I have been intending to write another Foreign Extraterritorial Measures Act (Canada) ("FEMA") post for some time. I informed an U.S export controls lawyer of this intention earlier this week as I was being asked a FEMA question.

Canada's FEMA is intended to block the extra-territorial application of U.S. anti-Cuba laws to Canadian corporations, a defined term that includes Canadian subsidiaries and branches of U.S. entities, as well as Canadian corporations without any relationship to a U.S. person.

FEMA's blocking provisions impose a number of obligations on Canadian entities and their shareholders, directors, officers and employees, including:

1) Every Canadian corporation and every director and officer of a Canadian corporation shall forthwith give notice to the Attorney General of Canada of any directive, instruction, intimation of a policy or other communication relating to an extra-territorial measures of the United States in respect of any trade or commerce between Canada and Cuba that the Canadian corporation, director or officer has received from a person who is in a position to direct or influence the policies of the Canadian corporation in Canada; 2) No Canadian corporation and no director, officer, manager or employee in a position of authority of a Canadian corporation shall, in respect of any trade or commerce between Canada and Cuba, comply with an extraterritorial measure of the United States or with any directive, instruction, intimation of a policy or other communication relating to such a measure that the Canadian corporation or director, officer, manager or employee has received from a person who is in a position to direct or influence the policies of the Canadian corporation in Canada.

The legislative intention of these two Canadian legal requirements is to block the compliance with U.S. anti-Cuba laws by persons in Canada. Canada has a strong trading relationship with Cuba. The United States on the other hand has an embargo that Canada does not support.

Canada has intentionally created a Catch-22 for some businesses. I would like to highlight that FEMA requires legitimate business under Canadian law to take place. FEMA is a pro-business piece of legislation (in addition to being retaliatory to U.S. laws that Canada does not like). It causes Canadian companies to ask the question: "How can we make this business transaction occur?" It requires the parties to use the law to find a solution that results in trade with Cuba. It inspires the positive Canadian approach.

What is striking is that the U.S. approach is the opposite. The U.S. approach is to stop the business from occurring. This is the effect of an embargo. The path is one of obstacles to business.

To put it another way, the safe approach under U.S. law is to not engage in business with Cuba or persons who do business with Cuba. One must justify engaging in business. However, under Canadian law, the safe approach is to engage in legitimate business under Canadian law, which includes business with Cuba. One must have a justification under Canadian law for not engaging in business with Cuba or persons doing business with Cuba.

Canadian lawyers are problem solvers when it comes to answering FEMA questions. Canadian lawyers are often asked to propose solutions so that the Canadian corporation and/or its representatives can comply with the law on both sides of the border. We do this with our positive Canadian disposition.

If you would like to discuss this further, please contact Cyndee Todgham Cherniak at 416-307-4168. I have to note that the comments feature on this blog has not been working for some time and your comments are not being filtered.