The idea is seductively simple: Westerners should use the billions of dollars in frozen Russian assets for the reconstruction of Ukraine. But this option faces significant legal problems and has not progressed further.
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Following Russia’s invasion of Ukraine on February 24, 2022, unprecedented economic sanctions against Moscow led to the freezing by Western banks including of approximately $350 billion in Russian public assets, foreign currency and property belonging to to Russian oligarchs.
Nearly twelve months later, politicians and activists in some Western countries are pleading for these resources to be used to rebuild the infrastructure, homes and businesses destroyed in Ukraine by the Russian invasion.
“There is so much damage and the country that caused all this destruction should pay,” Canada’s Deputy Prime Minister Chrystia Freedland told the World Economic Forum in Davos in January.
In December, the Canadian government announced that it had begun a process to seize $26 million from a company owned by Russian oligarch Roman Abramovich, under sanctions in retaliation for the invasion of the Ukraine by Moscow. An action described as “theft in broad daylight” by the Russian ambassador to Canada.
At the beginning of February, the European Union said it wanted to intensify “its efforts to use frozen Russian assets to support the reconstruction of Ukraine and for reparation purposes”.
Poland and the three Baltic states have also publicly urged action “as soon as possible”.
Estonia is developing its own confiscation plans, which would make the small Baltic state a frontrunner in the EU.
“Putin broke, he must fix it,” former American investor and now activist Bill Browder told AFP in a recent interview.
The man — who is behind the Obama administration’s Magnitsky Act, pioneering legislation to punish Russian government officials implicated in human rights abuses — is working to put pressure on parliamentarians .
The US Congress has been conducting hearings on how US law could be changed to allow for permanent confiscations, though the Biden administration remains officially cautious on the idea.
Lawyers distinguish between private assets frozen by Western governments — like an oligarch’s yacht — and public assets like Russian central bank currency reserves.
In the case of private assets, legal safeguards mean that Western states are allowed to permanently confiscate them in very limited circumstances — usually when they can be proven to be the proceeds of criminal activity. .
And even if the Russian oligarchs operate in the troubled waters of Russian capitalism, “we don’t really know if the assets that have been frozen are the proceeds of criminal activities”, international legal expert Anton Moiseienko told AFP. the Australian National University (ANU).
Confiscating them poses a challenge to fundamental human and legal rights, such as the right to property, protection against arbitrary punishment or the right to a fair trial.
“How are you going to prove that they (the confiscated assets) constitute the proceeds of criminal activities without the cooperation of Russia?” Asks Mr. Moiseienko.
Other issues arise from bilateral or international investment treaties signed with Russia, which would potentially expose states to legal action before international arbitration tribunals.
Public assets like central bank reserves pose different, but equally thorny issues, because they are covered by “sovereign immunity” — an agreement that one state will not confiscate the assets of another.
Western central banks such as the US Federal Reserve (Fed), the European Central Bank or the Bank of Japan would have blocked reserves estimated at 300 billion dollars held at home by Russia.
“Customary international law relating to state immunity generally protects against confiscation property belonging to the state,” Paul B. Stephen wrote in June in the “Capital Markets Law Journal.”
“Exceptions exist, but their framework remains unclear,” he added.
Many lawyers believe that the best opportunity for compensation for Ukraine is to try to obtain a favorable agreement to end the war, which would include reparations.
But others, including activists like Bill Browder, advocate a more radical approach that would send a message to other states, including China.
“It doesn’t make sense that Putin invents new types of crimes and that, on our side, we cannot reinvent the legal framework to respond to these crimes,” he argued to AFP.