Executive Summary: Key Legal and Evidentiary Issues

• Canada sanctioned Mr. Makarov under the Special Economic Measures (Russia) Regulations for his associations with the Russian government and state-connected business activities.

• The Minister of Foreign Affairs refused to recommend delisting Mr. Makarov, finding his attempts to distance himself from the Russian regime superficial and not meaningful.

• Judicial deference applies broadly to ministerial decisions involving foreign affairs, international relations, and sanctions policy, which are considered "quintessentially executive" matters.

• Mr. Makarov's evidence of distancing—including selling his business, renouncing citizenship, and claiming humanitarian contributions—was deemed insufficient to rebut his past associations.

• The appellant's argument for a narrow interpretation of "associate" was rejected because he failed to raise this issue before the Minister and the Federal Court properly exercised discretion in declining to hear it for the first time on judicial review.

• Past associations can constitute circumstantial evidence of current associations, requiring sanctioned individuals to take meaningful steps to demonstrate genuine separation from the regime.

Background and facts of the case

Igor Viktorovich Makarov became a billionaire through his business activities in Russia, some of which were state-assisted or state-associated, with connections, some close, to Russian governmental officials. In response to Russia's war against Ukraine, the Government of Canada imposed sanctions on the Government of Russia and those associated with it under the Special Economic Measures Act, S.C. 1992, c. 17 and the Special Economic Measures (Russia) Regulations, S.O.R./2014-58. The Governor in Council was of the opinion that the actions of the Government of Russia constitute a grave breach of international peace and security that has resulted or is likely to result in a serious international crisis. The Governor in Council added Mr. Makarov to the sanctions list.

Mr. Makarov's business and political connections

The record before the Minister established that Mr. Makarov was heavily involved in Russian gas sectors through his company, ITERA. He was connected to Russian oligarchs and controllers of Russian state-sponsored and state-owned companies. Additionally, he was a senior sports official in Russia and had dealings with the Russian President, Vladimir Putin.

The delisting application and ministerial decision

Under the Act and the Regulations, Mr. Makarov submitted an application to the Minister of Foreign Affairs to recommend to remove him from the sanctions list, with evidence and submissions in support. He argued he was no longer an associate of the Russian regime, citing that he was forced to sell his oil and gas business, ITERA; he renounced his Russian citizenship; his relationship with certain figures was adversarial; he had never been politically involved; he does not currently support President Vladimir Putin; he has spoken against the Ukraine war; and he has made humanitarian contributions to vulnerable Ukrainians. The Minister refused. Given the limited evidence, the Minister considered Mr. Makarov's attempts to distance himself from the Russian regime to be superficial, not meaningful. The Minister found that nothing really changed between the decision to list Mr. Makarov, which was supported by a constellation of evidence of association, and his application to be delisted. The Minister did not consider Mr. Makarov's renunciation of citizenship a genuine effort to separate himself from the regime. He had not publicly denounced the Government of Russia or President Vladimir Putin, something that might help to rebut his past associations and activities. The Minister also found the extent of Mr. Makarov's humanitarian efforts difficult to substantiate.

Federal Court proceedings

Mr. Makarov challenged the Minister's refusal in the Federal Court. The Federal Court dismissed Mr. Makarov's challenge, finding the Minister's decision reasonable: 2024 FC 1234 (per Brown J.). Mr. Makarov then appealed to the Federal Court of Appeal.

Standard of review and executive discretion

The Federal Court of Appeal agreed with Mr. Makarov that a reviewing court should not be unduly deferential and that in this regulatory regime, the Minister must consider, evaluate and weigh both sides' evidence, decide the matter based on a reasonable view of the legislative standards, and provide reasons responsive to the important personal and state interests at stake. However, the Court emphasized that the Minister's decision under this legislation—particularly her appreciation of the meaning of an "associate" in subsection 2(c) of the Regulations viewed in light of the other subsections, the purposes behind including "associates" in this sanctions regime, and whether there are reasonable grounds to believe Mr. Makarov is no longer an "associate" and should be delisted—calls at least in part upon intangible, policy-based appreciations resting right at the bullseye of the executive's high responsibility to manage Canada's foreign relations, international interests and global affairs. These are fields that draw upon sensitive, impressionistic and imprecise evaluations and assessments that are complex, ever-changing and fraught with expertise. The Court stated this is the realm of the quintessentially executive, a matter beyond the ken of the Courts, and thus the Minister's decision is rather unconstrained and judicial intervention will be rare.

Legislative interpretation arguments

Mr. Makarov asked the Court to interpret the word "associate" in the Regulations narrowly and precisely, arguing that "associate" requires a closeness that the Minister cannot demonstrate in this case, relying mainly on dictionary definitions. The Court rejected this argument, noting that Mr. Makarov, then represented by different counsel, did not make submissions to the Minister on the interpretation of "associate", including its text, context and purpose. Under this legislative framework, the Minister—not the reviewing courts—is the merits-decider on all issues, including issues of legislative interpretation. The Federal Court exercised its discretion not to hear Mr. Makarov's legislative interpretation arguments for the first time on judicial review, and to interfere with that discretion, the Court of Appeal must find palpable and overriding error, a high standard. The Court found Mr. Makarov had fallen way short of the mark and stated it would have exercised its discretion like the Federal Court did.

Ruling and outcome

The Federal Court of Appeal dismissed Mr. Makarov's appeal with costs. The Court stated it cannot say that the Minister's decision is unreasonable, especially given the ample and detailed record supporting the Minister's decision. The Court noted that Mr. Makarov properly admitted in his memorandum that "evidence of a past association could be circumstantial evidence of a current association," and this idea was very much part of the Minister's decision that in the circumstances Mr. Makarov had to do more to distance himself from the regime to be delisted. Canada (Minister of Foreign Affairs) and the Attorney General of Canada prevailed as the successful parties, with the appellant ordered to pay costs. No specific monetary amount was at issue in this case. The Court noted that if there is new evidence such that the legislative threshold of a "material change in circumstances" is met, Mr. Makarov can apply again to the Minister and the Minister must consider the matter afresh.