Editor’s note: This article is part of Just Security‘s series on reparation mechanisms in the context of Russia’s war against Ukraine.

In June 2023, Canada’s Minister of Foreign Affairs, Mélanie Joly, announced that the Government of Canada had seized an Antonov-124 cargo aircraft under the Special Economic Measures Act (“SEMA”). The Canadian government had previously announced sanctions against the Volga Dnepr Group, a Russian company that owns Volga-Dnepr Airlines, which in turn owns the aircraft. In announcing the seizure, Joly proclaimed that “there will be nowhere left to hide for those who support and profit from the Kremlin’s war of aggression.” Passengers flying out of Toronto’s Pearson International Airport have grown accustomed to seeing the gigantic aircraft, which has sat idle on the tarmac since February 2022.

Politicians and commentators around the world have praised Canada’s deployment of asset seizures under the SEMA as innovative. Canadian academics have suggested that Canada’s use of legal tools could even result in a “Grotian moment”—that is, a “paradigm-shifting development in which new rules and doctrines of customary international law emerge with unusual rapidity and acceptance.” With a couple notable exceptions, few Canadian observers have identified potential problems, either under domestic or international law, with the Canadian legal regime.

In this article, I argue that various aspects of the SEMA regime may be impermissible under international law. Canada has both a legal and moral duty to counter Russian aggression and to support Ukraine but must make sure to abide by international law in its response. After all, as Oona Hathaway, Maggie Mills, and Thomas Poston note in their forthcoming Stanford Law Review article, “Ukraine’s most powerful asset in the war has been its capacity to demonstrate time and again that it is consistently on the right side of the law against an opponent bent on breaking every rule on the books.”

A Primer on the SEMA Regime

In 1992, Canada enacted the Special Economic Measures Act to enable the government to take economic measures against certain persons under grave circumstances, such as where gross and systematic human rights violations have been committed in a foreign State. Over the course of 2022 and 2023 and in response to Russia’s invasion of Ukraine, Parliament has introduced significant amendments to the SEMA to allow for even more robust measures. In June 2022, Parliament adopted a set of amendments, which, inter alia, allow Canada’s executive branch to seize or restrain property that is owned, held, or controlled by (a) a foreign State, (b) any person in that foreign State, or (3) a national of that foreign State who does not ordinarily reside in Canada. Despite some recent, minor wording changes, s. 4(1)(b) of the SEMA still allows the Executive branch to seize or restrain property owned, held, or controlled by a foreign State or a person identified by order or regulation.

The SEMA involves the Canadian judiciary too. Under s. 5.4(1), a judge shall order that the property be forfeited to the Crown if they determine that the property in question is indeed the property described under a s. 4(1)(b) order and is owned, held, or controlled by the person in question. The executive branch can then divert the proceeds from the disposition of property for three listed purposes:

(a) the reconstruction of a foreign state adversely affected by a grave breach of international peace and security; (b) the restoration of international peace and security; and (c) the compensation of victims of a grave breach of international peace and security, gross and systematic human rights violations or acts of significant corruption.

The SEMA thus grants the executive branch broad powers. Under the Act, the executive can seize Russian central bank assets, for example, and funnel those funds to Ukraine. The Act is unprecedented in the sense that no other Western ally has gone so far as Canada in explicitly authorizing the seizure of Russian central bank funds. Despite Parliament’s broad grant of powers, the Canadian executive branch has proceeded rather haltingly. While the government has seized the Volga-Dnepr Airlines’ Antonov aircraft as well as a company that belongs to Russian oligarch, Roman Abramovich, the executive has not gone so far as to seize Russian central bank assets. The Canadian government is right to proceed with extreme caution. The Canadian seizure of both private and public foreign assets poses challenges under international law.

The SEMA and the Seizure of Foreign Private Assets

To the extent that the SEMA has drawn criticism, commentators have tended to focus on its operation as regards foreign private assets. Joe Oliver, previously Minister of Finance under Prime Minister Stephen Harper, has argued that the SEMA allows the government to expropriate the assets of individuals absent proof of criminal or civil liability and without due process. Oliver warns that the confiscation of property “without proof of a crime or compensation could set a precedent for arbitrary action against other foreigners or even Canadians.” Indeed, while other countries have seized oligarch assets after proving that the property bore a nexus to criminal activity, the SEMA regime has allowed the Canadian government to seize foreign private property on thinner evidentiary grounds. An aggrieved oligarch might also argue that an asset seizure involves “unreasonable search and seizure” and that the Canadian state has thus breached s. 8 of the Canadian Charter of Rights and Freedoms. Ultimately, however, the fact that the Charter does not constitutionally protect property rights means that challenges based upon domestic law may not succeed.

Yet international law presents some challenges that may at least complicate the Canadian government’s efforts to seize foreign private assets. Although states have a sovereign right under international law to take property held by nationals or aliens, there are certain rules that attach to such takings: property must be accompanied by compensation and taken for a public purpose, on a non-discriminatory basis, and in accordance with due process of law. Here, Abramovich and Volga-Dnepr Airlines have prima facie cases that Canada’s actions violated international legal rules on expropriation.

A second complication under international law is the 1989 Agreement between Canada and the USSR for the Promotion and Reciprocal Protection of Investments, which continues to bind Canada and Russia. Under Article VI of the bilateral investment treaty, investments of either country shall not be expropriated “except for a public purpose, under due process of law, in a non-discriminatory manner and provided that it is accompanied by prompt, adequate, and effective compensation.” Article I defines the term “investment” quite broadly to include “any movable and immovable property and any related property rights.” Volga-Dnepr Airlines has already served notice of its intent to initiate a formal dispute under the treaty.

In short, Canada’s repeated expropriation without compensation of private Russian assets may run afoul of international law rules on expropriation and of its bilateral investment treaty with Russia. The uncertain legality surrounding the seizure under the SEMA of foreign private assets may force the Canadian government to exercise its powers under the Act even more sparingly in the future.

The SEMA and the Seizure of Foreign Public Assets

The SEMA’s most revolutionary aspect is that it allows the Canadian government to seize foreign public assets, such as Russian central bank holdings. That the Canadian government has not yet seized such assets indicates that it may be aware of the problems that would flow from such a bold move.

The SEMA’s provisions on the seizure of foreign public assets likely violate international legal rules on sovereign immunity. The consensus, as Paul Stephan notes, is that “the assets of a sovereign central bank enjoy some kind of international legal immunity from confiscation, as opposed to freezing, by the state in which they are found.” Ingrid Wuerth Brunk has likewise concluded that “the confiscation of central bank assets would almost certainly violate foreign sovereign immunity.” The bedrock principle of sovereign immunity flows from long-established principles of customary international law and finds expression in Article 2(1) of the U.N. Charter, which enshrines the “sovereign equality” of the United Nations’ members.

To my knowledge, no Canadian commentator has argued that the SEMA—as currently constituted—avoids the infringement of sovereign immunity. Instead, Canadian commentators have sought to justify the infringement of sovereign immunity under the counter-measures doctrine. Under the counter-measures doctrine, States can violate their own international legal obligations to induce the target state to “bring its conduct into compliance with international law.” But the counter-measures doctrine is not a magic wand; the doctrine involves requirements that can, in practice, be difficult to fulfil. Counter-measures must be reversible, temporal, proportionate, and designed to induce compliance.

Hathaway, Mills, and Poston have demonstrated that proposals for seizures of Russian central bank assets do not comply with the counter-measures doctrine. The proportionality requirement does not pose real challenges in this context, but the seizure of Russian central bank assets likely does not comply with the other requirements of the counter-measures doctrine. Ultimately, seizures are designed not to induce compliance, “but rather to enjoin or force it,” and thus cut against the very purpose of the doctrine. In addition, it is difficult to see how seizures can be reversible or temporary, especially under the SEMA. Once the government has diverted seized funds to Ukraine, for example, there would be no practical way to get those funds back. Brunk has warned that an assault on central bank immunity “to make permanent reparations to Ukraine” would be regarded by many countries as “manipulation for political purposes.”

It should be noted that a Canadian court could read the SEMA to comply with international rules on sovereign immunity. As Justice Louis LeBel held in R v Hape, courts will “strive to avoid constructions of domestic law pursuant to which the state would be in violation of its international obligations, unless the wording of the statute clearly compels that result.” A court faced with a challenge to the SEMA amendments might decide to read the SEMA to exclude a governmental power to seize Russian central bank assets. Without such a reading, however, it seems clear that s. 4(1)(b) of the SEMA, by allowing the executive to seize Russian central bank assets, violates the law on sovereign immunity and cannot be justified under the counter-measures doctrine.

Finally, a seizure of Russian central bank assets under the SEMA might also contravene domestic law. As Robert Currie, Fen Osler Hampson, and Allan Rock note, Russia could mount a successful defense under the State Immunity Act. Section 3 of the Act declares that “a foreign state is immune from the jurisdiction of any court in Canada.” Although the Act excepts foreign state immunity with respect to “any commercial activity of the foreign state,” the Canadian government would face an uphill battle in overcoming the State Immunity Act. As currently framed, the SEMA involves the judiciary in case of a governmental seizure of foreign public assets; in case of a judicial action under s. 5.4(1), the Central Bank of the Russian Federation would be able to rely upon the State Immunity Act to argue that the Canadian judiciary cannot approve of the seizure of its assets.

Bill S-278 and the Proposal to Amend the SEMA

Canadian Senator Ratna Omidvar recently tabled Bill S-278, an Act to amend the SEMA. The bill, which is still winding its way through the Senate, would amend the SEMA to allow the executive to dispose of a foreign state’s assets even if the seizure occurred without a judicial order. The normal SEMA procedure sets forth limited judicial safeguards through s. 5.4(1), which requires the judge to ensure that the seized property belongs to the person in question and is the property that the government has designated for seizure. Omidvar’s amendments would theoretically allow the executive to seize property without judicial involvement.

The bill’s supporters are evidently attempting to avoid the restrictions of the State Immunity Act. Moreover, at first glance, the bill places Canada back in compliance with international law. While there is consensus that the assets of a sovereign central bank enjoy immunity from confiscation, there is disagreement as to the limits of that principle. One notable question is whether the principle applies only to actions taken in connection with a judicial proceeding; a seizure of foreign state assets effected solely by the executive branch of a state might not contravene international law. Brunk has concluded that immunity does not apply to all measures that “restrain a foreign government’s use of its own property in the forum state.” Yet even Brunk suggests that proposals to seize Russian central bank assets through “executive action (with no role for courts)” would run into potential legal issues; she notes, for example, that international law requires “judicial process for property deprivations.” Hathaway, Mills, and Poston go even further and argue that asset seizures are “necessarily judicial” in character, for they are “premised on the decisive disapprobation of the target state’s conduct, informed by a finding of unlawfulness, however institutionally veiled.”

Thus, it is unclear whether Omidvar’s proposal effectively avoids infringement of Russia’s sovereign immunity. Under Hathaway, Mills, and Poston’s more functional reading of the principle, with which I agree, the Canadian government’s seizure of assets would infringe the principle. Even under a more formalistic reading, a domestic constitutional challenge under Omidvar’s envisioned SEMA regime might force the judiciary to authorize the seizure of Russian central bank assets; in such a situation, the new and improved SEMA would run into the same problems as the extant regime.

Charting a Path Forward

The motivations behind the 2022, 2023, and prospective amendments to the SEMA are noble. Canadian lawmakers stand relatively united in their desire to aid Ukraine and to counter Russian aggression. Yet in pushing back against Russia’s violation of the U.N. Charter, Canadian lawmakers must make sure to abide by international law. Although I have identified several international law challenges with the SEMA, there are plenty of alternative options open to the Canadian State.

Rather than confiscating Russian state assets, for example, Canada might freeze them. Brunk has argued that freezing assets does not at all implicate sovereign immunity because a freeze “does not involve the assertion of jurisdiction by domestic courts.” Hathaway, Mills, and Poston, on the other hand, contend that an asset freeze violates sovereign immunity but can be justified under the counter-measures doctrine. Canada could freeze Russian central bank assets until Russia finally agrees to meet its international law obligation to provide reparations to Ukraine. In tandem with an asset freeze and to meet Ukraine’s immediate financial needs, Canada should continue to funnel economic aid and reconstruction funds to Ukraine.

IMAGE: Minister of Foreign Affairs of Canada Melanie Joly speaks during the Eleventh Emergency Special Session of the General Assembly on Ukraine, at UN headquarters in New York City on February 22, 2023.  (Photo by TIMOTHY A. CLARY/AFP via Getty Images)