Thank you very much, Chair.
I'd like to thank you all for inviting me to participate in your consideration of the effectiveness of sanctions as a tool of Canadian statecraft.
I should begin by stressing, if you haven't already figured out from what is not in my bio, that whatever assistance I might be able to afford you today is limited to a broad consideration of sanctions as a foreign policy tool. Mine is an academic's, not a practitioner's, perspective. It's academic in the sense that I'd like to pitch the focus more broadly, to address some of the general questions posed in the excellent backgrounder by Allison Goody, Brian Hermon, and Robin MacKay.
The perspective is also academic in the sense that it's broadly historical. I've been looking at the use of sanctions in foreign policy since I began my academic career in the mid-1970s. As a young and callow academic, I was particularly interested in understanding the enthusiasm for international sanctions, given the failure of this tool of statecraft under the League of Nations in the interwar period and the long-running sanctions regimes in the post-1945 period—the sanctions against the Soviet Union that began in the late 1940s, against the People's Republic of China in the 1950s, against Castro's Cuba in the 1960s, and the sanctions that were being advocated against the white minority regimes in Rhodesia, South Africa, and Portugal's African colonies in the 1960s and 1970s.
What prompted my interest was the renewed enthusiasm for sanctions against the Soviet Union following its invasion of Afghanistan and against South Africa after the collapse of order in the townships in the mid-1980s. I wondered why there was such enthusiasm, given the string of long-running failures up to that point. Much of my early writing, when I was at McMaster University in Hamilton, sought to address this puzzle.
I raise these historical cases because I think it's important that we remain very conscious of just how enduring the problems with these measures have been. Many years on, it continues to surprise me that we see the same optimism about sanctions that we saw a century ago. To be sure, much water has passed under the bridge since then. The nature of sanctions themselves has changed, and radically so, in the last generation. Instead of the blunt instruments applied in the 20th century to entire communities, instruments that invariably produced a great deal of humanitarian suffering in the target country, we now have so-called smart sanctions or targeted sanctions. Indeed, there can be no better example, in my view, of the move to targeted sanctions than the Magnitsky Act of 2012, a piece of legislation, as members of this committee know well, that was adopted by the United States government to impose sanctions on just 18 of Russia's 143 million people.
What's not changed in all these years is the conviction that imposing economic hardship on some, many, or all the people in a target community will achieve political change. But is there evidence that these measures actually produce political change? Now, it's true that economic sanctions can and do inflict economic hardship on entire communities, on groups, on sectors in the economy, on particular firms, and of course on selected individuals. But do these measures produce the desired political change? Do the economic hurts that are clearly produced by sanctions actually change the behaviour that triggered the sanctions in the first place?
Consider the sanctions regime that Canada presently has in place against 21 different countries, some now for well over a decade. This is a simple question for the committee to consider: have any of these measures actually changed the behaviour of the target government? In my view, the answer, broadly speaking, must be no.
Like the long-running sanctions regimes of the Cold War, which lingered year after year without producing any of the changes that they were supposed to produce, Canada's bundle of sanctions regimes grows older, but no more effective.
Ironically, however, we know that while these measures do produce economic pain, it's not always the pain that is intended. Consider, for example, the hugely gendered impact of the sanctions imposed on Iraq during the 1990s in the aftermath of the Persian Gulf war. The relatively greater negative impact of these sanctions on Iraqi women was one of the reasons why so-called “smart” sanctions came to replace the “dumb” sanctions of the 1980s and 1990s, sanctions dubbed that because they tended not to discriminate between targets.
We also know that sanctions can end up hurting the sender's own people. Talk to Canadian banks or firms in other sectors of the economy that have to deal with current Canadian sanctions practice and have to spend, in the aggregate, millions of dollars because the federal government has downloaded the costs of implementing its enthusiasm for this highly questionable public policy tool onto those firms.
In short, we know that these measures don't produce their intended effects, while at the same time they produce all manner of unintended, and usually negative, collateral damage. That is, of course, why students of sanctions like me continue to ask the question we've always asked: If the economic hardship that is produced by sanctions does not produce the desired change, why do governments continue to use this tool of statecraft and, importantly, continue to pretend that these measures work? The answer to this question is that sanctions, whether the “dumb”, blunt sanctions of the past or the supposedly “smart”, targeted sanctions of the contemporary era, are really not about producing actual political change in the target state.
On the contrary, sanctions are all about producing other political effects. First, sanctions, like all punishments—and we need to remember the etymological origin of the term itself—are useful for symbolic reasons. Like all harms imposed on wrongdoers, sanctions are a useful way of signalling disapproval of particular behaviour. In that sense, international economic sanctions will always “work”, because they punish. They always have, and they always will.
Second, international sanctions are a very useful tool for domestic political purposes. Because sanctions actually produce harm, unlike mere words, these measures give the impression of a stern rebuke to wrongdoers and wrongdoing.
I understand why governments continue to embrace sanctions with the same enthusiasm they always have, and continue to pretend that they will be effective in producing political change. Nonetheless, I remain highly skeptical about this tool of statecraft, and that skepticism is buttressed by the views of a new generation of sanction scholars.
You've already heard from one of this new generation, Andrea Charron. Another one is Dr. Lee Jones, a young academic at Queen Mary University of London, who has explored how sanctions actually play out in target communities. I would highly recommend his 2015 book Societies Under Siege: Exploring How International Economic Sanctions (Do Not) Work. This book demonstrates nicely how inflicting economic pain simply doesn't pay enough attention to what actually happens in societies targeted by sanctions.
Dr. Jones's research led him to write, in a briefing in 2015, the following:
||If policymakers cannot specify a plausible, step-by-step mechanism by which the infliction of economic pain will generate political gain, they ought not to impose sanctions at all. Doing so merely imposes random suffering in the vain hope of positive outcomes. This is deeply unethical, and poor public policy.
In my view, there can be no better way to put it.
Thank you very much. I look forward to your questions.
Chairman Nault and Vice-Chairs Allison and Laverdière, good afternoon. It is an honour to appear before you today.
My opening remarks will focus on two main issues: first, a few ways to think about the goals of financial sanctions; and second, some of the processes by which the U.S. government imposes financial sanctions.
When the government thinks about the imposition of financial sanctions, it likely has one or both of two goals in mind. Here, while I'm speaking specifically about the U.S. government, I believe the points generalize and in some sense echo the interventions of Professor Nossal. The first goal of financial sanctions is to engineer a change in behaviour in the ultimate target of the sanctions, and in so doing to advance the foreign policy and national security interests of the United States. The second is to protect the integrity of the financial system by preventing illicit capital from entering.
One prominent example of this first objective to change behaviour is the successful Iran sanctions program, where sanctions imposed by a broad coalition over many years incentivized Iran to negotiate a deal regarding its nuclear program. Other recent cases include Burma, where sanctions were recently lifted in response to important democratic reforms, and Côte d'Ivoire, where sanctions were removed in response to a successful presidential election, progress on arms control issues, and the removal of multilateral UN sanctions. There also have been important successes in the narco-trafficking context, where large numbers of individuals and entities have been delisted because of a change of behaviour.
On the preventive side, it is helpful to think about two intertwined goals. Sanctions can be used to help ensure that ordinary citizens and businesses retain their trust in the international financial system by targeting illicit conduct. Here, sanctions work in concert with other forms of preventive measures such as anti-money laundering regulations to keep illicit activity out of the global financial system. National and transnational sanctions regimes work in concert with national AML measures and guidance offered by non-governmental organizations such as the Financial Action Task Force and the Wolfsberg Group.
There is another preventive function that sanctions can serve—namely, to interfere with the ability of illicit actors to obtain the goods and services they need to function, to make it harder for them to raise, store, move, and use funds. This was another part of the rationale for the Iran sanctions program and for other successful programs, including counterterrorism sanctions.
Officials understand, of course, that sanctions alone will not cause an end to terrorism. They are not blind to some of the unintended consequences that Professor Nossal identified, but if terrorist groups are unable to gain access to the international financial system, it will be harder for them to engage in the financial activities necessary to sustain themselves. Individual attacks might not cost much, but sustaining a terrorist organization over time costs a great deal.
It is important to note that financial sanctions are preventive and not punitive. The goal is not to use sanctions in lieu of criminal prosecutions. Instead, sanctions can be a complement to indictments, but fundamentally have a different goal. Whereas criminal prosecutions are designed first and foremost to punish with respect to completed conduct, sanctions are regulatory measures designed to have broad systemic effects.
We saw an example of this complementarity in September, when the U.S. announced the indictment of Chinese industrialist Ma Xiaohong, a company she controls, and several of her associates for helping North Korean entities evade U.S. sanctions and provide support to its WMD program. At the same time as the indictment was announced, the U.S. government sanctioned some of those same entities in order to prevent them or entities they own or control from participating in the international financial system. Here, the two legal mechanisms worked side by side.
Sanctions operate through a range of legal mechanisms. Broadly, they are regulatory restrictions imposed on natural or legal persons. There are two basic types of schemes: some sanctions are directly imposed by legislation, while others rely on a grant of authority by Congress to the executive to establish sanctions programs that address particular national emergencies.
The main U.S. statute that follows this pattern is the International Emergency Economic Powers Act of 1977, or IEEPA. It authorizes the president to declare a national emergency with respect to a problem that originates wholly or substantially outside the United States. The president can then investigate, regulate, or prohibit and generally constrain a wide range of financial transactions in response to the problem. In practice, the president has adopted dozens of executive orders to address the financial dimensions of critical national security threats, such as nuclear proliferation, counterterrorism, the situation in Syria, and Russian activities that undermined democratic processes and threatened peace and stability in eastern Ukraine.
The executive orders allow the treasury department to target individuals or entities involved in illicit conduct. The Department of the Treasury can impose a range of restrictions, but most common are sanctions that block the property of designated persons subject to U.S. jurisdiction, and prevent U.S. persons from doing business with them. Other types of restrictions are also possible. For the Russia-Ukraine sanctions program, for example, the U.S. and its allies adopted creative restrictions on dealings in the debt and equity of a range of Russian companies. The objective was to target as precisely as possible the objectionable conduct and to spare, as much as possible, activities that would have a wide-ranging and unanticipated impact on the Russian economy.
The actual process of identifying targets for designation involves a number of steps. The U.S. government canvasses a wide range of information sources to develop targets and then compiles an administrative record that is subject to multiple levels of legal and policy review by different agencies before a final decision about a designation is made. Designations are then finalized with an administrative order and are made public via a press release and a public change to the relevant sanctions list on which the target will appear.
If they wish, designated parties can seek review and reconsideration of the designation by the Office of Foreign Assets Control, OFAC, the administrative agency that implements financial sanctions, or can challenge their designation in court. OFAC must make public sufficient information about the basis for designation such that the target can understand the conduct that led to the imposition of sanctions, but OFAC can use classified materials in compiling the evidentiary record, which a review in court can evaluate in camera ex parte.
Some statutes also directly impose certain financial sanctions, most prominently in the Iran context.
In the post-9/11 era, financial sanctions have taken on an increasingly important role in national security, foreign policy, and financial integrity discussions. Very few people believe that they are intended to have decisive impacts on their own. They are, however, a critical tool of risk management.
I look forward to answering any questions that you might have.
Thanks to both of you for attending today and sharing your insight and expertise.
In the barely six hours of testimony that we have heard in this study on the SEMA and the corrupt foreign officials act, we've heard a great deal with regard to the Canadian situation, where enforcement and/or compliance has as much to do with capacity as it does with the laws. We were told that there are gaps in our laws and that some of our departments and agencies—the RCMP, for example—have capacity issues, and that enforcement of these sorts of sanctions, or crimes for which sanctions have been imposed, is of a lower priority than their anti-terror focus.
I would like to start with a question to you, Mr. Goldman, regarding the harshest enforcement penalty levied. It was in the United States for the BNP Paribas case. I think the penalty was almost $9 billion against that financial institution for channelling many billions of dollars through the United States on behalf of clients in Sudan, Iran, and Cuba.
I'm just wondering, for a penalty of $9 billion, what would you estimate—or do you know—was the capacity cost, the enforcement and prosecution cost, of that particular case?
Thank you very much for your question.
I couldn't put a precise number on it, but I would think about enforcement and compliance in two respects. The first is enforcement and compliance costs borne by the government itself. The U.S. Department of the Treasury has an office called OFAC, the Office of Foreign Assets Control, which I alluded to, and it enforces financial sanctions. Roughly 200 people work in that office, so we can back from that into a rough estimation of the annual cost.
There are others involved in that enforcement action as well. There are oftentimes multiple overlapping jurisdiction on these cases, and because the banks are located in New York, by and large, the New York banking supervisor and the New York State Department of Financial Services is involved. The local state prosecutor in Manhattan is often involved. Also, the federal prosecutors are often involved because these involve violations of federal statutes.
In that instance, the $8.9-billion fine was a result of at least four or five different agencies: OFAC; the Department of Justice, which is the only entity that can bring federal criminal prosecutions; the state prosecutors; the New York state banking supervisor; and, I believe, the Federal Reserve. These are all folks who have multiple missions. It might be difficult to disaggregate with any degree of precision the amount of time, for example, they spent on that particular case.
Another way to think about the cost of compliance is the cost borne by the banks themselves. All of the banks subject to U.S. jurisdiction must—and have—built up very elaborate compliance architectures in order to ensure that they are behaving in a manner that is consistent with U.S. law and policy and their other legal obligations.
Take a bank like BNP Paribas, for example. They're subject to French and EU law because they're a French bank, and their activities that are subject to U.S. jurisdiction are subject to U.S. law as well. Presumably, the point generalizes across the many dozens of countries in which banks like that operate. Needless to say, their compliance architectures are very complicated. They have to adhere to local law wherever they operate and also to, for example, EU law, because they are an EU person.
It's difficult, sir, to give you a precise answer, but that's perhaps a way to begin thinking about the problem.
Absolutely. When I focused on that particular act and the 18 individuals, it was really to underscore the nature of the targeted sanctions that, as you say, try to be as precise as possible. As Professor Goldman notes, the idea is to try to avoid unintended consequences.
What has been the focus of that particular act underscores, it seems to me, the symbolic purpose that you focus on, which is essentially a shunning, essentially the sending of a message about these particular individuals and their particular roles in the death of Mr. Magnitsky in 2009.
From that point of view, the measure is a useful measure, but to the extent that considerable resources are devoted to the creation of these kinds of measures, it's not entirely clear to me that there is a larger policy purpose, other than the symbolic element of signalling and shunning that is served. From that point of view, it seems to me that these kinds of targeted sanctions tend to focus too purely on the symbolic side.
There's one other element, too, and it is that when you're talking about the Russian Federation, one of the important elements here is the ability of many individuals to sidestep and subvert these measures. There's also the element of basically being able to provide individuals with a certain benefit within Russian society of being the target of western sanctions.
Thanks for the testimony today. I'll match your “callow” professor with a number of callow politicians around this table any day.
In your 1994 book on sanctions, which focused on Canadian and Australian foreign policy, you noted that Canada in particular lacked the economic capability to “give the sanctions of major powers their bite”, thus essentially saying that the sanctions were symbolic.
If we go back to what my colleague MP Kent was saying with respect to a sanctions regime that would condemn or seize assets of gross human rights violators, the initial act of seizing the assets has some beauty to it, because it is smart, at least at first glance, in the sense that you're grabbing an asset on Canadian territory of a person who has manifestly committed these gross human rights violations, but the unintended consequence is what I'd like to focus on, or at least a countermeasure that could be enacted against Canada and could have on Canadians perverse consequences that were never intended in the first place.
It seems to me that there's a distinction to draw between the easiness of freezing an asset that belongs to someone if it's properly identified and then focusing on the countermeasure, which may have perverse consequences, vis-à-vis a broader regime that simply doesn't work because Canada lacks the heft to put bite into its actions. I do think we need to examine at what point our actions have consequences for other Canadians that weren't intended in the first place. The initial ability to freeze those assets, if you can actually do it, is interesting as a policy measure and, properly, to send a message to the person who has committed those acts that they can't hide their assets in Canada.
I'll perhaps generalize the point a bit more and note that the general pattern now is to impose costs on states by targeting individual entities or individual persons that will be perceived to have an impact.
To take the example of Russia, but perhaps a slightly different example, after the violence in Ukraine accelerated in early 2014, the U.S. and many of its partners in the EU and elsewhere imposed sanctions that were designed to shape the cost-benefit calculations of Russian President Vladimir Putin. The U.S. and others did so by targeting individuals who were close to him, former regime officials, and banks that played a significant role, at least putatively, in hiding regime assets, such as Bank Rossiya and others. There, the purpose was to shape Putin's thinking about the cost and benefits of continued escalation in Ukraine.
Now, the question can be raised: to what extent did Russia retaliate against the U.S. and its allies for this activity? Also, what impact did the sanctions have? One can make an argument that it's of course impossible to know for certain, because to determine the impact would require knowing the outcome of a counterfactual, which is to ask what would have happened if you had not imposed sanctions, and that's obviously impossible to say with certainty.
But there's at least a credible argument could be made that the acceleration of sanctions in the first half of 2014 in that context at least dampened the escalatory cycle in eastern Ukraine. While it may have frozen the status quo, Putin did not take the other more inflammatory actions that he could have taken.
Sure. I would make two or three related points.
First, there are very few people who would advance the argument that sanctions alone will solve any particular foreign policy crisis. To take Iran, which is the most I think poignant recent example, sanctions there I think were designed to generate leverage that would ultimately be used in a course of diplomatic negotiations. I think very few people had the self-understanding that we could just sanction Iran into compliance with our desires about its nuclear program. Again, the sanctions were built up over a long period of time and involved broad multilateral efforts, but ultimately it was diplomacy that caused the nuclear agreement to materialize. It was not sanctions alone.
Let me abstract away from that specific example to a more general point that I alluded to, which is that sanctions are a tool of risk management. There, I think the key is that the international financial system relies fundamentally on trust. Individuals will not engage in trusted transactions with the international financial system if they believe the banks and others with whom they interact are doing business with rogue actors.
If you envision a world in which governments—particularly western governments and Asian governments—that harness the bulk of the world's financial activity simply stopped enforcing financial sanctions, which is to say, if they allowed with impunity those involved in acts like terrorism and narco-trafficking and WMD proliferation to have free access to the international financial system, I can't imagine that would be an international financial system in which trust and the free flow of information and financial services would be enhanced.
I can develop more points if you'd like, but those are the two I would make: one, sanctions are always used in complement with other national security tools, such as diplomacy, the use or threat of military force, and intelligence means, to achieve particular goals; and, second, it is very important to focus on the broad systemic effects on financial integrity when thinking about the utility of sanctions.
I want to thank the witnesses for being here and for shedding light on a file involving quite a complex study.
I want to hear from you, because in your opening remarks, you both seem to have stated somewhat different positions. Feel free to correct me if I'm misinterpreting your words.
Mr. Goldman, you seemed to say that the sanctions are preventive and not punitive. Mr. Nossal, you argued the opposite, if I understood correctly. You think the sanctions are essentially punitive or symbolic and not effective.
Let's look at this first difference and at the statistics, which particularly impressed me, on the number of economic sanction programs supported by the UN and the number of programs supported by the United States. The number is almost double. Regarding the people who are personally affected by sanctions, the number is five times higher in the United States.
Is the difference related to a systemic difference in the approach, basically, and design of the sanctions programs? Or is it related to the cumbersome nature of an institution such as the UN, for example?
Let's start with Mr. Goldman.
I'll address one of your points on the preventive versus punitive discussion. Second, I'll talk about the importance of symbolism.
What I meant by that is that the classic understanding of criminal prosecution is that, one, it applies to completed conduct. There is some resemblance there with financial sanctions. More broadly, the obligations of banks to engage in other kinds of measures designed to protect the international financial system, such as anti-money laundering and things like that, are designed not only to target completed illicit activity but also to enable the systems to be established that prevent it in the first instance. Therein, I think, lies the primary difference between, for example, criminal prosecutions on the one hand, and sanctions on the other.
Obviously, another important difference is the punishment, the effect. Nobody goes to jail when they're put on a sanctions list per se. Sanctions evasion is a crime, but the result of a sanction is an asset freeze, not a trip to prison. That's obviously the most significant difference in the United States that drives different levels of legal proof and legal review.
On the symbolic point, I don't disagree with Professor Nossal. In some instances, sanctions are symbolic, but I don't think that for that reason they're useless. I think it is important to provide the international community with opportunities to express its collective disgust with particular forms of reprehensible activity and to draw boundaries around what is acceptable international conduct and what is unacceptable international conduct.
If, for example, the regime of Bashar al-Assad could freely access the international financial system, I think that would not be consistent with the horror and disgust with which almost all of us view his behaviour toward his own people. It may or may not be true that sanctions on Syria will ultimately lead to a peaceful resolution of the civil war there, but it will certainly impede the ability of the Assad regime to function and obtain the resources it needs to continue its oppression of its people, and I think the expression of disregard for his actions is appropriate and important.
Absolutely. Thank you very much for your question.
I think judicial involvement in the sanctions process is critical to the integrity and legitimacy of the enterprise. At the outset, I want to make sure that I'm clear about that.
I would say that there are two characteristics of a sanctions regime that are important, and I think this has troubled the EU in some regard. I won't say that the U.S. does it better, but I will say I think the U.S. does it reasonably well.
The first is clarity about the process. What exactly goes into a decision to impose sanctions in the first instance? What institutional actors are involved? What are the legal criteria? What are their burdens of proof? What are the evidentiary thresholds? I think it's important that there's clarity about these issues and that they are foreseeable, and that this in some measure helps protect the due process rights of designated individuals.
Second, I think it is important that the courts have some ability to review classified information, information that's provided in confidence by the executive branch, but again, in order to protect the due process rights of sanctions targets, it's important that the sanctions targets know enough about the underlying conduct for which they have been designated that they can mount an effective defence.
These are the two principles that I would articulate as being important, and at least in the U.S. context, I would say we do reasonably well. There's always room for improvement, but I think we do these reasonably well, and they are important to focus on moving forward.
Thank you very much, Mr. Chair.
As well, thank you very much to our witnesses.
We have heard also from other witnesses that looking at some of these overarching sanctions sometimes doesn't work. We talked about whether we're trying to send a message or some of these other things.
My question is for you, Mr. Goldman. Obviously in the States you're familiar with Magnitsky. It was something that Mr. Kent was talking about with Mr. Nossal. I want to get your comments on Magnitsky as it relates to the U.S. and where—and if—you feel that it's been successful. I know that we're certainly aware of some of the unintended consequences, such as the refusal for adoptions by Americans who want to bring in Russian babies, etc.
As we look at some of the testimony that even we have heard about individuals and sanctions targeting, we've heard people say that it's either too expensive or it doesn't work, or they ask if people really put their money in Canada. I want to refer you to an article written last week by Daniel Leblanc, who basically talked about the fact that Mr. Browder, out of the U.K., has looked at some of these things, and already we're seeing money flow into Canada. What may be even more troubling is that for some of these individuals and the companies that were set up to take advantage of the fraud and what's happened, there's actually money flowing out of Canada in large amounts as well.
It is a reality. We realize that if we act unilaterally, it probably doesn't work, but as we move forward and other countries look at this, I think the whole purpose of Magnitsky is to say, listen, if you're going to take advantage, if you're going to rip off your own governments, you're not going to find a place in the western world where you can actually safely take that money, store it, spend it, and keep it safe until such time as you want to take advantage of that.
Very quickly, what are your thoughts on what has happened with Magnitsky and the U.S. and on whether you feel it's moving in that direction? I realize that maybe other countries need to move on this if we're going to have the desired effect that we want to have on multiple countries.
Thanks again for this opportunity.
The use of multilateral economic sanctions, particularly by the UN Security Council, has been increasingly advocated by transnational human rights NGOs and various governments friendly to human rights promotion and protection, and sanctions imposition and enforcement occupies a significant place in many of our foreign policies in democratic states, as well as in the UN Security Council.
In fact, in terms of human rights protection and advancement, the Security Council currently mandates 15 total sanctions regimes, with 11 of them having some form of human rights or humanitarian law dimension.
On its own, the African Union has imposed sanctions in eight cases where extra-constitutional changes of government have occurred and it has smartly leveraged these targeted measures to protect fragile rights during the first years of democratic governance in post-war nations.
The European Union administers almost 370 sanctions cases, with a high proportion of those having human rights dimensions. My own country, through the Treasury Office of Foreign Assets Control, has proposed 50 total financial sanctions programs against individuals, governments, or organizations for their violation of human rights.
Even with all of this structure and activity, I think the honest approach is to say that these measures have proven only somewhat effective. In fact, worse yet, are the cases where historic inaction by the Security Council has led to dramatic expansions of human rights atrocities. These, of course, occurred in the situation of mass killings in Yugoslavia, genocide in Rwanda, mass killings in Liberia until about 2001, and the continued debacle and killings in Sudan's Darfur region.
At present, the historical evidence about targeted sanctions is cautious at best for its ability to improve human rights performance of a violating government or of marauding militias that continue to kill civilians at will. Sanctions, I think we must say, have by themselves rarely forced rights violators to desist their actions. They've never toppled a government run by a dictator who violates human rights.
But when dictators have changed their behaviour, it's because sanctions have been an important part of the mix of wider foreign policy tools and ones that focus on domestic pressure points within terrible regimes that lead to an improved human rights situation over time. Sanctions have more dramatic success in safeguarding the rights protection culture that's emerging in fragile democracies.
If I were to put it in its best light, I would say the UN Security Council has made progress more in norm articulation and lags behind in effective implementation and enforcement. These new global norms that have emerged tend to fall into three categories.
The first is the protection of civilians during armed conflict.
The second is what some of us fear as an all too short-lived assertion in the international community at the UN about what would be called the R2P principle, the responsibility to protect civilians faced with upcoming mass atrocities. Of course, many of us are deeply indebted to Canada for its leadership in the R2P realm.
The third area is one I mentioned earlier, which is the protection of electoral and democratic transition processes at the UN. That includes the movement from prior sanctions aimed at stopping civil war to now be reformulated as part of peace-building and peacekeeping on the ground.
Much, as you know from the testimony of others, has proceeded to narrow sanctions, to what we call the “smart” or “targeted” kind. The ones that have proven most effective are those that fall into three areas.
The first is freezing financial assets, property, and other funds held outside the country where the atrocities are being held. These might be held by national government entities or officials, by officials privately or in their public realm, or by persons designated as supporters, conduits, or enablers of the regime.
The second is the ability to deny assets movement and access to overseas financial markets, particularly emerging financial institutions, national bank mechanisms, and other government ways of transferring funds, particularly to designated private banks, investors, and money launderers.
The third area is restricting the trade of very specific goods and commodities that provide substantial revenue to these human-rights-violating actors, especially ones that are highly traded and valued by markets in the west.
The structure of imposing targeted sanctions on rights abusers and their effectiveness is something we've learned over time. In practice, when powerful foreign policy countries such as Canada, the U.K., and the United States work with the United Nations or regional actors like the EU or AU to reinforce sanctions that have been passed or, more importantly, to precede the measures that the wider organizations will take, we've found increased chances of success.
The most notable case of this, I think, is what happened in 2011, when western states combined to pass a series of strong impositions and a locking down of assets of half of General Gadhafi's usable monies from Libyan official funds and from private assets available to the regime totalling nearly $36 billion. This occurred 48 hours before the Security Council Resolution 1970, and there was also another tranche examined and frozen before Security Council Resolution 1973. These particular locked-down assets had a significant impact on Gadhafi's ability to import heavy equipment, to hire foot-soldier mercenaries, and to hire in full the elite commando units he was exploring in a variety of countries to come to his aid.
My own work has increasingly pushed me, over the last few months, to look at a human rights abuse situation in which we have to move beyond the most visibly available agents who are authorizing the human rights atrocities, that is, government institutions and leaders, to more identifiable individuals who actually perpetrate the rights violations or mass atrocities themselves. A deeper probing of these abuses indicates to us a dramatic connection to specific products, companies that supply them, assets holding, and financial facilitating organizations—in fact, a wide array of individuals and entities that are usually not visible at early stages of analysis.
In light of this, we are advocating the targeting of sanctions on what we would call this enablers category, which focuses on the means that are used to commit mass atrocities, as well as the way that they're financed. The organizing logic behind this concept, in part derived from the Libyan experience, is that mass atrocities are organized crimes. Crippling the means to organize and sustain them—the money, the communications networks, the resources—can dramatically interrupt their execution.
As my time is coming to a close, I will hold for answering to questions the cases where we've seen this, in Congo, Darfur, and elsewhere. I'd advocate for examination by your good committee the way in which we can dig deeper into the perpetrators of mass atrocities and look at those sustaining enablers of a transnational nature that often have ties to the west, where their assets can be frozen and their networks disrupted.
Thank you very much.
I thank you for this opportunity to talk to the members. I hope that I can speak clearly and am sufficiently slow for the interpreters to translate to French.
My speaking notes are going to be very brief. Unfortunately, I have to mention that I was not able to listen to the presentation of Dr. Lopez because there were technical difficulties here. I apologize if I end up saying things that have already been mentioned by Dr. Lopez.
As a specialist in European Union sanctions, I would like to start by commenting on the comparability of the Canadian legislation with European Union measures.
The European Union has some possibilities, let's say, for imposing sanctions against countries where corruption is widespread, with the idea of actually punishing the governments that engage in widespread practices of corruption. However, it doesn't have anything along the lines of the. There is no equivalent legislation now, and no equivalent legislation is under discussion in the context of the EU. Basically, there have been no demands coming from civil society or from any member states to put in place legislation that is similar to the Freezing Assets of Corrupt Foreign Officials Act.
I mentioned that the EU still has the possibility of punishing government authorities, let's say, for corruption. This exists in the framework of development aid co-operation. As you know, the European Union is allowed to interrupt development aid on the basis of widespread corruption practices by government authorities. This takes place under the heading of “good governance”.
The treaty that provides for development aid from the European Union to developing countries includes a clause that explicitly foresees the possibility of interrupting development aid on the grounds of widespread corruption. This exists as an EU practice when the European Union as a whole is a donor, and it also exists in the practice of individual member states that are also important donors to developing countries, but outside this framework there are no measures along the lines of the Magnitsky Act in the U.S.
It is difficult to imagine that the EU will contemplate the adoption of an act of this nature due to the recurrent court challenges that it has been facing with regard to its designations. The EU has been blacklisting people under anti-terrorist legislation and also in the framework of its sanctions regimes against individual countries. However, these listings are subject to the scrutiny and the jurisdiction of the European Court of Justice.
The European Court of Justice has actually ruled in favour of the claimants quite often. According to calculations made by researchers, only 40% of the cases in which designations have been challenged in front of the European Court of Justice have been in favour of the European Union. In the remaining 60%, the claimants have been able to basically win the challenge and to compel the European Union to cancel its designation.
The European Union currently has a very big problem with blacklisting individuals. It is actually quite reluctant to expand legislation along these lines, because it has faced important difficulties in bringing evidence that could be made public to the court in order to support its cases.
Moving back to the Canadian version of the Magnitsky Act, which is basically the , this document actually puts Canada on a par with the U.S., because it is basically following a U.S. model. This departs from previous practice, in which Canada was actually not necessarily following the U.S. lead in terms of sanctions imposition, but was also coordinating with the European Union. We see that this departs from current practice.
To comment further on this act, what is good about this act is that it is actually a very targeted instrument. It allows for the imposition of very clearly targeted sanctions precisely because it focuses on individual designations. This contrasts with the practice in the case of the European Union, where state authorities are punished as a whole through the interruption of budgets support in terms of charges of corruption. To the extent that targeting is considered to be a positive innovation on the sanctions landscape, this act is actually very good. It's very good in terms of allowing there to be an effect on specific individuals without having any impact on society and on innocent bystanders.
My last point concerns the purpose of the measure. What do we actually want to do by freezing the assets of corrupt foreign officials and what effect is this likely to have?
The idea with this type of legislation is to make Canada a more hostile environment for corrupt officials, because once this type of legislation is in place and corrupt officials are aware that they have been blacklisted, they basically cannot operate in the Canadian markets. They cannot hold assets there. This delivers a very strong signal to them that they are unwelcome. They are personae non gratae in the country. This is definitely useful, because obviously it serves to single out and stigmatize these specific individuals.
We can also expect that this will have a deterrent effect on other officials who are tempted to engage in the same sorts of practices if they have any interest in maintaining assets in Canada or if they have any relationship to the country. At the same time, we should distance ourselves from the idea that by imposing these sort of measures we will be able to compel a behavioural change in any of the affected individuals.
Actually, we have to take into account the fact that even if these individuals resent the fact that they are blacklisted and stigmatized by a respectable member of the international community such as Canada, their priority is to be regarded as members of the group in power, or the elite circles, let's say, in their country of origin. If they find themselves in a situation in which all of their colleagues, associates and bosses, the other members of their circle, are part of a blacklist, it would actually be very suspicious if they did not appear on exactly the same blacklist. Consider the situation of person who has been blacklisted under the act and whose name disappears from the blacklist after some time, perhaps in response to a modification of its practices. This would put the person in a very delicate position in those elite circles if they're integrated in the country of origin. It seems to me that the moment somebody gets blacklisted under the act, we cannot expect any behavioural change at all.
What is important about this circumstance is not that the should be believed to be an ineffective tool, but it is important to be clear about what the purposes and likely impact of this act will be, and it is important that this be communicated very clearly to the public, particularly to the Canadian public directly. Otherwise, the authorities will face the risk of being accused of putting legislation in place that is ineffective. Actually, this can be very effective. It will be able to fulfill certain important functions in international relations. In terms of criminalization of corruption, that should definitely be pursued, at least in my opinion, but we should make sure that no expectation is created among the public that this will actually change things on the ground.
Thank you very much.
I totally agree with what Dr. Lopez just mentioned.
Perhaps what I would add is that it is difficult to foresee what the next state will be, because, interestingly, UN sanctions are becoming increasingly targeted. We have seen the UN Security Council basically being ready to blacklist spoilers to peace treaties, for example. The sanctions of the UN are becoming more personal, more targeted, and more individualized.
But if we look at the sanctions practice of the European Union, we see that it is actually becoming less targeted. There is increased readiness to impose measures that affect wider sectors of the economy or population groups that are not directly implied in the misbehaviour that the sanctions are trying to address.
Since we have a situation in which universal sanctions are becoming more targeted, but some unilateral sanctions are becoming less targeted, it is difficult to foresee what the next state will be. In any case, the interplay between these two levels might be quite interesting to observe over the coming years. We might witness a scenario in which the global and the regional levels follow different paths. They might even go in opposite directions, but they might still be complementary and actually quite effective.
Finally, I would underline again what Dr. Lopez has mentioned: what matters is that we improve our capacity to follow the money. The activities of the Financial Action Task Force have made it much easier to identify what financing networks are in place. This knowledge makes it much easier to target them specifically.
It is not easy to establish a causality link, but in some cases this has been quite evident, because even the targeted leaders or the advisers, the circle around them, have confirmed that the impact of sanctions or the prospect of the continuation of sanctions has affected their calculations.
Sometimes it is possible to ascertain that there is a relationship of causality simply by taking a look at the chronology. In some cases, it is pretty evident, but in many cases, what you usually have is a combination of factors leading to these decisions.
Sanctions can be effective and not simply by having a direct impact on the calculations of the responsible leaders. Sometimes the sanctions can create conditions that foster a climate, or they bring about, for example, defections among the members of the inner circle of the leaders, which helps bring about this kind of behaviour.
As I mentioned in my presentation very briefly, sanctions are not only, or primarily, or exclusively about influence, but about changing the behaviour of the targeted leaders. They fulfill a number of functions in international relations, and sometimes the sanctions are actually designed to just create an incentive for the leaders to negotiate, to participate in a process of negotiation that is influenced by many other factors.
In many cases, as long as the sanctions have actually provided an incentive for parties participating in a conflict to actually negotiate, then we can consider the sanctions to have been successful, even if they have not brought about a complete change in the behaviour of the leaders, or even if they have not managed to interrupt completely the prescribed behaviour.
Yes, let me pick up exactly where Clara left off. In the first 14 cases of UN sanctions of position from the nineties to the mid-2000s, we found that 11 of those cases resulted in some kind of negotiation between the UN or various actors and the targets. This notion of sanctions that punish exclusively or so arm-twist and inflict pain as to make a target capitulate are all a myth. They're not borne out by the history.
What you want to do is not only enrage the target that you've sanctioned them, but you want to leave that path, that incentive, that Dr. Portela talked about, for there being an engagement between the international community or the imposers of sanctions and the target so you can persuade them to change the behaviour and show them the rewards that may be associated with that. When that can't happen, the utility of sanctions, to be effective, is that they should deny unlimited access to easy resources of a financial type, or arms or other types, which leave the perpetrators of violence unaffected by what you're doing. It's very important to have a mechanism whereby you can measure the ability to constrain those resources and limit the ways in which they can find substitutes for their arms, for their technologies, and for greater followers.
Finally, I think I'd say that sanctions fail when they're seen as the major instrument or the pulse. Sanctions work when they're part of the tools in a larger set of policies. If I want to improve the human rights behaviour of a target, I will use sanctions to deny its resources and try to create a bargaining situation, but I'm going to use the other available tools to our country or to our international organization to find ways to strengthen and protect the people who were targets or victims of the atrocities and to find ways to change the international dealings with commercial actors within that country that are ambivalent or a little embarrassed by the actions of the regime.
I think that brings us back to where Dr. Portela began. Can you get to the elites who support the policy but haven't actually designed it or implemented it and want a better business and political climate than they currently have?