Legal Grounds for Seizure of Russian Assets

Following Russia’s full-scale invasion of Ukraine in February 2022, the EU, US, UK, and allies froze around $300 billion in CBR assets. Over $220 billion is within the EU, with Euroclear holding $190 billion. Initially, these funds were intended to remain blocked until Russia ends the invasion and compensates Ukraine. However, with direct damages due to the war reaching $155 billion as of January 2024 and continuing to rise, discussions about the confiscation of assets for the reconstruction of Ukraine have gained significant attention in recent months, making it a crucial and pressing topic.

While the U.S. appears to be moving in the direction of possible confiscation of CBR reserves and a bipartisan bill, which would empower the executive branch to confiscate Russian state assets within U.S. jurisdiction for the reconstruction of Ukraine, is under consideration in Congress – the “Rebuilding Economic Prosperity and Opportunity for Ukrainians Act” (known as REPO Act) —, the EU appears to insist on a more conservative position. As of February 2024, EU authorities maintain that the principal of Russian reserves held by Euroclear should remain immobilized and only accumulating extraordinary revenues can be taxed to secure additional financial aid to Ukraine.

In light of these developments, KSE Institute Legal Report on Confiscation of Russian State Assets for the Reconstruction of Ukraine provides an overview of the legal grounds for seizure of Russian assets as a matter of public international law. Further, the report dispels common and persisting myths about legal and practical difficulties arising from confiscation of Russian assets.

Specifically, the report contributes to the current debate about confiscation of CBR reserves as lawful countermeasures. It highlights that the legal nature of countermeasures is a means of self-help available to all states to induce the recalcitrant state to cease continuous and gross violations of international law. The report emphasizes that the mechanism of countermeasures is precisely designed to address situations like the one caused by Russia’s aggression against Ukraine. Countermeasures are intended to be used, first and foremost, to stop serious violations of international law when other mechanisms of redress such as UN Security Council resolutions are not available due to the fact that the violating state is a permanent member of the UN Security Council.

The report further provides an overview of Russia’s practice of abusing its veto powers in the UN Security Council to shield itself from international responsibility. It also addresses the proposition that the issue of seizure of Russian assets must be decided by an international tribunal or national courts in relevant jurisdiction by shedding light on Russia’s consistent strategy of noncompliance with decisions of international courts as well as amendments to Russia’s constitution which institutionalize Russia’s defiance of international law.

The report also provides an overview of collective nonmilitary self-defense as an alternative ground for the confiscation of Russian assets.

Further, it clarifies contested issues surrounding the application of sovereign immunity to the confiscation of Russian assets. The report explains that concerns regarding violation of sovereign immunity stem from an erroneous understanding of the principle of sovereign immunity, which is procedural in nature and applied in the context of litigation exclusively and cannot be overextended to other realms.

The report conclusively rebuts the position that Russia might retaliate against assets of Western companies within its jurisdiction. As is clearly demonstrated by an overview of Russian restrictive legislation adopted since spring 2022, even though G7 governments unequivocally communicated that seizure of CBR reserves was completely off the table, Russia has adopted a series of regulations that lead to the effective expropriation of assets of Western investors in Russia.

All these grounds ensure that democratic countries stay within the bounds of the law while holding Russia accountable for its violations. Furthermore, states possess sufficient means to legitimize the seizure, entering into a binding multilateral treaty regarding treatment of Russian assets to restore international peace and security.

Full report by KSE Institute is available here