How to better confiscate Russian assets for Ukraine

The vast majority of people support the notion of sanctioned Russian assets being confiscated for Ukrainians. The political will is there. The moral justification is overwhelming. And now the timing is critical as allied financial support for Ukraine is waning. The game has just changed from down the line confiscation for Ukrainian reparations to immediate confiscation for Ukrainian war efforts. Political and legal minds are back to the drawing boards. There are a number of challenges to deliver this new objective that cannot be ignored, but which can be overcome. The challenges might be boiled down to ensuring that any legal solution should: (i) be fast tracked, (ii) attract as much international consensus and unity as is possible, (iii) minimise the risk of retaliatory or copycat measures, (iv) consider the actual use of the confiscated funds, and (v) critically, maximise the legal justification for any seizure.

Legal justification

Numerous legal minds have mulled over what is required for the key issue of legal justification. The essential difficulty is that treaties and domestic legislation regarding sanction regimes are silent on the issue of confiscation. This is because the inherent purpose of any sanction regime is to force positive change in a party in order for their asset to be unfrozen. Thus, any justification for confiscation under such regimes is like stuffing a square peg into a round hole. Absent some legislative change to deliver justification, one is left with awkward and uncomfortable dancing around established laws and practice outside of the sanction regimes. Ukraine deserves a new choreographed dance from us, not our being foolish-looking dads on the dance floor.

The tension to deliver a legal solution for Ukraine must be balanced with the need to mitigate against tit-for-tat measures through inadvertently setting a precedent that opens the floodgates for less justifiable confiscations around the world. The sensible way to mitigate against this danger is to frame it within established international law, systems, and practice. My recent article ‘Rome is Burning’ in the Solicitors Journal advocated ways that this could be achieved under established practices in the name of reparations. Without the international community supporting and fast tracking such reparations-based practices and routes to de facto confiscation (their major 'justice failing' in their support for Ukraine thus far being their focus on criminality rather than compensation), it is quite another thing to provide an immediate fast track confiscation for Ukraine’s ‘war efforts’. In respect of taking an asset from a transgressor, the law is less about an arbitrary eye for an eye and more about an assessment of liability, followed by one of damages. The rules and process are there for good reason.

The collective perspective

Alternatively, one could create a solution by creating a new avenue to justification through consensus within a treaty. When considering an issue such as a grievous act of aggression by Russia, a united approach is not just desired for unity, but also to provide diplomatic comfort for each zebra within the herd. Obtaining broad consensus would be challenging but not impossible. The problem with creating something new is that it takes time, looks like ganging up, and is always open to criticisms levelled at the politicisation of the law. Failing consensus, the alternative is to pursue an individual state-led domestic executive or legislative formula. The problem with the individualistic route is that it lacks the unity and objectivity of consensus. What would stop another country from doing as they unilaterally pleased in circumstances where there may be no objective justification whatsoever? Prudence demands efforts to utilise existing legal frameworks and that we focus any reform and our efforts towards fast-tracking such efforts.

From the collective international perspective, Professor Philip Zelikow and others make a sound international-wide legal analysis of why sovereign immunity does not apply to the confiscation of Russian state sanctioned assets where the intention of the confiscation is to compensate Ukraine. Such legal opinion requires the application of the legal doctrine of reprisal and principles in the UN International Law Commission’s Articles on the Responsibility of States for Internationally Wrongful Acts (ARSIWA). Under ARSIWA, states that undertake wrongful acts are legally obliged to compensate those harmed by their actions. Zelikow’s argument – which he admits is novel – is that it is appropriate for Russia, to comply with international law, to be obliged now to “compensate Ukraine, and possibly other countries, for damage done.” He argues that such an approach “gives full weight to the international law that obliges Russia to compensate a directly injured state like Ukraine.” Only once compensation occurs, he suggests, should confiscated funds be released to Russia. Crucially, only if Russia does not comply with its obligation to compensate Ukraine, can such funds then be used to provide some sense of compliance. Thus, he says, “in this case, the state countermeasure should be designed as a kind of equitable remedy to enforce performance of the Russian obligation to compensate”.

While this seems on its face to be a neat solution, it takes us to a position where confiscation only has legal justification once Russia has failed in its obligation to pay compensation to Ukraine. An obligation is more than an arbitrary demand or a moral justification. Thus, questions also arise as to how to assess the amount of that obligation. Quite separately, international law and practice requires a competent court to assess compensation for any damages award to be satisfied against relevant sanctioned assets. Zelikow’s ‘obligation’ would surely require a ‘legal obligation’ which in turn would require a judicial assessment on liability and damages from a competent court. The theory is perhaps sounder long term but appears less helpful with the new immediate need for confiscation to enable Ukraine to fund its war efforts.

The individual perspective

From the alternative purely individual state perspective, Laurence Tribe and a group of other eminent lawyers produced their legal justification for a purely USA solution to the issue through the existing International Emergency Economic Powers Act. Putting aside that this solution is isolated to the US (note there are considerably more sanctioned assets in Belgium than in the US) and does not provide a unified legal front solution, there is an inherent problem in its method. In short, their clever solution requires an executive decision rather than a legislative or judicial solution. While they smartly argue their solution thus dances around sovereign immunity – because there is no judicial process to trigger it – it nevertheless relies on an executive decision, which is therefore inherently political, and which then could be used by others to justify tit for tat political decisions. It’s a sound solution but, lacking the cloak of unity or a judicial decision of a competent court (which mitigates against rogue state reprisals); it is not a perfect solution.

The overlooked approach

This all highlights how the legal solution has been approached through seeking legal justification from the perspective of the state host of the sanctioned assets; what legal justification does that state need to enable it to confiscate the assets and give them to Ukraine? The overlooked approach is: What justification does Ukraine need to provide it with to secure legal entitlement to the assets and thereby also provide legal justification for the host state to release sanctioned assets to satisfy Ukraine’s legal right?

If that approach were taken towards Zelikow’s argument, perhaps it is all the more convincing. The doctrine of reprisal undoubtedly allows Ukraine at war with Russia to confiscate Russian assets in Ukraine (as it has done), but it doesn’t necessarily – regardless of Zelikow’s novel argument – allow states not at war to do the same. As Ukraine is the direct victim of aggression, it has a wider range of legal options available to it – to respond to that aggression – than non-injured parties.

Therefore, absent host states being actively engaged in the war, an alternative approach may be to look at how Ukraine has an ‘extra territorial’ right to reprisal countermeasure damages under the doctrine that thereby provides legal justification for host states to confiscate Russian assets it holds for compliance with Ukraine’s rights under the doctrine.

By taking this Ukrainian approach to justification, the international community should fast track and support a number of established ways to achieve the objective in a way that navigates the challenges. First, there is lawfare litigation around the global domestic courts on behalf of Ukrainians that targets the sanctioned assets as damages. Under international precedent, such judgments by a competent court with a judicial assessment of the damages can be satisfied against sanctioned assets. Such judgments provide a compliant way for states hosting sanctioned assets to release them in satisfaction of the damages award. Remarkably, the Ukrainian initiative to deliver this remains unfunded by the international community. Perhaps more remarkably, the cost of delivery is the same cost as a small handful of tanks. There are various straightforward steps that states could take to help such actions, including expanding judicial jurisdiction (to limit the protection of sovereign immunity), offering amicus support to claims and making funding available. Those that complain such litigation could take three years might also reflect that such lawfare was suggested at the very beginning of the invasion and would now only have a year left to run. They might also reflect on how easy it would be for the states hosting such litigation to enable the fast tracking of such cases.

Second, there is a nuance concerning the above that can enable much quicker delivery. Existing Ukrainian court judgments (state and private claims) that include damages assessments can be domesticated in the courts of states that hold sanctioned assets. Again, the initiative to deliver this via the UK courts requires less funding than the cost of a single tank and could quickly and compliantly enable all sanctioned assets in the UK to be deployed to Ukraine in just a few months. The initiative remains starved of funding.

Third, albeit this would only deliver for later reparations and not for war time efforts, the proposed special tribunal on the Russian act of aggression could have a secondary function, beyond just establishing liability, of judicially assessing damages and, thereby, piggybacking on the lawfare litigation precedent. It beggars belief that the current modelling of the special tribunal does not include this function, which would provide a long-term legal justification to use sanctioned assets to meet the desired objective of reparations.

Finally, the European Court of Human Rights (ECtHR) arguably provides a route for Ukrainians to confiscate sanctioned assets in a relatively short space of time, which would meet war effort needs. Russia may have left the ECtHR, but they are still on the hook for claims pre-September 2022, whereby most of the invasion damage had already been inflicted. Many baulk at the ECtHR by rejecting it on the basis that Russia will not comply with its ‘declaratory’ damages awards. That is true, but they miss the potential for including member states (hosting sanctioned assets) as third-party defendants or involving them in some other way in the action. Article 43 of the European Convention on Human Rights expressly states that members must comply with an order by the ECtHR to which they are a party. Such hosts could readily and diplomatically be made parties – through a variety of legal positions – within a Ukraine state case against Russia. Ambassador David Carden who shares these opinions also suggested to me that even the sanctioned assets themselves might be capable of being ‘interpleaded’ into such a case or being captured within the claim. Thereby, any judgement would then place a legal obligation on a member state to justifiably confiscate sanctioned assets to comply with an ECtHR order. Again, this avenue has been ignored to date.

Such a Ukraine-centric approach to using current international frameworks offers the quickest and most legally compliant route – if fully supported and fast tracked by the international community – to confiscating assets for Ukraine. The upside to lawfare of this type is that it uses largely pre-existing courts and tribunals and requires little multilateral collaboration and political will to implement. The downside is that it requires the payment of legal fees and costs. Western states and leaders in the international community can help fix this problem, and at the same time deliver immediate cash to Ukraine, by supercharging the financing of such initiatives.

Leading law firms could initially carry out this work on a 'low bono' basis, while public funds are utilised. With facilitation from government, this Ukrainian war effort objective could then be funded by private commercial funding leveraged against frozen Russian assets – rather than effectively by Western taxpayers. 

The use of such assets

Given the difficulties outlined above, it is not surprising that there has been little discussion about how the confiscated assets will actually be used. This may seem trivial, particularly in the understandable drive to meet the objective, but it is an important consideration that is being overlooked. International statements on the intended use shift between using the generic ‘for Ukraine’, to ‘helping win the war’ (defence), humanitarian efforts, and reparations. All great reasons for the objective that will quickly swallow up the $300 billion of sanctioned assets that are being targeted. But such usage must come with some warnings. It goes without saying – but it is being said – that corruption must not rear its ugly head. States that provide confiscation may consider some monitoring; not to frustrate Ukraine, but to protect it against the damage to its war efforts and their own reputations if not every cent is used for good causes.

But one warning is unspoken, less apparent, and is being overshadowed by our sincere eagerness to achieve the end goal. The total of the $300 billion is earmarked for ‘Ukraine’ – this means the Ukrainian government’s war and survival needs. These are clear priorities that will understandably soak up all such confiscated funds. Whatever is earmarked for reparations will undoubtedly be allotted to the state and civil society infrastructure rebuild. There is no mention of Ukrainians or the reparations entitlement of the people. If all sanctioned Russian assets are confiscated for war time and state purposes, what will be left to fund the people’s reparations? There is no chance Russia will voluntarily pay any reparations beyond what is taken from it (due to its vulnerability outside of Russian borders). We must manage expectations. The lack of clarity may later lead to resentment from the people. It may feel silly when every penny is needed to defend the walls against the Russian marauders, but the old adage of winning the battle only to lose the war must be heeded. Evacuees and those on the frontline will return to their normal lives, after the Russians are driven back to their borders, and if their deserved reparations are not to some extent met, there may be discontent that could further destabilise Ukraine. Perhaps it would be wiser and promote war interests better to simply earmark a part of any confiscated assets for the people’s reparations.

The game has changed in modern warfare and the international community has been slow to react. The priority of justice in today’s wars is reparations and compensation, not criminality or Nuremburg-type trials. The latter is crucial legacy justice, but the former is about winning, survival, rebuilding a future, and deterrence. The threat of criminality will never deter Putin types from acts of aggression, but a real threat to their assets and economy will. There is a window of opportunity for the international community to wake up and smell the coffee and get justice back on track.

Dr Jason McCue is a senior partner at McCue Jury & Partners LLP and head of www.payback4ukraine.org
mccue-law.com

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