• GOVERNMENT OF CANADA IMPLEMENTS NEW IRAN SANCTIONS
  • RECENT DEVELOPMENTS IN THE EXPORT CONTROL OF ENCRYPTION TECHNOLOGY

GOVERNMENT OF CANADA IMPLEMENTS NEW IRAN SANCTIONS
 BY CHRIS KENT AND CHRIS COCHLIN

On June 17, 2010, regulations implementing the latest round of United Nations sanctions against Iran (the "Regulations") came into force in Canada. The Regulations are intended to implement United Nations Security Council Resolution 1929, the most recent in a series of Security Council Resolutions imposing sanctions against Iran, in response to Iran's continued failure to cooperate with the International Atomic Energy Agency ("IAEA"), and to comply with provisions of earlier Security Council Resolutions regarding its nuclear program.

Key aspects of the Regulations include:

  • An expansion of the list of items (including technology) for which exportation to Iran is prohibited
  • An expansion to the lists of individuals and entities subject to an asset freeze and travel ban (in the case of certain individuals)
  • A prohibition on persons in Canada or Canadians outside of Canada knowingly making available any property, financial service or other related service for the purpose of investing in commercial activity in Canada related to uranium mining production, or use of various nuclear materials or technologies to Iran, persons in Iran, corporations incorporated in Iran or subject to its jurisdiction, or any person owned or controlled by any of the foregoing
  • A clarification to previously unclear language prohibiting certain dealings with "designated persons"

Notably, other jurisdictions, including the United States and the European Union, have either already implemented or announced intentions to implement sanctions regimes, which go beyond the sanctions provided for by the various UN Security Council resolutions adopted to date. In contrast, Canada has thus far limited its sanctions to mirror the scope of the UN Security Council sanctions. That said, Canada's Foreign Affairs Minister, Lawrence Cannon, has indicated that: "Canada stands ready to implement additional sanctions to address Iran's egregious violations and continued threat to global peace and security."

In any event, the multijurisdictional combination of new UN-based sanctions, and unilateral sanctions in some jurisdictions that go beyond the UN sanctions, will require increased vigilance on the part of any business with actual, or even potential, direct or indirect business dealings involving Iran, Iranian entities, and, more generally, the Persian Gulf. Moreover, the fact that Canada's Regulations (which are an interpretation of the Security Council Resolution) are the legally binding instruments applicable in Canada, as opposed to Security Council Resolutions themselves, and given that that key terms in the Canadian Regulations (e.g. "persons in Canada", "Canadians outside Canada," "financial services") remain undefined, suggest that business officials and others with responsibility for trade compliance should always be vigilant to issues of Canadian legal interpretation in considering the potential application of Canada's Regulations, whether in the context of applying global trade compliance policies or otherwise.

RECENT DEVELOPMENTS IN THE EXPORT CONTROL OF ENCRYPTION TECHNOLOGY
 BY OLIVIA WRIGHT

At its most recent Plenary Meeting held in December 2009, the membership of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (the "Wassenaar Arrangement") agreed to certain revisions to its List of Dual-Use Goods and Technologies, among these the decontrol of certain items incorporating or using cryptography.

This recent decontrol of certain cryptographic items is effected through the inclusion of a "Note 4" to Category 5 – Part 2 of the List of Dual-Use Goods and Technologies. Subject to certain identified exceptions, Category 5 – Part 2 imposes export controls on systems, equipment and components thereof that use or incorporate cryptography, meeting specified criteria as well as certain encryption software. The new Note 4, however, exempts items incorporating or using cryptography that meet the following criteria from such export controls:

a. The primary function or set of functions is not any of the following:

  1. "Information security";
  2. A computer, including operating systems, parts and components therefor;
  3. Sending, receiving or storing information (except in support of entertainment, mass commercial broadcasts, digital rights management or medical records management); or
  4. Networking (includes operation, administration, management and provisioning);

b. The cryptographic functionality is limited to supporting their primary function or set of functions; and

c. When necessary, details of the items are accessible and will be provided, upon request, to the appropriate authority in the exporter's country in order to ascertain compliance with conditions described in paragraphs (a) and (b) above.

Notably, the application of this new safe-harbour turns on "function" rather than cryptographic strength. In this respect, it expands on certain existing limited safeharbour language in Category 5 – Part 2 of the List of Dual-Use Goods and Technologies. For example, item 5.A.2.a.1 provides for the control of certain systems, equipment and components which employ cryptography of a certain strength that performs a cryptographic function, "other than" authentication and digital signature.

These revisions have yet to be reflected in many national export control regimes, including Canada's Export Control List ("ECL"). As a member of the Wassenaar Arrangement, however, Canada can be expected to include this new Note 4 (as well as other revisions agreed to at the Plenary Meeting) in the next version of the ECL. If and when implemented, these revisions will have beneficial implications, in particular for exporters of high tech products that include cryptographic functionality that is ancillary to a product's primary function. It should be noted, however, that cryptrographic items otherwise described in Note 4, may still be captured by other export control classifications (and, consequently, may still be subject to export controls).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.