In the wake of geopolitical turmoil and Russia's aggression against Ukraine, the global community faces a critical question: how to make the aggressor pay? At the heart of this complex issue lies the notion of confiscating Russian state-owned and private assets, is an increasingly relevant topic in international law.
The Urgent Need for Confiscation
The staggering value of frozen Russian assets in Western countries, estimated at a minimum of $320 billion, serves as a stark reminder of the financial burden Russia should bear for its actions. With no immediate prospects of Russia providing compensation to Ukraine, coupled with Ukraine's dire need for both short- and long-term financial assistance (exceeding €350 billion for full recovery), the confiscation of Russian assets emerges as the most just and viable option. Western taxpayers should not bear the sole responsibility for Ukraine's recovery, especially when these assets can be utilized to address the devastation caused by the aggressor.
Confiscating Private Assets
To implement the confiscation of frozen private property, a new mechanism is essential. This mechanism should permit the confiscation of assets that do not have a direct connection to specific crimes. The concept of non-conviction-based confiscation, while not novel in the West (e.g., Italy’s Legislative Decree 159/2011, Anti-Mafia Code), has gained traction. The European Court of Human Rights has validated the legality of such schemes (Raimondo v. Italy, Arcuri & Three Others v. Italy). A possible ground for confiscation could mirror Italy's approach, targeting private individuals (oligarchs) affiliated with the Kremlin, who contribute to its crime of aggression against Ukraine and are already under sanctions.
Confiscation of State-Owned Enterprises
Confiscating state-owned enterprises, including assets such as those held by Gazprom, presents a unique challenge. Under the doctrine of functional immunity, as embodied in U.S. FSIA, UK SIA 1978, and other Western states' legislation, property owned by Russian state-owned enterprises for commercial purposes does not enjoy immunity protections. Therefore, confiscation is primarily a matter of national legislation. Canada has already adopted such legislation, allowing for the confiscation of state-owned assets in support of their stance against aggression.
The Police Powers Doctrine and Compensation
The police powers doctrine in international law permits states to expropriate assets without compensation when they act within the bounds of legitimate purpose and proportionality. According to the OECD, economic injury resulting from non-discriminatory regulations within a state's police powers does not necessitate compensation. This doctrine has been well-established in customary international law, as reaffirmed by the ICSID Tribunal in Philip Morris v. Uruguay (paras. 292-301). Hence, Western states may not be obligated to provide compensation for confiscation under certain circumstances.
Countermeasures as a Legal Tool
While central bank funds and some state-owned assets dedicated to public purposes enjoy immunity protection, international law recognizes special circumstances that can justify their confiscation. These circumstances, which preclude wrongfulness, render the confiscation of such assets lawful and legitimate.
Countermeasures, rooted in international customary law and codified by the UN International Law Commission, allow states to deviate from obligations, such as immunities, to ensure compliance with international law. The prohibition of aggression is an erga omnes ("to all") obligation, empowering any third country to take countermeasures against Russia for its aggression against Ukraine. Immunities can be lifted as a countermeasure to safeguard human rights and uphold international law, making confiscation a plausible countermeasure.
A New Customary Exception
As more states adopt measures to confiscate Russian property in response to aggression, a new customary exception for cases of aggression is likely to crystallize. This development would bolster the legitimacy of such actions, reflecting the evolving nature of international law. Customary exceptions have historically arisen due to shifts in state practice, much like the commercial exception symbolized by the 1952 letter from the U.S. State Department's Acting Legal Adviser, Jack B. Tate.
In the foreseeable future, an international tribunal, accompanied by a compensation mechanism, could be established. These institutions would provide additional legitimacy to individual states' decisions to introduce non-conviction-based mechanisms for seizing private or state property. Simultaneously, domestic actions to confiscate assets can parallel efforts to establish an international framework.
International Political Support
The call for large-scale confiscation has gained traction among prominent international bodies, including the European Parliament and the Parliamentary Assembly of the Council of Europe. The European Parliament has even contemplated lifting immunities in response to the gravity of Russian violations.
Canada's groundbreaking legislation allows for the confiscation of assets owned by individuals who support and enable aggression, requiring a judicial decision for implementation. Estonia is also considering enacting a confiscation scheme in its national legislation. Additionally, the EU is working to classify sanctions evasion as an EU crime, enabling the confiscation of property linked to criminal origins or sanctions evasion. However, it remains uncertain whether these measures will provide substantial financial support for Ukraine's recovery.
In conclusion, the confiscation of Russian assets, both state-owned and private, presents a complex yet increasingly justifiable approach to enforce international obligations. As the international community navigates this challenging terrain, a careful balance between justice and pragmatism will be crucial in addressing the aftermath of aggression while upholding the principles of international law.
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