Canadian Lawyer InHouse

17 canadianlawyermag.com/inhouse April 2015 17 Working with Russia as sanctions bite. MATTHEW BilliNGTON WITH THE BEAR BY JANET GUTTSMAN hen Canada introduced its fi rst sanctions against Russia, back in March of 2014, it was the big play- ers like Bombardier and Kinross Gold that landed on the radar screen. Investors looked askance at Kinross, which has signifi cant opera- tions in Russia, even as the miner in- sisted that the new rules did not affect its business, and within months, plane and train maker Bombardier Inc. put a high profi le $3.4 billion airplane assembly project on hold. "It was a mixture of many things," Daniel Desjardins, general counsel and corporate secretary for Quebec-based Bombardier, says of the decision not, for now, to go ahead with the project to assemble Bombardier's Q400 turboprop planes in Russia. "Obviously the sanc- tions did affect the project, but also the state of the economy in Russia right now is a cause for the delay of the project. Right now we are paus- ing and we will stay tuned. And obviously if the environment changes, both from a sanctions point of view and from an economy point of view in Russia, we will start to reengage." Yet it's smaller Canadian companies that have often found it the most challenging to cope with the rapidly changing export and fi - nancing curbs, especially after a December 2014 amendment that in- troduced new restrictions on exports to big sections of Russia's energy sector. While U.N. sponsored sanctions against smaller countries like Burma or Iran had only a limited impact in Canada, the Russia-fo- cused restrictions on trade and investment have already affected a sur- prisingly large portion of the Canadian economy. That refl ects Rus- sia's size and its position as a producer of energy and other resources, as a still underdeveloped consumer market and as an overseas investor in its own right. Banks must weigh ownership closely in all fi nancial transactions relating to Russia and Russian entities and companies must pore through opaque documents to be sure they are not poised to deal with a partner named in the sanctions lists. "With Russia this is probably one of the fi rst times where the measures have a broad effect across the economy just because of the business, and Russia's involvement around the world. It's not just the territory of Russia, but its dealings with Russian banks, Russian mul- tinationals," says John Boscariol, head of the international trade and investment section at McCarthy Tétrault LLP, where he focuses on enforcement and compliance, anti-corruption laws, and economic sanctions. "Canadian companies are now realizing that you need to do due di- ligence on who you are doing business with abroad. You need to inves- tigate who stands behind those companies, who owns the companies you are doing business with. Is the company owned or controlled by a blacklisted person? Who else will be involved in the transaction? You should be screening everyone who is involved in the transaction to see if they are on those lists." Desjardins, who is responsible for Bombardier's corporate gover- nance and head of its legal team, credits the fi rm's in-house export control department with enabling Bombardier to stay abreast of the sanctions imposed by Canada, the United States, and the European Union, all areas where the Canadian fi rm has subsidiary operations and deep business ties. "Sanctions between states are part of today's life," he says. "And since we are a global corporation, we have to be mindful not just of the Canadian sanctions but [also] sanctions in Europe and sanctions in the United States, because we've got subsidiaries around the world that are governed by the laws in those jurisdictions." "You've got to have a good process and system . . . and make sure you map who is responsible to make sure that you follow up on the list and make sure that the updates are communicated. It doesn't happen BEAR BUSINESS BUSINESS DOING

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