Canada: Foreign Extraterritorial Measures Act incorporating the amendments countering the U.S. Helms-Burton Act

October 9, 1996
+Cite as 36 I.L.M. 111 (1997)+
Introductory Note by Douglas H. Forsythe

The recent amendments to Canada's blocking legislation, the Foreign Extraterritorial Measures Act (FEMA), came into force on January 1, 1997. The amendments (Bill C-54) were sparked by the need to react to the U.S. Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 (the Helms-Burton Act). In particular, Canada wanted to provide some protection to Canadians from lawsuits filed pursuant to Title III of the Helms-Burton Act. This Title provides a right of action in U.S. courts in respect of property expropriated in Cuba.

Canada and most other major partners of the United States have been strongly critical of the Helms-Burton Act. Canada's concerns are not just in respect of foreign policy differences on relations with Cuba, but also concerns over the longer term implications of the U.S. resorting to this type of legislation to try and force other nations to act in accordance with U.S. objectives. This note will address only the FEMA amendments as part of the Canadian response to the Helms-Burton Act.

It should be noted that the federal government of Canada can and does exercise extraterritorial jurisdiction. Accordingly, Canada does not object to the assertion of extraterritorial jurisdiction per se. What Canada does oppose is conflict created by such assertions of jurisdiction. More specifically, Canada opposes extraterritorial measures that contradict or undermine the laws or clearly enunciated policies of another state exercising concurrent jurisdiction, on a territorial basis, over the same conduct.

Title III of the Helms-Burton Act represents just the type of U.S. extra-territorial reach that stretches the internationally accepted principles of jurisdiction. The reach of the legislation is justified by the so-called "effects doctrine". It also suggests that the expropriations that took place in Cuba decades ago are continuing to have such a serious effect within the United States so as to justify the rather extraordinary rights to claim inflated damages given to U.S. claimants.

Before turning to the amendments themselves, we should review the enactment of the original FEMA legislation. FEMA was adopted by Parliament in 1984, taking effect in 1985. The origins of the legislation lie in battles in the late 1970s and early 1980s over extraterritorial assertion of jurisdiction that Canada found objectionable. These conflicts included the uranium cartel litigation, the Bank of Nova Scotia subpoenas case and the Siberian pipeline embargo.

The legislation was based on similar blocking laws that were enacted or then contemplated by others, notably the U.K. Protection of Trading Interests Act. Canada did have some experience in blocking legislation; at the provincial level, both Quebec and Ontario had enacted laws to provide for orders to protect corporate documents from production in foreign court proceedings. During the uranium cartel litigation, the federal government enacted an Order-in-Council to block production of Canadian court documents in a U.S. court. While the Supreme Court of Canada upheld the validity of that Order, an impetus behind the enactment of FEMA was a wish that such a blocking power should have a sounder legislative footing.

The FEMA has three blocking provisions. The first (section 5) authorizes the Attorney General, with the concurrence of the Minister of Foreign Affairs, to make orders to block compliance in Canada with an extraterritorial measure of a foreign state. The extraterritorial measures must adversely affect significant Canadian trading interests or infringe Canadian sovereignty. This section is the basis of the current FEMA order (the Foreign Extraterritorial Measures (United States) Order, 1992, as amended in 1996). This order forbids compliance by Canadians with the extraterritorial measures enacted by the United States to enforce the embargo of Cuba.

The second blocking provision permits the Attorney General (a) to order that records in Canada not be produced in a foreign tribunal (section 3) and (b) to order that the records be seized for safe-keeping if the Attorney General is not satisfied that the records are secure from production. As with section 5, the Attorney General must consider that the actions of the foreign tribunal affect significant Canadian trading interests or infringe Canadian sovereignty. This is the authority that would be relied upon if Canada were again to block production of documents, as was done in the uranium cartel case.

The third blocking provision, section 8, was amended. It originally provided that the Attorney General may issue orders forbidding enforcement of foreign competition law ("antitrust" in the Act) judgments in Canadian courts. As with the other provisions, the Attorney General must find that the foreign judgment affects significant Canadian trading interests or infringes Canadian sovereignty.

Related to the third blocking provision is the "clawback" in section 9. It originally provides that if a judgment is blocked by a section 8 order, the Canadian defendant in the foreign action had the right to sue in a Canadian court to recover an equivalent amount in damages against the person who took action in the foreign tribunal.

The amendments to FEMA were generally directed at changing the blocking provisions in section 8 and the clawback provisions in section 9. Generally, these sections were amended by removing the restrictions that limited the application of these sections to competition law or antitrust judgments. The amendments provide for a Schedule to the Act which will list foreign laws that the Attorney General, with the concurrence of the Minister of Foreign Affairs, considers to violate international law and international comity. The amended section 8 allows for blocking of judgments made pursuant to such scheduled legislation. The Helms-Burton Act is named in the schedule to the Act. In fact, in consideration of the FEMA amendments bill, Parliament introduced an amendment that provided that judgments made pursuant to the Helms- Burton Act will be blocked from enforcement in Canadian courts. There is no need for an order of the Attorney General. The FEMA amendments also make the clawback available in respect of scheduled offensive legislation.

The thrust of these amendments is to provide tools to Canadians to protect themselves from Helms-Burton litigation in respect of property interests that they might have in Canada. It is hoped that the existence of the blocking legislation will discourage the initiation of lawsuits both by ensuring that judgments cannot be enforced against assets in Canada and providing for a clawback of damages and costs. The provision in the amended Act to schedule new foreign trade laws that are objectionable will provide the Canadian Government with flexibility to react in the unfortunate event that more legislation, perhaps on the model of Title III of the Helms- Burton Act, is enacted.

Review of Major Amendments to FEMA

Section 2.1 is new. It allows the Attorney General, acting with the concurrence of the Minister of Foreign Affairs, to amend the schedule to the Act to list foreign trade laws or provisions of such laws which, in his or her opinion, are repugnant to international law or international comity. The Attorney General may, with the same concurrence, remove items from the list when he or she deems it appropriate to do so.

The amendment to subsection 3.(1) expands the powers of the Attorney General to prohibit or restrict the disclosure of records to foreign tribunals. The new words allow the Attorney General to prevent such disclosure when the foreign tribunal is exercising jurisdiction or powers relating to the enforcement of legislation listed in the schedule to the Act.

The amendments in subsection 7.(1) increase the penalties available under the Act in respect of breaches of orders made under sections 3 and 5, in such a manner as to contribute to discouraging compliance with objectionable foreign measures. The amendment is not directly related to addressing the Helms-Burton Act. Rather, an increase in the fines was thought necessary to balance the penalties available in other jurisdictions to enforce foreign extraterritorial measures that Canada wants to block. For example, breaches of the United States regulations imposing the Cuban embargo are punishable by fines of up to USD 1 million.

Subsection 7.(4) is new. It lists factors to be taken into account by a court in determining the sentence for a breach of an order made under sections 3 or 5 of the Act. The list is not exclusive: judges may consider other factors as well. The listed factors were selected from judicial precedents. They are: 1. the degree of premeditation in the commission of the offense; 2. the size, scale and nature of the offender's operations; and 3. whether any economic benefits have, directly or indirectly, accrued to the offender as a result of having committed the offence.

Section 7.1 is new. It provides that any attempt to enforce in Canada any judgment, order or decree given under the Helms-Burton Act will be blocked. There will be no need for a specific Attorney General's order (as provided for in subsection 8(1.1), below). This blocking of all Helms-Burton judgments will permit Canadian companies that do not have assets in the United States to ignore any proceedings based on the Helms-Burton Act that may be launched against them in the U.S., as they will know that no such judgments will be enforced in Canada.

Subsection 8.(1.1) is new. It allows the Attorney General, by order, to prevent, in whole or in part, the recognition and enforcement in Canada of judgments given under scheduled legislation which adversely affect significant interests in Canada.

Section 8.1 is new. It provides that the Attorney General has the authority to issue, upon application by a Canadian or a person carrying on business in Canada, a special recovery order in cases where a judgment is given under the Helms-Burton Act. Such a special recovery order may be issued in respect of a judgment under scheduled legislation or an antitrust (competition) law when such a judgment has been fully satisfied outside Canada and therefore no order can usefully be issued to prevent its recognition and enforcement in Canada.

Subsection 9.(1) has been extended to allow for a right to recover in whole or in part in Canadian courts any sums of money paid in satisfaction of a judgment given under scheduled legislation as well as antitrust (competition) laws. The right to recover now extends to expenses incurred in the proceedings in the foreign jurisdiction and in the recovery proceedings in Canada and any consequential loss or damage suffered by reason of the enforcement of the foreign judgment. The rule on expenses and consequential damages is new. It also applies in respect of antitrust (law) judgments that are extraterritorial or otherwise offensive to Canadian sovereignty.

Subsection 9.(1.1) is new. It has been added to allow persons in Canada to recover expenses incurred in defending foreign litigation taken under scheduled legislation or an offensive antitrust law, even when that litigation is still in progress.

Subsection 9.(2) has been amended to provide that a recovery judgment rendered in Canada, including one for expenses in respect of foreign litigation still in progress, can also be executed on the property of a person who owns or controls, or is a member of a group that controls, the person who obtained the impugned foreign judgment or is seeking such a judgment.

The schedule is new. It lists all the provisions of the United States Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 (the Helms-Burton Act) as a foreign trade law for the purposes of the amended Act.

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