This article deals with lawyers representing sanctioned clients in Canada and the United States, how sanctions affect immigration, and their implication for the Canadian legal profession. Canada may impose sanctions on foreign states or non-state actors to support peace and security and enforce international norms and laws. Once imposed, these sanctions can restrict or prohibit foreign states or actors from trading with, entering Canada, or conducting business therein. There are several types of sanctions that can be imposed: economic, diplomatic, and military, among others. Canada has enacted three statutes that authorize the imposition of sanctions: (1) the United Nations Act, (2) the Special Economic Measures Act (SEMA), (3) and the Justice for Victims of Corrupt Foreign Officials Act (JVCFOA). The Royal Canadian Mounted Police (RCMP) and the Canada Border Services Agency (CBSA) enforce these statutes and regulations.
The lawyer-client relationship is a fiduciary one, in which the lawyer owes the client a duty of loyalty. The duty of loyalty is a fundamental principle in maintaining public confidence in the integrity of the legal profession and the administration of justice. However, this duty can be put to a test when lawyers represent clients who are subject to sanctions.
In Canada, the Law Society of Ontario direct that once a lawyer has been retained, the client may end the lawyer-client relationship at any time and for any reason. However, a lawyer can only withdraw from representation for good cause and on reasonable notice to the client. Reasons for mandatory withdrawal include (1) where the client has discharged the lawyer, regardless of the reason, (2) client instructions require the lawyer to act contrary to the Rules of Professional Conduct (the Rules), or (3) the lawyer is not competent to continue handling the matter.
Lawyers who wish to withdraw from representing sanctioned clients must ensure that the client will not be prejudiced as a result. In Cengic v. Castro the Ontario Superior Court of Justice held that “lawyers are not free to desert their clients at a critical stage of a matter or at a time when withdrawal would put the client in a position of disadvantage or peril.” In Cengic, the lawyer on record requested to withdraw 19 days before a six-week trial for a case that had been ongoing for a decade. As such, the Court held that the lawyer was not permitted to withdraw.
A similar approach has recently been taken by the Eastern Caribbean Supreme Court in the British Virgin Islands (BVI) when deciding whether a lawyer could withdraw from representing a sanctioned client due to the Russian invasion of Ukraine. In VTB Bank v. Taruta, the main issue was that the lawyer brought an application to withdraw from representation of VTB, a Russian bank that has been sanctioned by the United Kingdom. These sanctions also apply in the BVI. The lawyer, Ogier, argued that it was against his ethics and code of practice to act for a sanctioned company that was closely associated with Russia as any breach of those sanctions is a criminal offence. He argued that he could no longer meaningfully represent VTB because of the sanctions, and because VTB could no longer pay for representation. The Court did not accept these arguments. The Court held that Ogier could obtain payment by having any monies being “routed by other means through countries, like China or India, which have not imposed sanctions on Russian entities.” In relation to withdrawing, the Court held that “save for [VTB’s] assets are frozen, sanctioned entities retain all their civil rights, including full access to the Courts and an entitlement to have their rights and obligations determined by this Court.” The Court also held that if Ogier were to withdraw from representation, this could prejudice VTB’s current proceedings as they would no longer be represented and would be unable to argue their claims by themselves. The Court said that “there is nothing in the sanctions legislation to support an inference that the denial of a right to participate was intended.” Therefore, the request to withdraw was refused.
Sanctions alone do not give rise to good cause for withdrawal. Lawyers must ensure that their clients are not prejudiced by the withdrawal as they are owed a fiduciary duty of loyalty. However, lawyers still have an opportunity to withdraw if their sanctioned client’s instructions require them to act contrary to the Rules or by-laws made under the Law Society Act (LSA). Lawyers also must not knowingly assist in or encourage any dishonesty, fraud, crime, or illegal conduct by the client.
Akin to the Rules, lawyers practicing in the United States also have a duty to abide by the American Bar Association Model Rules of Professional Conduct (the Model Rules). The Model Rules stipulate the acts from which lawyers are prohibited in conducting in this situation. Lawyers must ensure that when representing sanctioned clients, they do not breach the Model Rules as lawyers “shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent […].”
United States of America v. Luis A. Flores is an example of the Model Rule 1.2(d) being applied. In the case, Flores was an attorney for Altamirano, who presented himself as a businessman wanting to establish an export/import business in the U.S. Flores spent several years opening corporations for Altamirano, along with several business checking accounts for each of Altamirano’s corporations at different banks and authorized numerous wire-transfers from accounts to various domestic and foreign recipients. Eventually both Flores and Altamirano were indicted for conspiracy to commit money laundering. The prosecution argued that Flores was “willfully blind” to his client’s unlawful activities, to which Flores argued that he was deceived by Altamirano into believing that he was a legitimate businessman. Flores filed a motion for a new trial. However, the District Court denied Flores’ motion, and an appeal followed. In the U.S. Court of Appeals for the Third Circuit (the Court), one of the issues in the case was whether the government produced sufficient evidence at trial to prove that Flores was willfully blind to the money laundering scheme and that he “knew that the monetary transactions represented the proceeds of criminally derived property.” The Court held that there was sufficient evidence for the jury to reasonably conclude that Flores participated in the money laundering conspiracy either knowingly or with willful blindness. The Court quoted the District Court with approval and held that there were multiple instances that pointed toward Flores being aware “of the high probability that Altamirano was involved in money laundering” including that “one of Flores’ initial interactions with Altamirano involved the supply of two false social security numbers.” The Court affirmed the District Court’s decision and denied the motion for a new trial, by finding that Flores breached the Model Rules because of his assistance in Altamirano’s criminal activity.
U.S. lawyers are also expected to decline or withdraw from representation if it “will result in violation of the rules of professional conduct or other law.” When representing sanctioned clients, lawyers should proceed with caution to ensure that they do not breach the Model Rules. After the United States imposed sanctions on Russia, some U.S. law firms have been barred from representing sanctioned individuals and entities. However, lawyers are still able to represent clients “if they are contesting sanctions in court or seeking counsel on compliance.” When the sanctions were imposed, different firms took different approaches to representation. Law firms that continue to represent sanctioned clients are rigorously screening them to ensure that representation does not lead to a breach in the Model Rules or any other laws. Many firms have ceased to represent sanctioned clients or have withdrawn representation to ensure compliance with the laws and regulations or are “reviewing and adjusting [their] Russia-related operations and client work to align with all application sanctions.”
SEMA allows for sanctions to be imposed on listed countries to maximize the effectiveness of a sanctions regime and ensure that they are applied multilaterally. There are four situations where SEMA can be applied. “(1) where an international organization to which Canada belongs calls on its members to take economic measures against a foreign state; (2) where a grave breach of international peace and security has occurred and is likely to result in a serious international crisis; (3) where gross and systematic human rights violations have been committed in a foreign state; or (4) where a national of a foreign state, who is either a foreign public official or an associate of such an official, is responsible for or complicit in acts of significant corruption.”
Sections 35(1)(c) to (e) of the Immigration and Refugee Protection Act (IRPA) allows the authorities to deny entry to Canada to foreign nationals who are inadmissible pursuant to sanctions. This section leads to a “travel ban,” restricting persons and entities listed under SEMA or the JVCFOA regulations. There is no reported caselaw that discusses section 35(1)(c), (d) or (e) of the IRPA. However, the Library of the Parliament of Canada published research suggesting that “[w]hile persons listed pursuant to the other triggers under the SEMA are not specifically inadmissible, listing may be considered when determining inadmissibility under other provisions of the IRPA.”
In Fallah v. Canada (Citizenship and Immigration), a sanctioned Iranian company was listed pursuant to SEMA. The listing was considered when the Court determined the inadmissibility of one of their employees. The applicant sought to enter Canada from Iran on a work permit to continue ongoing business. However, his application was refused under section 34 IRPA due to danger to the security of Canada, pursuant to his affiliation to the listed company. The applicant sought to challenge the refusal on the basis that he was denied procedural fairness as he believed that the officer failed to disclose all his concerns. The officer relied on the CBSA inadmissibility assessment which stated that, “Mr. Fallah has been the Managing Director of Fanavari Azmayeshgahi since October 2001 [redacted]… this company has been involved with procurement connected to the Iranian nuclear program.” The CBSA further recommended that “Mr. Fallah be found inadmissible on the basis of his employer’s ‘reported involvement with procurement connected to the Iranian nuclear program.’” The Court held that there was no breach of procedural fairness as the applicant was told that:
“his senior employment relationship with ‘an internationally sanctioned entity that deals with goods and products that are listed under’ the SEMA regulations was the potential basis for a refusal decision. He was also told to provide any information that would allay those concerns. Mr. Fallah, thus, knew of the Officer’s concern about the past trading practices of his employer and about its attempts to procure dual purpose technologies.”
The Officer’s decision was therefore reasonable, and the application was dismissed.
Recently, regulations have been enacted under SEMA against Russia which outline the prohibitions placed in response to the gravity of its aggression against Ukraine and the grave human rights violations that have been committed. Schedule 1 of the SEMA regulations list certain individuals and corporations that are subject to the regulation because there are reasonable grounds to believe that they contributed or engaged in violation of the sovereignty or territorial integrity of Ukraine, they participated in human rights violations, or based other grounds. The regulations may be amended continuously to expand on either the sanctions imposed on Russia, or to include additional individuals or corporations listed in Schedule 1. The individuals and entities listed are also inadmissible to Canada under the IRPA.
Due to the invasion of Ukraine by Russia, the Federation of Law Societies of Canada (FLSC) Policy Counsel issued a report discussing the implications for the legal profession. The report outlines that “legal professionals are expected to familiarize themselves with the sanctions and exercise due diligence in determining whether the sanctions apply to a matter or client they are dealing with.” Some implications that legal professionals must consider include not assisting clients engaging in illegal conduct. Sanctions prohibit any person in Canada, or Canadians outside Canada from participating or assisting in prescribed activities related to sanctioned persons. For example, prohibited activities include: (1)“dealing in any property, wherever situated, held by or on behalf of a designated person whose name is listed in Schedule 1, (2) entering into or facilitating, directly or indirectly, any transaction related to such a dealing; (3) providing any financial or other related services in respect of such a dealing; (4) making any goods, wherever situated, available to a designated person listed in Schedule 1; or (5) providing any financial or related service to, or for the benefit of, a designated person listed in Schedule 1.”
Other implications of the sanctions include withdrawing from representation if a client’s request means that the lawyer will be violating sanctions or the Rules, identifying and verifying participants in a transaction to ensure that they do not include persons targeted by the sanctions, and ensuring that they obtain information about the source and origins of the funds related to the legal services to be provided.
Lawyers representing sanctioned individuals must exercise caution when representing them, to ensure that they do not breach the Rules or violate the sanctions imposed under SEMA. The sanctions against Russia and other countries are continuously monitored, and the list of persons and entities may be expanded on a continual basis. Therefore, lawyers must act diligently by reviewing the Rules, regulations, and sanctions to keep abreast of the potential effects on their practice.
