Vol. 151, No. 20 — October 4, 2017

Registration
SOR/2017-204 September 22, 2017

SPECIAL ECONOMIC MEASURES ACT

Special Economic Measures (Venezuela) Regulations

P.C. 2017-1196 September 22, 2017

His Excellency the Governor General in Council, on the recommendation of the Minister of Foreign Affairs, pursuant to subsections 4(1) to (3) of the Special Economic Measures Act (see footnote a), makes the annexed Special Economic Measures (Venezuela) Regulations for the purpose of implementing the decision of the Association Concerning the Situation in Venezuela made on September 5, 2017.

Special Economic Measures (Venezuela) Regulations

Interpretation

Definitions

1 The following definitions apply in these Regulations.

Minister means the Minister of Foreign Affairs. (ministre)

Venezuela means the Bolivarian Republic of Venezuela and includes

List

Listed person

2 A person whose name is listed in the schedule is a person who is in Venezuela, or is a national of Venezuela who does not ordinarily reside in Canada, and in respect of whom the Governor in Council, on the recommendation of the Minister, is satisfied that there are reasonable grounds to believe is

Prohibitions

Prohibited dealings and activities

3 It is prohibited for any person in Canada or any Canadian outside Canada to

Non-application

4 Section 3 does not apply in respect of

Assisting a prohibited act

5 It is prohibited for any person in Canada or any Canadian outside Canada to knowingly do anything that causes, facilitates or assists in, or is intended to cause, facilitate or assist in, any act prohibited under section 3.

Obligations

Duty to determine

6 (1) The following entities must determine on a continuing basis whether they are in possession or control of property that is owned, held or controlled by or on behalf of a listed person:

Duty to disclose — supervising and regulating agencies

(2) Every entity referred to in subsection (1) must disclose, every month, to the principal agency or the body that supervises or regulates it under federal or provincial law, whether it is in possession or control of any property referred to in subsections (1) and, if so, the number of persons or dealings involved and the total value of the property.

Immunity

(3) No proceedings under the Special Economic Measures Act and no civil proceedings lie against a person for a disclosure made in good faith under subsection (2).

Duty to disclose — RCMP or CSIS

7 (1) Every person in Canada and every Canadian outside Canada must disclose without delay to the Commissioner of the Royal Canadian Mounted Police or to the Director of the Canadian Security Intelligence Service

Immunity

(2) No proceedings under the Special Economic Measures Act and no civil proceedings lie against a person for a disclosure made in good faith under subsection (1).

Applications

Application to no longer be a listed person

8 (1) A listed person may apply to the Minister in writing to have their name removed from the schedule.

Reasonable grounds

(2) On receipt of an application, the Minister must decide whether there are reasonable grounds to recommend to the Governor in Council that the applicant’s name be removed from the schedule.

New application

9 If there has been a material change in circumstances since the last application was submitted, a person may submit another application under section 8.

Mistaken identity

10 (1) A person whose name is the same as or similar to the name of a listed person and who claims not to be that person may apply to the Minister in writing for a certificate stating that they are not that listed person.

Determination by Minister

(2) Within 30 days after receiving the application, the Minister must,

Application Before Publication

11 For the purpose of paragraph 11(2)(a) of the Statutory Instruments Act, these Regulations apply according to their terms before they are published in the Canada Gazette.

Coming into Force

12 These Regulations come into force on the day on which they are registered.

SCHEDULE

(Section 2 and subsections 8(1) and (2))

Persons

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations or the Order.)

Issues

The Venezuelan government is becoming more authoritarian, Venezuelan citizens are increasingly unable to exercise their democratic rights, the Venezuelan economy is continuing to deteriorate, and the prospects for a democratic restoration appear low.

Background

Venezuela is undergoing an economic and political crisis. The population is suffering from severe shortages of basic necessities (i.e. food, energy and medicine) due to a severe economic contraction resulting from the collapse of oil prices in 2014 (oil accounts for 95% of export earnings), general mismanagement of the economy, rampant corruption, and near total exclusion from international markets. Hyperinflation has severely devalued the Venezuelan currency, despite capital controls and a multiple exchange rate system intended to preserve its purchasing power.

Domestic instability is also growing as President Nicolas Maduro’s government consolidates his authoritarian rule. A coalition of opposition political parties that won a majority in the National Assembly in the December 2015 elections was stripped of its powers by Venezuela’s Supreme Court in early 2017. While the decision was subsequently reversed, the Assembly remained powerless as President Maduro ruled by decree under the state of emergency he declared in 2016.

On May 1, 2017, President Maduro announced the creation of a Constituent National Assembly (ANC), which would have the authority to override the democratically elected National Assembly and to rewrite the Constitution. Members of this Assembly were elected on July 30, 2017, amidst allegations of vote rigging and a boycott from the political opposition. The ANC was formed on August 4 and immediately moved to assume core functions of the opposition-led National Assembly. The ANC has the power to supersede any institution in Venezuela; to rule by decree and to unilaterally rewrite the Constitution. While its existence is allowed by the constitution, President Maduro chose to proceed with its establishment without first putting its creation to a referendum, a prerequisite under the Constitution. Additionally, the elections that determined the members of the ANC were not in accordance with the principles of universal suffrage. As a result, much of the international community, including Canada, has chosen not to recognize the ANC as a legitimate body. The next scheduled round of elections in Venezuela is for regional elections (state governors) due to take place in the fall of 2017, followed by municipal elections expected to take place in December 2017. The next presidential election is due to take place by December 2018.

As a result of the measures to strip the National Assembly of its democratically enshrined powers, citizens took to the streets in protests that began in early April 2017. The death toll from protests and associated looting continues to increase with estimates of over 120 deaths. While these protests have subsided since the inauguration of the National Constituent Assembly, the impact of repression has been staggering with more than 5 000 people arrested during the protests, 1 300 of whom are still behind bars, and more than 300 civilians being tried by military tribunals, according to a report by the non-governmental organization (NGO) Foro Penal. Foro Penal is a local NGO with a network of lawyers from all across the country which has supported and/or represented hundreds of detainees arrested during the last protest movement, as well as many political prisoners. Given its presence in practically all states of Venezuela, this network is the only entity across the country that has reliable national figures in this regard. The United Nations High Commissioner for Human Rights’ Report published on August 30, 2017, also cites the report from Foro Penal. The network is also an important source for the Inter-American institutions on matters related to human rights. The violence these protests engendered has also been criticized by the international community, by Venezuela’s former Attorney General (a one-time Maduro loyalist turned critic) as well as the United Nations Commissioner for Human Rights, who issued a report on August 30, 2017, citing grave concerns with the “systematic use of excessive force” by security forces. Upwards of 600 “political prisoners” remain in jail, including people arrested during the protests and opposition leaders and mayors that were arrested outside the scope of the protests.

The Government has also ramped up its efforts to stamp out dissident voices of opposing political figures. On April 8, 2017, the Government banned opposition leader Henrique Capriles from running for office, while opposition leader Leopoldo Lopez remains under house arrest. Additionally, the Maduro government has launched a campaign of intimidation and repression against opposition mayors. Currently four opposition mayors are being held under arrest, including Antonio Ledezma, the Mayor of Metropolitan Caracas. In the last two months, six opposition mayors have been removed from office and given prison sentences. Threats of incarceration made by the Maduro government to 33 judges appointed by the opposition-led National Assembly, has led many of these judges to seek asylum or go into hiding. The Maduro government has also moved to silence media thought to be opposition supporters by refusing entry, or prohibiting the exit of foreign and Venezuelan journalists. At least 23 radio stations and one television station have been shut down in 2017, and various foreign television channels and web pages have been blocked.

In addition, on April 26, 2017, in the face of growing criticism, Venezuela announced its intention to withdraw from the Organization of American States, a forum consisting of 35 states of the Americas that constitutes the main political, judicial and social governmental organization in the western hemisphere. Taken together, these actions represent a breakdown in constitutional order and a violation of regional and international norms of democratic governance.

Canada has engaged strongly on this issue. The Prime Minister has spoken to regional leaders as well as human rights activists from Venezuela and the Minister of Foreign Affairs has played a leading role in regional efforts to hold Venezuela to account. The regional response to the situation in Venezuela has been robust, with growing condemnation of the Government’s authoritarian actions.

On August 8, 2017, an ad hoc group of 16 Foreign Ministers from throughout the hemisphere met in Lima, Peru, to address the critical situation in Venezuela. At this special meeting of Foreign Ministers a group of 12 like-minded countries (Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Honduras, Mexico, Panama, Paraguay and Peru) signed the “Lima Declaration.” The Declaration calls upon states to, among other things, “impose an arms embargo” against Venezuela. The Declaration condemns the interruption in the democratic order of Venezuela, confirms a collective decision to refuse to recognize the Constituent Assembly or any of its decisions, and expresses full support for Venezuela’s democratically elected National Assembly. Participating countries also supported the continued application of the Inter-American Democratic Charter, and measures to politically isolate the Maduro government, including non-recognition of Venezuelan candidates to international bodies and the non-recognition of acts undertaken by the Constituent Assembly. Additionally, in August 2017, the South American trade bloc Mercosur suspended Venezuela indefinitely.

The United States (U.S.) government has targeted 37 individuals pursuant to Executive Order 13692, first signed on March 9, 2015, including 30 individuals since May 2017, including members of the executive, military, judiciary, National Guard, National Electoral Commission and Constituent Assembly. Additionally, in August 2017, the United States also announced economic sanctions restricting U.S. institutions from dealing in debt, equity and holdings for the Venezuela government and the state-oil company Petroleos de Venezuela (PDVSA). In February 2017, the United States sanctioned the Venezuelan VicePresident for drug trafficking under the Foreign Narcotics Kingpin Designation Act (also known as the Kingpin Act). It is important to note that the United States has previously targeted Venezuelan individuals (not only public officials) for human rights violations; drug and weapons trafficking; and support for Hezbollah. In December 2014, U.S. congress enacted the Venezuelan Defense of Human Rights and Civil Society Act, which allows for asset blocking and visa restrictions against those responsible for significant acts of violence and serious human rights abuses.

Noting that the Venezuelan government is becoming more authoritarian, that Venezuelans are increasingly unable to exercise their rights, that the Venezuelan economy is continuing to deteriorate, and that the prospects for a democratic restoration appear low, the governments of the United States of America and Canada decided, in Ottawa, Ontario, on September 5, 2017, to form an association for the purpose of discussing and recommending measures to respond to the situation in Venezuela. The association met on September 5, 2017, and recommended that its members take measures to respond to the situation in Venezuela and called upon its members to take economic measures against Venezuela and persons responsible for the current situation in Venezuela. The association further called upon its members to continue to monitor the situation and adjust measures as appropriate.

Objectives

The Special Economic Measures (Venezuela) Regulations impose targeted sanctions on a person who is in Venezuela, or is a national of Venezuela who does not ordinarily reside in Canada, and in respect of whom the Governor in Council, on the recommendation of the Minister, is satisfied that there are reasonable grounds to believe: is engaged in activities that directly or indirectly undermine the security, stability, or integrity of democratic institutions of Venezuela; is a current or former senior official in the Government of Venezuela; is a current or former member of the Constituent National Assembly; is an associate or family member of a person described in the preceding three categories; is an entity owned, held or controlled, directly or indirectly, by a person described above or is acting on behalf of or at the direction of a person described above or is a senior official of an entity described in the preceding category.

These measures are in accordance with the recommendations of the association between the governments of Canada and the United States. Additionally, these measures demonstrate solidarity with the actions of like-minded partners in the hemisphere, in particular the United States, to send a message to members of the Venezuelan government that their anti-democratic actions have consequences. More broadly, these measures demonstrate to Canadians that the Government is prepared to take action when international norms of democratic good governance are flouted.

The Special Economic Measures (Venezuela) Permit Authorization Order authorizes the Minister of Foreign Affairs to issue to any person in Canada and 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 or prohibited pursuant to the Regulations.

Description

The Regulations establish a list of 40 persons to be sanctioned, who are subject to an asset freeze and dealing prohibition. Of these 40 persons, the United States has sanctioned 25 under the Venezuelan Executive Order 13692 and 1 under the Kingpin Act. The Regulations prohibit any person in Canada and any Canadian outside Canada from (a) dealing in any property, wherever situated, that is owned, held or controlled by a listed person or by a person acting on behalf of a listed person; (b) entering into or facilitating any transaction related to a dealing referred to in paragraph (a); (c) providing any financial or related service in respect of a dealing referred to in paragraph (a); (d) making any goods, wherever situated, available to a listed person or to a person acting on behalf of a listed person; or (e) providing any financial or related service to or for the benefit of a listed person.

There are exceptions to the above-noted prohibitions, including

A separate Special Economic Measures (Venezuela) 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 and 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 or prohibited pursuant to the Regulations.

“One-for-One” Rule

The “One-for-One” Rule applies to this proposal as there are administrative costs to business, related to a disclosure requirement of the Regulations. The Regulations require financial institutions in Canada to determine on a continuing basis whether they are in possession or control of property owned, held or controlled by a listed person. These financial institutions are required to disclose without delay the existence of such property to the Commissioner of the Royal Canadian Mounted Police or the Director of the Canadian Security Intelligence Service. Additionally, a separate Special Economic Measures (Venezuela) Permit Authorization Order made pursuant to subsection 4(4) of the Special Economic Measures Act may also increase administrative costs to businesses seeking permits orders that would authorize them to carry out specified activities or transactions that are otherwise prohibited.

However, the administrative burden associated with these Regulations is exempted from the “One-for-One” Rule as the Regulations address unique, exceptional circumstances, namely the urgent situation in Venezuela.

Small business lens

The small business lens does not apply to this proposal, as small business would not be disproportionately affected by the Regulations.

Consultation

Public consultation with regards to the regulations establishing lists of listed persons would not be appropriate, as prepublication of the list could result in asset flight prior to the coming into force of the Regulations.

Rationale

International concern has grown as the situation in Venezuela has deteriorated. Canada and most countries in the hemisphere have strongly condemned moves by the Maduro government to consolidate power, to limit the democratic rights of the Venezuelan people, to restrict opposition and freedom of expression, and to violate internationally recognized human rights. However, domestic instability is growing as President Maduro’s government continues to take actions that represent a breakdown in constitutional order and a violation of regional and international norms of democratic governance. While Canada has engaged strongly to hold Venezuela to account, the Maduro government continues to increase the authoritarian nature of its government. The measures contained in the Regulations will ensure members of the Venezuelan government understand that their anti-democratic actions have consequences and also to demonstrate more broadly that the Government of Canada is prepared to take action when regional norms of democratic good governance are flouted. These measures are in line with, and support the actions of like-minded countries in the hemisphere, in particular the United States, and implement the recommendations of the association formed by the Government of Canada and the United States.

While imposing sanctions may trigger collateral impacts on Canadian businesses and commercial interests (such as missed business opportunities), it is anticipated that such impacts would be minimal. Trade with Venezuela is comparatively low and has been rapidly declining — from $780 million in bilateral trade in 2015 to $260 million in 2016 to less than $100 million so far in 2017. This is not the result of political decisions but due to a rapidly shrinking economy (GDP contracted by 10% in 2016 and is expected to shrink a similar amount in 2017), lack of access to hard currency and export credits, and a high risk of default, which has caused most Canadian exporters to cease selling into the Venezuelan market. Remaining Canadian exports are mainly agricultural products, particularly wheat, peas, seed potatoes and lentils. Imports from Venezuela totalled $17 million in 2016.

Canadian businesses who wish to continue to do businesses with a listed person may apply for a permit pursuant to the Special Economic Measures (Venezuela) Permit Authorization Order.

Implementation, enforcement and service standards

Canada’s sanction regulations are enforced by the Royal Canadian Mounted Police and the Canada Border Services Agency. In accordance with section 8 of the Special Economic Measures Act (SEMA), every person who willfully contravenes the Special Economic Measures (Venezuela) Regulations under the SEMA is liable upon summary conviction to a fine of not more than $25,000 or to imprisonment for a term of not more than one year or to both, or upon conviction on indictment, to imprisonment for a term or not more than five years.

Contact

Sylvia Cesaratto
Director
South American Relations Division
Global Affairs Canada
125 Sussex Drive
Ottawa, Ontario
K1A 0G2
Telephone: 343-203-3277
Fax: 613-996-3406
Email: Sylvia.Cesaratto@international.gc.ca