Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



CAUTION: Canadian Companies Owing Money To Libyan Regime May Be Prohibited Under Canadian Law From Paying

Louise Elliott of the CBC raises an important issue in her blog posting entitled "Does Suncor still owe money to Gadhafi's regime?" see http://www.cbc.ca/news/politics/inside-politics-blog/2011/03/does-suncor-still-owe-money-to-gadhafis-regime.html

This issue is: Under the new Canadian economic sanctions against the Libyan regime and/or institutions, can Canadian companies pay amounts owed?

The answer may be "NO"! The new Canadian regulations (unofficial version) is available at the following link - http://www.international.gc.ca/sanctions/libya-libye_regs.aspx

The new Canadian regulations prohibit Canadians (and Canadian businesses) from making goods (wherever situated) available to designated persons. Persons in Canada and Canadian outside Canada shall NOT provide any financial or financial-related service to or for the benefit of a designated person. Persons in Canada and Canadian outside Canada shall NOT deal in any property, wherever situated, held by or on behalf of a designated person or enter into or facilitate any transaction related to a dealing such property or provide any financial or other related service in respect of such dealings. Persons in Canada and Canadian outside Canada shall NOT make any property or any financial or other related service available to a designated person, to a person acting on behalf of, or at the direction of, a designated person or to a person owned or controlled by a designated person. Persons in Canada and Canadian outside Canada shall NOT deal, directly or indirectly, in any property in Canada as of February 26, 2011 or at any time after that date, that is owned or controlled by a designated person, by a person acting on behalf of, or at the direction of, a designated person or by a person owned or controlled by a designated person.

That being said, the Canadian government may issue certificates to Canadian businesses after situations are reported to the government. The payments may be made if reviewed and permitted by Canadian officials.

What this means is that Canadian companies who owe money to the Libyan regime must immediately tell their accounts payable department to stop payment on all amounts owed to the Libyan regime. All payments due to the Libyan regime (inside or outside Libya) must be approved by a chief compliance officer or most senior levels of management prior to being processed. The chief compliance officer and senior members of management must review any transaction or payment to determine if it is covered by the new Canadian sanctions. If the transaction or dealing is clearly prohibited or their is any doubt whether the transaction of dealing is prohibited, legal advice would be prudent. In addition, a determination must be made whether the new Canadian regulations create new reporting requirements. If there is a reporting requirement, thought must be put into the making of the reporting (communications must be clearly considered and written to avoid confusion and negative ramifications).

Internal controls must be updated to reflect the new Canadian sanctions against the Libyan regime. This is important because Canadian companies have a socially responsibility to help the world to apply pressure to stop the crimes against the citizens of Libya. Money and reputation is at stake if mistakes are made - and this is a time when mistakes should not be an option.

For more information, please contact Cyndee Todgham Cherniak at 416-307-4168.

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