Ukraine War Reparations: The Legality of Confiscating Russian Assets

There are plans, especially in the West, to confiscate Russian assets with a view to transferring them to Ukraine. These plans are in tension with international law. New customary international law could crystallize, but normative developments would need the support of non-Western states to legally materialize, argues Cedric Ryngaert.

As we are approaching the second anniversary of Russia’s illegal aggression against Ukraine, we are witnessing a fatigue in the West to further bankroll Ukraine. From that perspective, seizing Russian assets that are already frozen in various Western countries, and possibly amount to 300 billion US dollar, may be an attractive proposition.

Most of these funds are immobilized in the EU, and especially in Belgium, where Euroclear, a financial service-provider, manages around 200 billion US dollar in Russian Central Bank funds. EU Commission lawyers have earlier rejected confiscation on the ground that it is not legally viable. Instead, the EU’s focus is currently on ‘how any extraordinary revenues held by private entities [such as Euroclear] stemming directly from Russia’s immobilised assets could be directed to support Ukraine and its recovery and reconstruction’. At the 2024 World Economic Forum in Davos, Belgian Prime Minister De Croo indicated that these assets could possibly be used as collateral for raising funds for Ukraine, or revenue from Russian securities could be taxed, with the tax going to Ukraine.

This relatively tepid EU approach stands in contrast with recent US plans to seize the assets as such, and not just their revenues. It also stands in contrast with a recent plan of the Parliamentary Assembly of the 46 member states-strong Council of Europe (PACE) to seize Russian assets and transfer them to an international compensation mechanism for Ukraine.

I had the honor of being invited as an expert to a PACE hearing on 22 January 2024, and I am happy to share my insights in this blogpost. My main argument is that confiscating Russian assets is in tension with international law. Confiscation is likely to violate the international law of immunity, and it is unclear whether countermeasures could be validly invoked to preclude wrongfulness.  That said, a new customary norm could crystallize that allows confiscation of a foreign state’s assets. The member states of, e.g., the Council of Europe can, set in motion this process, but they will need the support of other states for it to come to fruition.

In this post, I do not as such address the EU’s plan to appropriate and redirect extraordinary revenues. That said, I consider this plan to be legally less problematic under current international law, if it is true that, pursuant to contractual arrangements with financial intermediaries, Russia may not be entitled in the first place to interest on income made on cash balances (Veron).

State immunity

Under current international law, Russian state assets are protected by sovereign immunity. This means that no measures of constraint can be taken against them (see Articles 18-21 of the United Nations Convention on Jurisdictional Immunities of States and Their Property, not yet in force, but largely representing custom). It has been argued (e.g., by Brunk) that immunity rules only apply to court proceedings, and not to administrative confiscation by the executive branch.

I am not fully convinced by this argument, and would rather take the view that immunity protects against all measures of constraint, including by the executive (see also Hathaway et al.). This discussion may be largely besides the point, however, insofar as in rule of law-based states, confiscation will tend to be under judicial control (as is case, e.g., under Canada’s Special Economic Measures (Ukraine) Regulations).  Accordingly, confiscation of a foreign state’s assets will, in principle, be internationally unlawful.

Countermeasures

While confiscation prima facie violates the international law of immunity,  its wrongfulness could potentially be precluded under the international law of countermeasures. This is a body of law that allows a state to suspend its own international law obligations as a response to another state’s prior violation of international law (Article 49-54 ILC Articles on State Responsibility). The argument would then go as follows: (1) Russia has violated international law by attacking Ukraine; (2) other states can respond to this serious violation by terminating the international immunity granted to Russian state property. Arguably, confiscating the property would exert pressure on Russia to withdraw from Ukraine, and to pay reparations.

This looks like an attractive proposition, but it comes with its own legal problems.  First, there is controversy as to whether states other than Ukraine, i.e., non-injured states, can take countermeasures against Russia (see for a thorough discussion Dawidowicz). Still, an argument can be made that, in the meantime, such third-party countermeasures have risen to the level of customary international law, even if their exact legal contours remain uncertain (see Dutch Advisory Committee on Public International Law, 2022 – full disclosure: I am the chair).

Second, and perhaps more fatally, countermeasures are not a means of punishing another state, but a means of inducing it to comply with its international obligations. This is why the law requires countermeasures to be temporary and reversible (and proportionate). Confiscating Russian assets and transferring them to Ukraine appears to be permanent and irreversible, however. Admittedly, one could design the process of confiscation in such a way that the confiscating states, together with Ukraine, guarantee repayment to Russia in case Russia pays reparations to Ukraine. In practice, this would mean offsetting the confiscated funds with the compensation offered by Russia to Ukraine. What could also be done is to confiscate a first tranche of the assets, and await Russia’s response. If the first act of confiscation does not induce Russia to pay reparations, additional assets could be seized. This may appear sensible, but then again: the goal of confiscating Russian assets may not be so much to induce Russia’s compliance with international law, but rather to directly compensate Ukraine (and Ukrainian victims). This goal is in tension with how countermeasures are traditionally conceived.

Changing the law

All this explains why I am hesitant to confidently state that, under current international law, confiscation of Russian assets is lawful. Yet international law is not static. It can change if states want it to change. Member states of the Council of Europe, together with like-minded states such as the US and Canada, could set in motion a process of changing international law, and aim for the crystallization of an international norm that allows for the confiscation of a foreign state’s assets, if that state has (undeniably) committed a serious violation of a peremptory norm of international law, such as aggression.

At the end of the day, it is mainly a political question whether such a norm is desirable. We should bear in mind that it may have adverse consequences for the stability of Western currencies. It may also be used by non-Western countries against Western interests (see Demarais, Veron).

Concluding remarks

In this post, I have argued that confiscation of Russian assets is in tension with international law, but that international law can change. For a new customary norm to crystallize, however, in keeping with the requirements for the formation of customary international law, a general practice of states will be needed, which means that mere practice of Western states will not suffice. Such a general practice, coupled with a conviction that this practice represents the law, could be spurred on by the adoption of a UN General Assembly (UNGA) resolution. I recall that the UNGA held in 2022 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 it’. But it is far from clear whether there would be a UNGA majority to take the next step, namely, to force Russia to compensate Ukraine, and to allow third states to unilaterally seize Russian assets if compensation does not materialize.