Canada has implemented its commitments under the 2008
international Convention on Cluster Munitions by ratifying
the Convention and bringing national legislation, the
Prohibiting Cluster Munitions Act (Cluster Munitions
Act), into force on March 16, 20151 and this might
be of interest to investors and fund managers.
The Cluster Munitions Act prohibits the use,
development, production, acquisition, possession, import or export
of cluster munitions, explosive submunitions and explosive bomblets
(collectively, "cluster munitions"), as well as the
foreign movement thereof for purposes of transferring their
ownership and control. It also prohibits attempting to commit, or
aiding, abetting, counselling or conspiring to commit, such a
prohibited act and providing assistance after a prohibited act.
The Cluster Munitions Act does not explicitly prohibit
financial investments in cluster munitions, contrary to the
legislation of certain other countries that have enacted the
international Convention on Cluster Munitions. That being
said, Canadian government representatives have repeatedly asserted
during Canadian parliamentary debates that direct and intentional
investments in entities that engage in an act prohibited by the
Cluster Munitions Act are prohibited under the Act's
aiding or abetting prohibition.
It is unclear how the Cluster Munitions Act would be
applied to specific investment scenarios because of the absence of
explicit wording in the Act and the requirement that an offence
under the Act be committed with both knowledge and intent. We
expect that if investments are in fact prohibited under the
Cluster Munitions Act, its application is likely to vary
depending on the specific facts, including the type of investment,
the nature of the securities and the assessment of the intent of
the investment. In this respect, a case-by-case analysis would be
required to assess the likelihood that a particular investment is
prohibited or not under the Cluster Munitions Act.
1 The Convention will enter into force internationally
with respect to Canada on September 1, 2015.
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.
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