Abstract

The sanctions imposed on the Russian Federation following its further invasion of Ukraine in 2022 include measures such as the seizing of goods and freezing of assets. As the war between Russia and Ukraine grinds on, the call to confiscate these goods and assets, and use the proceeds for the recovery and reconstruction of Ukraine, are growing stronger. However, this endeavor is not without legal challenges, particularly concerning the repurposing of frozen Russian sovereign assets, such as the exchange reserves of the Central Bank of Russia, for which there is no clear basis under international law. Based on a legal assessment, the author argues that repurposing these assets, even if such an action does not fully meet the criteria to be classified as a third-party countermeasure, can still be justified as an in extremis measure given the exceptional circumstances of the current situation, provided certain conditions are satisfied. Such an in extremis measure cannot be considered a rule of customary international law as state practice is not sufficiently widespread, representative, and consistent and opinio juris is still lacking.

Introduction

1The Russian annexation of Crimea in 2014 and the destabilization of Eastern Ukraine prompted the imposition of the first set of economic sanctions targeting the Russian Federation (Russia). While the extent and scope of these sanctions initially remained limited, Russia’s recognition of the self-proclaimed People’s Republics of Donetsk and Luhansk, followed two days later by Russia’s illegal and unprovoked armed attack on Ukraine on February 24, 2022, triggered an unprecedented “rolling program of intensifying sanctions”.¹ Partly based on the sanctions of 2014, the United Kingdom (UK), the United States (US), and other members of the Group of Seven (G7), along with the EU and several like-minded states, imposed a series of expanding, well-coordinated sanctions on Russia.² The sanctions include measures such as the seizing of goods like yachts, aircraft, and real estate, as well as the freezing or immobilization of financial assets such as securities and funds belonging to Russian individuals, companies, financial institutions, and other entities.³

2As the armed conflict between the two states grinds on and war-induced damage in Ukraine surges, impacting all aspects of Ukrainian society, the call for confiscating, and repurposing the seized Russian goods and frozen assets to support and rebuild Ukraine grows stronger.⁴ Notably, the frozen foreign exchange reserves of the Central Bank of Russia are under scrutiny because of their value of approximately $280 billion, which could cover a larger portion of the expected $416 billion cost for the reconstruction of Ukraine over the next ten years.⁵

3However, international action has been tempered by legal complexities related to sovereign assets protected by the law of state immunity, making states reluctant to take drastic measures regarding Russia’s frozen foreign exchange reserves. Nevertheless, in May 2022, Canada amended the ‘Special Economic Measures Act’, the ‘Magnitsky Act’, and the ‘Seized Property Management Act’ to allow for the confiscation of assets belonging to a foreign state located within Canada.⁶ Two years later, the US followed suit when President Biden signed the ‘Rebuilding Economic Prosperity and Opportunity for Ukrainians Act’ (REPO Act) into law as part of the foreign aid package that included assistance for, inter alia, Ukraine.⁷ The statute authorizes the president to confiscate Russian sovereign assets and transfer them to the ‘Ukraine Support Fund’ established by the same law.

4This article examines the scope that international law provides for confiscating frozen Russian sovereign assets and using them to support and reconstruct Ukraine. First, Russia’s responsibility under international law is discussed, along with the legal consequences it entails, including the reparation of all damage and the potential imposition of countermeasures. Following a brief discussion of national forfeiture procedures, the article continues analyzing the law of state immunity. After concluding that this doctrine does not preclude executive action against sovereign assets, the article explores the legal challenges of various options the international community is currently considering to repurpose Russian sovereign assets in support of Ukraine. Finally, the article offers a brief synthesis and conclusion.

5

International responsibility of states

6When a state acts or fails to act in breach of an international legal obligation, such as one arising from a treaty, customary international law, or binding decision of an international organization, it leads to its liability for such internationally wrongful act under the rules of state responsibility. The key components of these rules reflect evolving customary international law, which the United Nations International Law Commission codified in 2001 in the ‘Draft Articles on Responsibility of States for Internationally Wrongful Acts’ (DARS).⁸ The DARS outlines the general conditions under which a state can be held responsible under international law and the legal consequences it entails.

7It is evident that Russia—through its armed invasion of Ukraine, the occupation of Ukrainian territories and the commission of war crimes and human rights violations⁹—is acting in violation of its international obligations.¹⁰ This means that Russia can be held responsible for these actions (Article 1 in conjunction with Article 2 DARS). Russia cannot invoke any of the justifications set out in Articles 20-25 DARS as it has violated the prohibition of the use of force (Article 2, paragraph 4 UN Charter).¹¹ As this provision is regarded as a peremptory norm of general international law (jus cogens), a breach of the norm cannot be justified pursuant to Article 26 DARS.¹²

8The international responsibility of Russia creates a new legal relationship wherein Russia, in short terms, is under the duty to continue to perform its breached obligations (Article 29 DARS), cease the wrongful act and offer guarantees to prevent recurrence (Article 30 DARS), and finally, ensure full reparation for the injury caused by the internationally wrongful act. Reparation can take various forms, as set out in Articles 34 through 39 DARS. First of all, the state that is responsible for the internationally wrongful act has to re-establish the situation which existed before the wrongful act was committed (‘restitution’ or resitutio in integram). When restitution is not possible or does not fully cover the damage caused, the responsible state is obliged to compensate all damage. If the injury caused by the wrongful act cannot made good by either of the two forms of reparation, the responsible state has to acknowledge its breach of the international obligation, express its regret, offer a formal apology, or employ another appropriate modality to give satisfaction for the injury caused. Taking into account the still ongoing massive destruction in Ukraine, resitutio in integram will be impossible, making compensation the only viable option for full reparation in addition to the general obligations to cease all hostilities and the withdrawal of the Russian troops from Ukraine.

9Recognizing Russia’s international responsibility, various international organizations have called for further action. Based on its emergency powers under the 1950 ‘Uniting for Peace Resolution’¹³—the UN General Assembly has adopted a number of resolutions, including Resolution A/RES/ES-11/5, in which it recognized that Russia “… must bear the legal consequences of all of its internationally wrongful acts, including making reparation for the injury, including any damage, caused by such acts.”¹⁴ Furthermore, the General Assembly recognized the need to establish an international mechanism for reparations for damages and recommended UN member states to create an international register of damage.

10The Council of Europe supports initiatives aimed at securing Russian reparations to Ukraine and, in response to the General Assembly's call in May 2023, has established a damages registry.¹⁵ The registry is based in The Hague, in the Netherlands, and is open to both member states of the Council of Europe and non-member states, as well as international organizations.¹⁶ The Council of Europe views the registry as a first step towards establishing a comprehensive system to hold Russia accountable. Furthermore, a report has been prepared proposing the establishment of a compensation mechanism in accordance with UN resolution A/RES/ES-11/5.¹⁷ However, the proposal goes further by also suggesting that frozen Russian government assets be transferred to the mechanism and used for the benefit of the reconstruction of Ukraine.¹⁸ The assets the proposal refers to mainly consist of the approximately $280 billion worth of reserves frozen by G-7 countries that the Russian Central Bank had deposited abroad.¹⁹

11The EU also takes the position that Russia and its leaders must be held responsible for waging a war of aggression and other international crimes. In this regard, the European Council has expressed its support for establishing a compensation mechanism and the damages registry set up by the Council of Europe.²⁰ On July 17, 2024, the newly elected European Parliament restated that Russia must compensate for the destruction in Ukraine and asked for a “sound legal regime” for confiscating Russian sovereign assets.²¹ Moreover, the EU has adopted a number of legislative acts that go beyond merely freezing Russian sovereign assets, as will be discussed below.

Countermeasures

12When a state breaches its international obligations, the injured state can invoke the responsibility of that state for the internationally wrongful act and may take countermeasures to induce that state to comply with its international obligations.²² Under specific circumstances, third states can also invoke another state’s responsibility.²³ This rule applies, for instance, when the breached obligation pertains to the international community as a whole (an erga omnes-obligation) rather than to a specific state.²⁴ Russia’s aggression against Ukraine is a case in point as it constitutes a violation of Article 4(2) of the UN Charter, thereby affecting the international community’s collective interests and security. Under Article 54 DARS, any state can take third-party countermeasures to ensure cessation of the breach and reparation in the interest of the injured state. Although the latter provision is not regarded as an established rule of customary international law, some see it as a clear progression in that direction.²⁵

13Furthermore, the DARS stipulates that in the event of a serious violation of an obligation arising under a peremptory norm of international law, states must cooperate to bring it to an end.²⁶ Russia’s attack on Ukraine violates the UN Charter and constitutes a violation of peremptory international law, against which the G-7, EU, and other states are coordinating action by imposing economic sanctions. Additionally, the EU is coordinating the implementation of the sanctions through the ‘Freeze and Seize’ Task Force²⁷—which closely cooperates with the Russian Elites, Proxies, and Oligarchs (REPO) Task Force of the G-7 plus²⁸—and the US Task Force KleptoCapture.²⁹

14Countermeasures, such as the coordinated economic sanctions targeting Russia, are a self-help remedy that is allowed under international law provided certain criteria are met, as set out in Articles 49 through 53 DARS. The key criteria, summarized, are that the countermeasure must induce compliance with the breached international obligation, do not entail the use of force, and must be proportional, temporary, and, where possible, reversible. In my opinion, the present sanctions imposed on Russia satisfy these conditions as they are measures that, by their nature, inherently do not involve the use of force and aim to bring an end to a particular situation. Furthermore, the sanctions can then be lifted and, for instance, seized goods and frozen assets can be released. Also, considering the extent of destruction in Ukraine, the sanctions are unquestionably proportionate.

15

Forfeiture

16The international sanctions do not extend to the point where states are allowed to confiscate Russian goods or assets. Rather, they are limited to freezing, immobilizing, and seizing goods and assets. These measures prevent Russian owners, whether they be the state or individuals and other legal entities such as companies, from freely disposing of their assets and properties. As a result, they have no access to their funds or shares and cannot move, convert, or sell them. In the case of immobilization, others are also prohibited from conducting transactions related to frozen assets targeting transactions related to the management of the assets;³⁰ e.g. blocking investments associated with the assets.³¹ Furthermore, owners cannot sell or transfer their seized goods. However, they still retain ownership of the goods and assets; the sanctions do not lead to a transfer of title.

17Confiscating Russian frozen assets and seized goods and using them to make reparations to Ukraine would entail (involuntary) transfer of ownership or circumvention of the rights to property.³² Since such actions could infringe upon the rights of the Russian rightful owners, they must be sufficiently justified under international law. Currently, however, international law does not provide for a clear legal basis for such actions.

18While sanction provisions may not extend to the point of allowing states to confiscate Russian goods and assets, most national laws enable courts to order the forfeiture of private Russian assets in national criminal or other legal proceedings. For example, most EU imposed sanctions (‘restrictive measures’ in EU terms) include the provision that member states must criminalize violations of EU sanctions regulations and provide “appropriate measures of confiscation of the proceeds of such infringements.”³³ Recently, the violation of these restrictive measures has become an EU-crime under Article 83(1) of the Treaty on the Functioning of the European Union with the adoption of Directive (EU) 2024/1226.³⁴ The Directive seeks to harmonize enforcement of violations of the restrictive measures by the EU member states, directing them to take necessary measures to enable freezing and confiscation. At the same time, the EU revised the Asset Recovery and Confiscation Directive, extending its scope to include offenses related to the violations of EU-restrictive measures.³⁵

19Several states have already initiated legal proceedings to forfeit Russian goods, primarily within the framework of criminal procedures.³⁶ A notable example is the United States. Under the ‘International Emergency Economic Powers Act’, which provides the general basis for sanctions imposed by the President, violation of sanction provisions based on that law is punishable.³⁷ The proceeds from these actions are then subject to forfeiture.³⁸ In addition, the ‘Oligarch Assets for Ukrainian Victory Act’ has recently been enacted, which enables the US Attorney General to transfer the proceeds from forfeited Russian goods and assets to the Department of State.³⁹ The Department of State can then utilize these proceeds as Foreign Assistance under the ‘Foreign Assistance Act’ to support Ukraine.⁴⁰ This statute aligns with earlier Canadian legislation of similar intent. In early 2023, the US Attorney General exercised that authority to transfer forfeited assets worth $5.4 million to the Department of State.⁴¹ These assets belonged to a Russian oligarch who was charged with violating US sanctions by financing certain individuals involved in promoting the secession of Crimea. Currently, multiple forfeiture procedures are ongoing in the US concerning Russian goods⁴²—including machinery,⁴³ luxury apartments,⁴⁴ and a superyacht worth $300 million.⁴⁵

20The proceeds from the often lengthy and complex forfeiture procedures are relatively low. However, expanding the procedures to include all seized goods and assets of Russian oligarchs and companies (those not involved in criminal proceedings) is not possible as it lacks legal grounds in most states.⁴⁶ It would potentially infringe upon the fundamental rights of the rightful owners, such as the right to property,⁴⁷ and the freedom to conduct business.48 Moreover, certain assets may be considered foreign investments subject to a bilateral investment treaty with Russia.49 Under such a treaty, expropriation is generally only permissible under certain conditions, including “...provisions for payment of just compensation”.⁵⁰

State immunity

21Since the proceeds from the forfeiture procedures are relatively modest compared to the value of the frozen Russian sovereign assets, it is understandable that the call for confiscation of these assets grows louder. However, these assets are protected by the right of state immunity, for which there is no universally accepted exception mechanism under international law.⁵¹ Only the warring parties in an armed conflict may have such a right under the laws of war.⁵² In the present situation, only Ukraine could confiscate Russian foreign assets under this title.

22State immunity is a universally accepted principle of customary international law arising from the sovereign equality of states.⁵³ The principle entails that a state and its organs are immune from the adjudicative and enforcement jurisdiction of another state. This immunity also applies to the organs of that state, such as financial institutions like the national central bank and its assets.⁵⁴

23Today, under the restrictive doctrine of state immunity, the immunity of a state is not absolute and only applies with respect to acts carried out in a typical sovereign capacity (acta jure imperii). In the field of private law, it means that when a state engages in commercial activities in the same manner as a natural or legal person (acts of private character: acta jure gestionis), it does not enjoy immunity in another state’s court. In such cases, a state cannot invoke immunity in disputes involving certain employment contracts, commercial transactions, and investments in legal entities. Particularly in the sphere of adjudicative jurisdiction, a state’s immunity is restricted.

24As the exercise of enforcement jurisdiction over the property of another state can be a greater breach of its sovereignty than being involved in a proceeding before a local court, the immunity of a foreign state is less restricted in that regard. Therefore, the property a foreign state uses for its sovereign, public purposes (the sovereign assets) is exempt from the jurisdiction of other states. This distinction between the exercise of adjudicative and enforcement jurisdiction is illustrated, for example, in a situation where a judge in a civil dispute rules against a foreign state, but the opposing party is not allowed, based on the judicial decision, to take measures of forced execution or conservatory measures concerning the property of the foreign state.⁵⁵

25Thus, the immunity of a state is a procedural bar that limits the jurisdiction of the courts of another state, as the report of the Council of Europe acknowledges: “Sovereign immunity operates as a principle preventing one state’s domestic courts from adjudicating on the governmental actions of another state or seizing that state’s assets.”⁵⁶ Consequently, when a state’s executive branch or government targets the sovereign assets of a foreign state based, for example, on an administrative measure, regulation, or governmental decision taken within the framework of international law, the foreign state cannot invoke state immunity.⁵⁷ The economic sanctions imposed on Russia are a case in point: the sanctions are third-party countermeasures accepted under international law and imposed by the executive branch.⁵⁸

26Both Canada⁵⁹ and the US⁶⁰ have incorporated a specific exception to state immunity in their national laws, which does not otherwise have a basis in international law. When a foreign state has been designated as a sponsor of terrorism, it cannot claim state immunity before Canadian or US courts with regards certain acts. Currently, neither state has designated Russia as such. While such a designation might burden Russia, it would contribute little to Ukraine’s recovery as the Canadian and US laws limit the right to file claims to their citizens and businesses, meaning any awarded damages would benefit the claimants, not Ukraine.⁶¹

27The idea of designating Russia as a state sponsor of terrorism appears to be gaining some international support. Although there is no universally accepted definition of terrorism, the European Parliament has stated that “...the deliberate attacks and atrocities committed by Russian forces and their proxies against civilians in Ukraine, the destruction of civilian infrastructure, and other serious violations of international and humanitarian law amount to acts of terror...”.⁶² Consequently, in November 2022, the European Parliament recognized Russia as a state sponsor of terrorism⁶³—following the lead of several European countries and the Council of Europe.⁶⁴ However, this recognition currently has no legal consequences regarding the law of state immunity as under EU law, the designation as a state sponsor of terrorism does not affect the immunity of the designated state, and such a designation is not a generally accepted exception under international law.⁶⁵

Options

28Although the law on state immunity cannot protect the frozen and immobilized Russian sovereign assets from foreign executive action, no international legal mechanisms currently exist that allow for the confiscation of these assets. However, given their value, it remains attractive for the G-7, EU, and like-minded states to explore options to repurpose the assets for the benefit of Ukraine.⁶⁶ Such options include initiatives to link the lifting of sanctions and freezing measures to reparations payments by Russia, or to use the frozen assets as collateral for loans to Ukraine. For instance, the UK recently amended the ‘Russia (Sanctions) (EU Exit) Regulations 2019’ to create a legal basis for continuing to freeze or immobilize certain assets until Russia pays compensation for the damage it caused.⁶⁷ The Belgian government made a slightly different proposal, suggesting the use of frozen Russian reserves as collateral for loans to Ukraine. After the war, Russia could choose to repay the debt through compensations or agree to confiscating of the reserves.⁶⁸ Since the UK legislation and Belgian proposal do not involve a change in ownership, they do not qualify as confiscation and can be considered lawful countermeasures.

29A further step involves measures aimed at directing certain revenues from frozen assets to benefit Ukraine or actually confiscating the assets. When sanctions were imposed in 2022, a significant portion of the Russian Central Bank’s assets were in the form of securities held by Euroclear, a Central Securities Depository in Belgium.⁶⁹ This financial service company holds an estimated €210 billion in frozen Russian reserves. These assets generate a substantial amount of interest, but due to the sanctions, this interest cannot be paid to Russia or used by Euroclear.⁷⁰ However, blocked Russian funds that become available, such as from maturing bonds, can be reinvested by Euroclear for its own account.⁷¹ In 2023, this activity generated €4.4 billion for Euroclear.⁷² Belgium then collected over €1 billion in windfall taxes from this amount, which Belgium has stated will be used to support Ukraine.⁷³ Since the unexpected and extraordinary revenues Euroclear make from reinvestments of the cash balances belong to Euroclear rather than the Russian Central Bank, Belgium can use the tax revenue as it sees fit without potentially violating Russia’s rights.⁷⁴

30The EU also takes the position that these revenues are not Russian sovereign assets and can be subjected to EU-imposed restrictions.⁷⁵ Consequently, early 2024, the EU passed legislation regarding the obligations of securities depositories concerning the extraordinary cash balances accumulated due to restrictive measures.⁷⁶ Under this legislation, depositories are prohibited from disposing of net revenues, and the Council may decide to allocate a portion of these revenues as contributions towards the recovery and reconstruction of Ukraine. These contributions may be transferred to the newly established ‘Ukraine Facility’,⁷⁷ a support mechanism agreed upon by the Council and the European Parliament in February 2022.⁷⁸ However, several restrictions may apply, given that depositories are private enterprises in which foreign parties may have interests.⁷⁹ It is essential to consider the right to property of these institutions and potentially applicable provisions of investment treaties.

31On May 8, 2024, the EU member states made a further move and agreed to seize €3 billion of the €5 billion profit made by Euroclear and allocate it to Ukraine.⁸⁰ Legislation to this effect followed shortly thereafter, ordering central securities depositories to make a financial contribution to the EU of 99.7% of the net revenues.⁸¹ Starting in July 2024, the EU will distribute 90% of the revenues received to the ‘European Peace Facility’, which was established to fund the purchase of weapons for Ukraine, and 10% to other EU programs to fund the reconstruction of Ukraine. In June 2024, the G7 leaders announced the launch of the Extraordinary Revenue Acceleration (ERA) Loans for Ukraine. The $50 billion loan will be financed using future extraordinary revenues from the immobilization of Russian sovereign assets held in the EU and elsewhere.⁸²

32As the options discussed above do not entail a change of title to the frozen Russian sovereign assets, it can be argued that they are all countermeasures meeting DARS requirements for such actions. An even more drastic step would be the confiscation of the revenues generated by the frozen assets, such as the accrued interest. However, these revenues also belong to the Russian state, meaning that confiscating them would present the same issues as confiscating the frozen assets. Nevertheless, it appears that some countries are willing to explore the boundaries of the law to see if confiscation is nonetheless feasible.⁸³

33Canada was one of the first countries to draft legislation that allowed for the confiscation of assets belonging to a foreign state located within Canada⁸⁴—followed by the US, which enacted the ‘Rebuilding Economic Prosperity and Opportunity for Ukrainians Act’ (REPO Act).⁸⁵ The REPO Act grants the President the authority to confiscate Russian sovereign assets, transfer them to the specially established ‘Ukraine Support Fund’.⁸⁶ It also prohibits the release of funds belonging to sanctioned Russian entities until Russia withdraws from Ukraine and agrees to make reparations. Additionally, the President must, in cooperation with others, establish an international compensation mechanism to manage frozen and seized sovereign assets.

34The Canadian and US initiatives do not have a legal basis under international law, even though they appear to be similar to the (third-party) countermeasures discussed earlier. However, neither initiative meets the requirement of reversibility as is required by Article 49(3) DARS, as confiscation cannot be undone once the proceeds have been used for the reconstruction of Ukraine. However, the requirement of reversibility is less stringent than the other conditions, as it states that the measure must be reversible “as far as possible.” In its commentary on this term, the International Law Commission notes that if a state has a choice between different countermeasures, it should select the measure that allows for the resumption of the performance of the suspended obligations resulting from the countermeasures.⁸⁷

35In the case of Russia’s unlawful invasion of Ukraine, imposing sanctions in the form of freezing assets and seizing property was the appropriate choice of countermeasures. When Russia again complies with its international obligations, these measures can be reversed by releasing the Russian assets. One could argue that since Russia continues its wrongful actions while the damage to Ukraine is mounting, the initial countermeasure has failed, and the international community is compelled to adopt an irreversible measure. While this reasoning has some appeal, it contradicts the spirit of the DARS. As such, confiscation cannot be considered a countermeasure as defined by the DARS⁸⁸—rendering national legislation to that effect incompatible with international law. This situation could lead to extensive, protracted legal battles in national and international courts, for which Russia appears to have already prepared plans.⁸⁹

36In addition to the legal questions it raises, confiscating Russian sovereign assets may also entail economic, financial, and political risks. While a comprehensive analysis of these risks is beyond the scope of this article, it is important to highlight a few key points. In Europe, there are serious concerns about potential damage to the reputation of the Euro and the European capital market⁹⁰—and the erosion of trust in Euroclear.⁹¹ Furthermore, confiscating state assets without a solid basis under international law could set a precedent with uncertain and potentially dangerous long-term effects.⁹² It might also deter other countries, such as China, from holding assets in the West in the future.⁹³ Additionally, it could prompt other states to confiscate Western assets.⁹⁴

37Russia itself has already taken initial steps⁹⁵—and further measures will, no doubt, follow. It has placed countries that have seized and frozen Russian goods and assets on a list of unfriendly nations, which primarily includes Western countries against which additional measures may be taken.⁹⁶ Although many Western companies have independently decided to cease operations in Russia, Russian media reports that approximately $290 billion in Western assets remain in the country.⁹⁷ Some companies have already experienced Russian actions, such as the state ‘temporarily’ taking over management⁹⁸—or making it impossible to transfer proceeds from the sale of businesses or their assets out of the country.⁹⁹ In May 2024, as a response to the REPO Act, Putin signed Degree No. 422 allowing Russia to seize US assets held in Russia and use them to compensate Russians whose assets were seized in the US.¹⁰⁰

Final reflection

38Further research into the financial and political risks associated with implementing additional measures against Russia’s sovereign assets seems warranted. Should those prove to be acceptable, I do not recommend that the international community abstain from adopting more extensive measures, primarily for legal reasons. In my view, given the exceptional circumstances at hand, the confiscation of Russian sovereign assets, even in the absence of a clear legal basis, can be justified as an in extremis measure.

39In that regard, I consider it important to recognize that Russia, through its actions, has violated and continues to violate significant international obligations, including the prohibition of interstate use of force, the territorial integrity of Ukraine, and the respect for human rights and the laws of war.¹⁰¹ The ongoing war and unlawful conduct by Russia continue to cause enormous damage to Ukraine. Additionally, Russia’s veto power as a permanent member of the UN Security Council prevents the international community from imposing binding measures to end the breaches of international peace and security that have an impact felt far beyond the region. Another critical factor is that Russia has not hesitated to hint at using nuclear options. In addition, in February 2023, Russia suspended its participation in the recently extended nuclear disarmament treaty with the US¹⁰²—and six months later, it withdrew from the Comprehensive Nuclear-Test-Ban Treaty.¹⁰³ In my view, given the current circumstances and the lack of indication that Russia is willing to compensate for the damages in the near future, these factors taken together justify the confiscation of Russian sovereign assets.

40Legislative initiatives in Canada and the US demonstrate that countries are willing to take this step. However, in my view, certain conditions must be met. The proceeds from the confiscated properties must be used for the restoration and reconstruction of Ukraine. To this end, these proceeds should be placed in a fund from which an international compensation mechanism, as the UN General Assembly proposed, would pay out claims after investigation. Additionally, the proceeds should be credited against the final amount that Russia will be required to pay as reparations.¹⁰⁴ This requirement would somewhat mitigate concern about the countermeasure’s irreversibility.¹⁰⁵ Moreover, given the amounts mentioned in the introduction, the compensation amount is not expected to be lower than the value of the seized properties and frozen assets.

41The confiscation of sovereign assets is a significant step, challenging accepted legal limits, which can nevertheless be justified as an in extremis measure considering the exceptional situation and subject to certain conditions. Some emphasize the evolving political willingness of states to explore the boundaries of what is legal¹⁰⁶—and view this as a potential catalyst for the development of customary international law.¹⁰⁷ Indeed, international law is not static and sufficiently widespread, representative, and consistent state practice combined with a sense of legal right or opinio juris, can result in the emergence of new customary rules.¹⁰⁸ Nonetheless, asserting that customary law is currently in the making seems premature as the present circumstances are unique, and international support is still insufficient for such a conclusion.

Conclusion

42After the annexation of Crimea and Sevastopol and the destabilization of Eastern Ukraine in 2014, and the further invasion of Ukraine in 2022, the G-7, EU, and like-minded states, felt compelled to impose a wide array of sanctions on Russia independent of the UN. A significant component of these autonomous sanctions includes the seizure of certain goods and the freezing and immobilization of Russian assets. The imposition of these measures is permitted under international law as Russia’s actions have breached its international obligations, allowing Ukraine and third countries to invoke Russia’s liability based on the principles of state responsibility, which are largely customary in nature and codified in the DARS.

43

44Russia’s international responsibility under international law entails that it must compensate Ukraine for the damages resulting from its unlawful actions. It is evident that the costs of Ukraine’s recovery and reconstruction will be enormous, and Russia is currently unwilling to make reparations. As the conflict grinds on, states are exploring ways to repurpose the seized assets and frozen funds to support Ukraine’s recovery and reconstruction efforts.

45Despite the sanctions, these goods and assets remain the property of Russian individuals and companies, as well as the Russian state. This creates legal challenges in taking these assets from their rightful owners and repurposing them for the reconstruction of Ukraine. In general, goods and assets can only be forfeited in the context of criminal proceedings before a national court. States and their organs, such as central banks, enjoy immunity from such judicial proceedings in another state, so sovereign assets cannot be confiscated in this manner.

46A state cannot invoke immunity if it is not the court but the executive or legislative branch of another state takes action. In this context, several countries and the EU have taken the first steps to allocate certain revenues from frozen assets of the Russian Central Bank to Ukraine. Additionally, the first legislative processes have begun to actually proceed with the confiscation of Russian sovereign assets. However, the latter measures are without a widely accepted basis under international law. Nevertheless, given the exceptional circumstances of the present situation and provided certain conditions are met, I strongly believe the confiscation of Russian sovereign assets is justifiable as an in extremis measure. However, it is still too early to speak of a customary right under international law for states to confiscate sovereign assets in certain situations. State practice and opinio juris will need to further develop and expand for that to occur.

Notes

To cite this article