Confiscate Russian assets to rebuild Ukraine? Easier said than done

BET À DAY

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.

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.

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“There is so much damage and the country that caused all this destruction should pay,” said Canadian Deputy Prime Minister Chrystia Freedland, speaking to 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.

In early February, the European Union said it wanted to intensify “its efforts to use frozen Russian assets to support Ukraine's reconstruction and for reparations purposes”.

Poland and the three Baltic states have also publicly urged action “as soon as possible”.

Estonia is drawing up its own confiscation plans, which would make the small Baltic state a forerunner in the EU. a recent interview with former American investor and now activist Bill Browder.

Changing the law

The man — who is behind the Magnitsky law, passed by the administration's pioneering legislation to sanction Russian government officials implicated in human rights abuses–is working to put pressure on parliamentarians.

The U.S. Congress has conducted hearings on how U.S. law could be changed to allow for permanent forfeitures, though the Biden administration remains officially cautious about the idea.

Legal scholars draw a distinction between private assets frozen by Western governments — like an oligarch's yacht — and public assets like the Russian central bank's 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. Australian National University (ANU).

Forfeiting them poses a challenge to fundamental human and legal rights, such as the right to property, freedom from arbitrary punishment or the right to a fair trial.< /p>

“How are you going to prove that they (the confiscated assets) are the proceeds of criminal activities without the cooperation of Russia?”, asks Mr. Moiseienko.

Other problems arise from bilateral or international investment treaties signed with Russia, which would potentially expose states to legal action before international arbitration tribunals.

Public assets such as bank reserves power plants pose different, but equally thorny issues, because they are covered by “sovereign immunity” — an agreement that one state will not confiscate the property of another.

 Western central banks such as the US Federal Reserve (Fed), the European Central Bank or the Bank of Japan are said to have blocked an estimated $300 billion in reserves held at home by Russia.

“The customary international law of state immunity generally protects state property from confiscation,” wrote Paul B. Stephen in the Capital Markets Law Journal in June.

“Des exceptions exist, but their framework remains vague”, he added.

Another solution?

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.