tekhnologii OOO
- Gaz-Alyans OOO (also known as Gas Alliance)
Schedule 2 Entities:
- JSC United Aircraft Corporation*
* Note that JSC United Aircraft Corporation, previously listed on Schedule 1, has been shifted to Schedule 2, reflecting a reduction in the level of sanctions against that entity.
Another set of amending regulations entered into force earlier this month that updated and clarified the wording of various provisions in a number of Special Economic Measures Act regulations, including the Russia Regulations. .
Canadians who have business or other contact with entities designated under the Russia Regulations or any other Canadian sanctions lists should immediately contact legal counsel to determine their compliance obligations.