Foreign Extraterritorial Measures Act (FEMA)

The Foreign Extraterritorial Measures Act (FEMA) is a piece of legislation enacted by the Government of Canada to protect Canadian businesses and individuals from the effects of foreign laws that attempt to regulate conduct outside Canadas borders. While its primary focus is on counteracting extraterritorial sanctions, embargoes and other measures imposed by nonCanadian authorities, FEMA also establishes a framework for compliance, enforcement and redress.

1. Purpose and Scope

FEMA serves three core purposes:

• Defence: Shield Canadian entities from foreign legal requirements that conflict with Canadian law or policy.
• Compliance: Provide clear guidance for businesses to navigate situations where foreign jurisdictions demand actions that would be illegal in Canada.
• Enforcement: Create mechanisms through which the Canadian government can intervene, seek injunctions, and impose penalties on parties that attempt to enforce foreign measures within Canada.

The Act applies to any person or corporation that is incorporated, carries on business, or otherwise operates within Canada. It also extends to foreign entities that have a substantial presence in Canada, such as a permanent office or significant employees.

2. Key Provisions

2.1 Prohibition on Compliance with Foreign Extraterritorial Laws

Section3 of FEMA makes it unlawful for a Canadian person to comply with any foreign law that purports to have effect outside that foreign jurisdiction, where such compliance would:

• Contravene an existing Canadian law, or
• Impair Canadas sovereign right to legislate and enforce its own policies.

Violations can result in civil penalties ranging from $5,000 to $500,000 per offence, and in severe cases, criminal charges.

2.2 Right to Seek Injunctive Relief

Anyone who faces an attempt by a foreign authority to enforce extraterritorial measures in Canada may apply to a Canadian court for an injunction. The court may:

• Order the foreign authority to cease its attempts to enforce the measure,
• Require the foreign authority to refrain from future attempts, and
• Mandate the return or destruction of documents, assets or data obtained under the foreign order.

2.3 Protection for Whistleblowers and Employees

Employees who refuse to obey foreign directives that conflict with Canadian law are protected from retaliation. The Act makes it unlawful for an employer to discipline, dismiss or otherwise penalise an employee for invoking FEMA protections.

2.4 Reporting Obligations

Corporations must report to the Minister of Innovation, Science and Industry any receipt of a foreign extraterritorial order that may affect their Canadian operations. The report must include the nature of the order, the foreign authority, and any steps taken to comply or resist.

3. Impact on Canadian Businesses

FEMA has immediate practical implications for sectors that regularly interact with foreign jurisdictions, such as finance, technology, energy and defence. Below are common scenarios and recommended actions.

3.1 Financial Institutions

Banks often receive requests from foreign regulators to freeze accounts, reveal client information, or restrict transactions that are legal under Canadian law. Under FEMA, banks must:

• Verify the legal basis of the request,
• Consult legal counsel before any disclosure,
• Document the decisionmaking process, and
• If the request is prohibited, promptly notify the Canadian regulator and seek a court injunction.

3.2 Technology Companies

Tech firms may be asked to provide user data to foreign intelligence services or comply with exportcontrol restrictions that exceed Canadian standards. Companies should:

• Implement a crossborder datagovernance policy,
• Maintain a safe harbour repository for data that can be disclosed only under Canadian authority, and
• Engage with the Office of the Privacy Commissioner to confirm compliance pathways.

3.3 Exportcontrolled Goods

When a foreign country imposes an embargo that Canada has not adopted, exporters must refuse to apply that embargo to Canadian transactions. FEMA supports this by allowing the Minister to issue export licences that specifically override the foreign restriction.

4. Enforcement and Remedies

The Minister may initiate investigations, issue compliance notices, and levy fines. In addition, affected parties may bring civil actions for damages caused by the enforcement of prohibited foreign measures. The courts have emphasized a balanced approach that respects both international comity and Canadian sovereignty.

5. Interaction with Other Canadian Laws

FEMA works in tandem with several existing statutes:

• International Trade Agreements Act: Provides the framework for Canadas participation in multilateral trade regimes.
• Criminal Code (Section83.01): Addresses foreigndirected bribery and money laundering, which may intersect with foreign extraterritorial demands.
• Privacy Act: Governs the handling of personal information, reinforcing the protection against foreign datarequests that violate Canadian privacy standards.

6. Practical Guidance for Compliance

1. Establish a Policy Committee: Include legal, riskmanagement and seniorbusiness leaders to review foreign orders.
2. Conduct a Risk Assessment: Identify which foreign jurisdictions pose the greatest likelihood of extraterritorial demands.
3. Document All Requests: Keep a secure log of foreign orders, the responding department, and the outcome.
4. Train Employees: Provide regular training on FEMA, emphasizing the right to refuse unlawful foreign directives.
5. Maintain Open Communication with Regulators: Promptly report potential conflicts and seek guidance where uncertainty exists.

7. International Context

Many jurisdictionsmost notably the United States (through the Foreign Narcotics Kingpin and Global Magnitsky regimes) and the European Unionhave enacted similar extraterritorial statutes. FEMA signals Canadas intention to resist parallel pressure and to assert its own foreign policy independence. It also provides a diplomatic tool: Canada can raise disputes in bilateral talks, referencing FEMA as the legal basis for refusing compliance.

8. Future Developments

The Canadian government has indicated that FEMA will be reviewed every two years to address emerging challenges such as:

• Cybersecurity directives from foreign nations,
• Sanctions regimes related to climatechange policies, and
• Potential conflicts with emerging digitalasset regulations.

Stakeholder consultations are expected to shape amendments, particularly in the areas of dataprivacy and crossborder supplychain transparency.

9. Conclusion

The Foreign Extraterritorial Measures Act represents a decisive step by Canada to safeguard its domestic legal order against the growing trend of foreign governments attempting to impose their laws beyond their borders. By clearly prohibiting compliance with conflicting extraterritorial measures, granting courts the power to issue injunctions, and protecting Canadian businesses and employees, FEMA offers a robust framework for navigating an increasingly complex international legal landscape.

Companies operating in Canada should treat FEMA as a central component of their compliance programmes, ensuring that they have the processes, documentation and legal counsel necessary to identify and resist prohibited foreign demands.

For more detailed information, consult the official text of FEMA or contact the Ministers Office of International Trade and Investment.