Canadian firms under pressure to apply U.S. laws
Campaign News | Sunday, 4 February 2007
From the Montreal Gazette newspaper
By Don Macdonald and Allison Lampert,
CanWest News Service; Montreal Gazette
Published: Saturday, February 03, 2007
MONTREAL -- Workers at a Valleyfield, Que., munition factory were more afraid for their civil liberties than their job security last year when they learned their plant had been purchased by a giant U.S. defence contractor.
As a new Canadian subsidiary of a U.S. company, the 400 employees at SNC TEC Inc. feared that the far-reaching effects of the U.S. Patriot Act could make their personal information available to U.S. law-enforcement agencies.
They'd already heard about the B.C. government passing a law against transferring private information in response to the Patriot Act, which gives U.S. agencies greater access to personal data in the name of security.
So even before General Dynamics acquired the company last month, union leaders made sure privacy protection was written into a new collective agreement they signed in July.
"We led our own battle against the Patriot Act," said Marc Laviolette, president of the Syndicat National des Produits Chimiques de Valleyfield. "For us it was about prevention."
A rash of recent cases where Uncle Sam has reached across the Canadian border suggests the Valleyfield workers were probably wise not to take any chances with their privacy. Trade experts warn it's not easy for companies doing business in the United States to fight laws that have an impact in Canada.
"It's rather obnoxious that the United States would seek to apply its laws outside its own territory and force compliance by Canadian companies," said Lawrence Herman, an international trade lawyer at the firm Cassels Brock & Blackwell in Toronto.
"But the practical reality is that those Canadian companies want to continue to do business in the U.S., so it's in their own interest to comply."
A security-obsessed U.S. government has stepped up its enforcement of laws aimed at combatting terrorism, enforcing trade sanctions and preventing espionage. And that's left Canadian companies struggling to comply with the rules of both countries.
The result has been high-profile incidents that have outraged immigrant groups, Canadian nationalists and civil libertarians.
The Royal Bank took a public-relations black eye earlier this month when it acknowledged denying U.S. dollar bank accounts to hundreds of Canadian citizens holding dual citizenship from six countries sanctioned by the U.S.
Bell Helicopter made headlines when 24 employees at its Mirabel, Que., plant were refused access to U.S. defence data. The workers, while Canadian citizens, are also nationals of countries under embargo by the U.S. The company was complying with U.S. rules called the International Traffic in Arms Regulations (ITAR), that refuse Canadians from 16 sanctioned countries access to U.S. military data.
U.S. laws are also reaching out and touching Canadian companies in other areas, including the tough Sarbanes-Oxley rules on corporate disclosure, anti-trust laws and intellectual property law - most prominently highlighted in Research in Motion's patent dispute over its BlackBerry device.
Disgruntled aerospace workers in Ontario and an Iranian Canadian who was refused access to a U.S.-dollar bank account by RBC have filed complaints with human rights commissions over respectively the ITAR and banking rules.
While U.S. rules with extraterritorial impact apply to all foreign countries doing business in the U.S. or hosting U.S. subsidiaries, the problem is often most acute in Canada because the North American economy is so integrated. The U.S. is destination for 85 per cent of Canadian exports.
The Royal Bank's situation is a good case in point. The bank clamped down on holders of U.S. dollar accounts with citizenship from a list of six U.S.-sanctioned countries: Iran, Iraq, Sudan, North Korea, Myanmar and Cuba.
Legal experts don't consider the U.S. rules to be extraterritorial in a strict sense. U.S.-dollar cheques, drafts and wire transfers must be cleared through a U.S. bank such as RBC's U.S. subsidiary where they are subject to domestic law. But enforcement of the rules does have an impact on Canadian and other foreign companies and that's where activists say they go too far.
"The U.S. attitude is really interfering with a sovereign country and they don't have the right to do that," said Mohamed Elmasry, president of the Canadian Islamic Congress. Elmasry recently discussed the issue with Royal Bank CEO Gordon Nixon, who promised to press Ottawa to take up the sanctioned country banking issue with U.S. officials.
While most other big Canadian banks don't ask for passports before offering a U.S.-dollar account, the Royal insists the spectre of U.S. penalties is real and goes as far as threatening its ability to do business in the country where it derived 16 per cent of its $4.7-billion profit last year.
Two European banks have already been hit by heavy fines.
ABN Amro, a Dutch bank, was fined $80 million US in 2005 for failing to adequately combat money laundering and participating in transactions that violated sanctions laws. Switzerland's UBS was fined $100 million US in 2004 in connection with U.S. dollar transactions with Cuba, Libya, Iran and the former Yugoslavia.
The U.S. government also appears to be stepping up its enforcement of the best known of its extra-territorial measures - laws enforcing its 45-year-old Cuban embargo.
One law prevents foreign subsidiaries of U.S. companies from having virtually any dealings with or in Cuba, while another allows U.S. entry to be refused to executives and directors of any company found to be "trafficking" assets confiscated by Cuba after the 1959 revolution.
Under the latter legislation, executives and directors of the Toronto resource company Sherritt International have been barred from the U.S. because the company has interests in a nickel mine and oil-and-gas ventures in Cuba.
Recently, U.S. companies appear to be under increasing pressure to enforce embargo laws through foreign subsidiaries even as loopholes allow other U.S. companies to do business in Cuba.
Last February, the Sheraton Maria Isobel Hotel in Mexico City expelled 16 Cuban officials who were attending a conference with U.S. energy executives after U.S. government officials complained. In October, a Spanish tour operator ended trips to Cuba after being acquired by a U.S. company. And last month, Scandic Edderkoppen Hotel in Oslo, owned by U.S.-based Hilton Hotels Corp., informed 14 Cubans that they had to go.
In Canada, the federal government passed in 1992 what's known as a blocking order, prohibiting Canadian companies from complying with the U.S embargo against Cuba. The law's effect has been more symbolic than anything. There have been no prosecutions under the order and common sense suggests that Canadian subsidiaries of U.S. companies simply avoid looking for business in Cuba.
Indeed, trade experts say there isn't much the federal government can do to prevent the extraterritorial application of U.S. laws except to plead for special treatment given the tight economic ties between the two countries.
"It's a North American market and the potential impact of ignoring U.S. laws and regulations are draconian," said Peter Kirby, an international trade lawyer at the firm Fasken Martineau in Montreal. "When you've got that level of integration, necessarily you need to work in tandem in terms of policy objectives in certain areas. And I'd say for the most part we are able to find solutions."
Security clearance operates under double standard 250 words
CanWest News Service
MONTREAL -When 24 Canadian helicopter employees were refused U.S. security clearance because of their places of birth, Canada's legal experts cried discrimination.
Nowsome are also crying double-standard.
Unlike the Bell Helicopter employees in Canada, American employees at the company's Texas plants are eligible to work with American military data, even if they come from U.S.-sanctioned countries.
That's because under International Traffic in Arms Regulations, which controls access to U.S. military technology, ITAR rules American citizenship exceeds country of origin, a Department of State spokesperson confirmed.
"We have engineers from Vietnam here, we've never had a complaint," said Jackie Dale, president of the United Auto Workers' local 218, which represents employees at a Bell factory in Fort Worth, Texas.
"We've never heard of anything like that," said Dale of the incident at Mirabel.
Canadian aerospace leaders, questioned why workers from the 16 sanctioned countries were more of a security threat as Canadian citizens, than as U.S. citizens.
"If it's allowed in the States, then it's a double standard," said Sue Dabrowski, director general of the Quebec Aerospace Association.
"They have much more regard for their citizens than they have for ours," observed civil liberties lawyer Julius Grey.
Sebastien Grammond, a professor at the University of Ottawa's faculty of law, said the rules can't work if they're not being evenly applied.
"I think the fact that they're not doing this at home shows that the policy is no good."