Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Canada Is Likely To Freeze Assets of Libyan Regime (Soon)

On June 14, 2011, the Canadian House of Commons voted to recognize the Libyan rebel government, the National Transitional Council (TNC) as the legitimate representative of the Libyan people.

What this means is that the Government of Canada may start the process to freeze the assets of the Libyan (Gadaffi) regime under Canada's newly passed Freezing Assets of Corrupt Regimes Act.

The Freezing Assets of Corrupt Regimes Act allows the Government of Canada to act upon the request of a foreign state to freeze the assets that their former leaders and members of their entourage, including family members, senior officials and associates, have placed in Canadian financial institutions. It grants the Government of Canada the authority to seize any property such individuals own in Canada.

The clock is ticking for the process to start. The precondition to the freezing assets is a request by a foreign country. With the June 14, 2011 recognition of the National Transitional Council, there is now a foreign state to send the needed request to Canada.

Where the Governor-in-Council (that is, Cabinet) determines that the requesting country is in a state of turmoil or political uncertainty (and no one questions whether Libya meets that requirement), it may order the assets to be frozen.

The asset freeze order will be sent to Canadian financial institutions. The assets at issue may be frozen for a period of up to five years in the interests of international relations, such as to permit the foreign state to initiate the necessary proceedings to allow for seizure and forfeiture of assets situated in Canada. The time period is open to renewal.

If any member of the Gadaffi family has assets in Canada, or if any member of the Gadaffi regime has assets in Canada, those assets may soon be frozen. The newly recognized National Transitional Council in Libya can cut off foreign stockpiles of wealth and, in so doing, may limit the Gadaffi regime's ability to pay for new supplies using assets located in Canada. They may limit the Gadaffi regime's ability to live off Canadian assets (if they should decide to leave Libya). Finally, Gadaffi will not be able to buy land in Canada to pitch his tent.

All Canada needs to do is wait for the request and then Canada may act quickly to freeze the assets of the Gadaffi family and regime in Canada. Canadian financial institutions and businesses will have to respond quickly to the Canadian freeze order if and when it is made. Since the legislation is new, the freeze order may be confusing in that Canadian companies must learn what to do and establish procedures to comply with the freeze order. Previously, orders were issued with respect to Egypt and Tunisia.

For more information, please contact Cyndee Todgham Cherniak, a Canadian export controls lawyer, at 416-307-4168.

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