Economic sanctions and de-listing applications in Canada

Recent events and developments in international affairs have brought increased focus on economic sanctions as an area of law requiring careful consideration for businesses operating in Canada. The relative dearth of caselaw considering and interpreting the provisions of the Special Economic Measures Act (“SEMA”) and its various regulations has left businesses grasping for straws as they endeavour to understand their obligations under this complex legal regime and the most recent reported cases.

The latest court decision interpreting SEMA, Mobile Telesystems Public Joint Stock Company v. Canada (Attorney General), (the “MTS Decision”), provides some interesting insights as to the process available for contesting government decisions to include a person or entity on a sanctioned parties list, and more generally on the decision-making process at the government level for sanctions-related decisions.

The facts

The applicant, Mobile TeleSystems (“MTS”) is Russia’s largest civil telecommunications operator. It was listed as a designated sanctioned entity in Schedule 1 to the Special Economic Measures Act (Russia) Regulations (“SEMA Russia Regulations”) on July 19, 2023, by the Governor in Council under the authority of section 2 of the regulations. MTS sought to challenge its listing by way of an application for judicial review, asserting that such a listing was unfair, unreasonable, and ultra vires.

The Attorney General filed a motion to strike MTS’ notice of application. This motion was granted by the case management judge on the grounds that an adequate alternative remedy exists in the form of the application for de-listing provided for under section 8 of the SEMA Russia Regulations, and therefore the application for judicial for review was bereft of any chance of success.

MTS appealed this case management decision on three main grounds:

• the affidavit from its external counsel filed in support of the application which was struck from the record as “replete with opinion, argument, and irrelevant information”, was admissible and should have been considered by the case management judge;
• the case management judge should have applied the framework established in Strickland to determine whether judicial review was available to MTS as an adequate remedy; and
• the remedy under section 8 of the SEMA Russia Regulations amounts to a reconsideration of the listing decision and is therefore insufficient.

The Court found none of these grounds to be persuasive and dismissed MTS’ appeal. The Court further commented on the essential character of the dispute, namely for MTS to have its name removed from Schedule 1 of the SEMA Russia Regulations, and noted that a section 8 application was the only correct procedural avenue for MTS in this case. This remedy must be exhausted before judicial review may be contemplated.

Key takeaways

Although on the surface, the MTS Decision appears to deal chiefly with procedural issues, it nonetheless offers some interesting takeaways from a sanctions law perspective.

• The recourse set out in section 8 of the SEMA Russia Regulations is the appropriate procedural route for persons and entities seeking to challenge a listing decision. This mandatory process may not be bypassed by way of an application in judicial review. The delays inherent to a section 8 application do not make it an inadequate remedy.
• Listing decisions under the authority of section 2 of the SEMA Russia Regulations are unilateral decisions made by the Governor in Council, without notice or an opportunity to respond. As noted in the recent Makarov case, these are highly discretionary decisions which courts will show the widest of deference towards. In contrast, section 8 provides for due process and allows a party to submit evidence and information in support of its position.
• Before applying for a section 8 remedy, a party seeking de-listing should carefully review the reasons provided by Global Affairs, and request any additional relevant information so as to be able to properly support its application. The overall process leading to the decision should also be reviewed in detail, as defects in procedural fairness at the listing stage may be raised as part of a section 8 application.

The MTS Decision is part of a small but growing body of Canadian caselaw dealing with SEMA and matters relating to economic sanctions. As economic sanctions continue to be leveraged by Global Affairs as a means to advance Canada’s foreign policy interests, we can expect more such decisions.