An anatomy of a Cuban Pyjama crisis: Reconsidering blocking legislation in response to extraterritorial trade measures of the United States

Law and Policy in International Business, Spring 1999 by Boscariol, John W

The enactment of the Helms-Burton Act in particular has widened the scope of these problems. Now not only must Canadian corporations that are owned or controlled by U.S. entities resolve the difficult issues of conflicting obligations under Canadian and U.S. law, but all Canadian companies, and their officers, directors and employees, to the extent that the 1996 FEMA Order may apply to the Helms-Burton Act, have been drawn into this "Catch-22."

Even if one concedes that FEMA orders are absolutely necessary to assert Canadian sovereignty in response to extraterritorial measures undertaken by the United States, the 1996 FEMA Order suffers from broad, vague language, uncertainty of application and fundamental unfairness. By contrast, the EU blocking legislation explicitly applies to the Helms-Burton Act, it does not yet suffer from a lack of enforcement, provides for an exclusion permitting EU nationals to partially or fully comply with certain extraterritorial measures in cases of hardship arising out of conflicting obligations under EU and U.S. law.

In contrast to the time at the enactment of FEMA, today there are better responses to extraterritorial measures available to Canada than threatening Canadian directors or officers with five years in prison or Canadian companies with fines up to Can.$1.5 million. Recourse to binding dispute settlement procedures at the WTO or pursuant to NAFTA, along with the pursuit of bilateral or multilateral arrangements limiting the extraterritorial effects of these measures, are alternative options worthy of further consideration. Indeed, recent events concerning the EU's WTO challenge of the U.S. trade embargo of Cuba and the subsequent negotiation of the Investment Protection Agreement indicate that, at least for the time being, EU companies and individuals appear to be better insulated from the negative effects of U.S. extraterritorial trade measures than their Canadian counterparts.

1. The Pajamas Are Coming N.Y. TMEs, Mar. 9,1997, at Sec 3, p. 2.

2. See infra Part III.E for a further description of the Wal-Mart incident and the subsequent investigation by Canadian authorities.

3. Undoubtedly, there are a number of businesses that are unaware of the full ramifications of the Canadian legislation.

4. Foreign Extraterritorial Measures Act, R.S.C., ch. F-29, Sec 3 (1985), amended by ch. 28, 1996 S.C. (Can.).

5. See William C. Graham, The Foreign Extraterritorial Measures Act, 11 CAN. Bus. LJ. 410, 410 (1986).

6. Gilles Lauzon, Extraterritorial Acts Good and Bad, 1 CAN. INT'L LAW. 75, 75 (1995).

7. Foreign Extraterritorial Measures Act, supra note 4.

8. Id. Sec 8.

9. Id. Sec 9.

10. Id. Sec 5 (1) (a).

11. Id. Sec 5 (1)(b).

12. See Cuban Liberty and Democratic Solidarity (LIBERTAD) Act. 22 U.S.C. Sec6021 (Supp. III 1998).

13. Foreign Extraterritorial Measures Act. supra note 4, Sec 3.

14. For a detailed review of past extraterritorial disagreements arising between Canada and the United States and Canada's responses, see generally Graham, supra note 5;J.-G. CASTEL ET AL., THE CANADIAN LAw AND PRA(-ICE OF INTERNATIONAL TRADE 293-310 (1991); A.L.C. DE MESTRAL Rc T. GRUCHALLA-WESIERSKI, EXTRATERRITORIAL APPLICATION OF EXPORT CONTROL LEGISLATION: CANADA AND THE U.S.A. 129-IS(J (1990); J.-G. CASTEL, EXTRATERRITRIALITY IN INTERNATIONAL TRADE: C-NADA AND UNITED STATES OF AMERICA PRACTICES COMPARED (1998).