Frozen Russian Assets and the Reconstruction of Ukraine: Legal Options2022-06-01 | Expert publications, Asset confiscation
This paper is based on a workshop that brought together a group of academics, practitioners and civil society groups specialising in sanctions, asset confiscation and international law in April 2022. It has also benefitted substantially from feedback provided by multiple experts, including Ben Batros, Jamison Firestone, Dr Tom Grant, Professor Chimène Keitner and Professor Philippa Webb. The authors alone are responsible for any errors and omissions, and they wish to thank everyone who has contributed to this collective effort.
Following Russia’s invasion of Ukraine, a significant amount of assets linked to Russia has been frozen around the world. This reportedly includes approximately US$300 billion in the Russian Central Bank’s foreign currency reserves. The amount of frozen wealth that belongs to Russian state-owned enterprises or private persons, such as so-called oligarchs, is unknown but likely runs into tens of billions of US dollars.
Under international law, Ukraine is entitled to full reparations from Russia for the damage the latter caused. These continue to grow and, according to the Ukrainian government, total over US$600 billion as of late April. But there is no real prospect of Russia honouring this obligation. It has openly acted in defiance of international law, including by disregarding the ruling of the International Court of Justice that ordered that Russia cease its invasion. As a result, frozen Russian property overseas presents the only pool of assets that can realistically be used to compensate Ukraine.
There is, however, no existing legal framework for doing so. The freezing of the assets means Russia cannot use them, but it does not permit their confiscation or handover to Ukraine. This is notwithstanding the recognition by major sanctioning powers, including the US, EU and UK, that it is desirable for these assets to be disbursed for Ukraine’s benefit. There is therefore a gulf between political aspirations and available legal tools. This exacerbates the risk that the cost of rebuilding Ukraine will fall entirely on Ukrainian and allied nations’ taxpayers, rather than Russia as the aggressor. In the meantime, Ukraine is under severe financial strain as it seeks to continue providing essential services to its population.
There are well-known and formidable legal challenges in the way of converting the temporary freezing of Russia-linked assets into their permanent seizure. State-owned property is shielded from enforcement by sovereign immunity rules. Meanwhile, the confiscation of private property gives rise to constitutional and human rights concerns. The objective of this paper is to present options for resolving these difficulties.
In summary, there appear to be four main options in dealing with frozen Russian assets:
- Continued freezing
- Private claims
- Enforcement of a foreign judgment or international award
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