Named the legal nuances of the confiscation of Russian assets by the European Union

The European Union, in an attempt to punish Russia, started an uphill battle for the confiscation of Russian assets. The European Commission is considering options to seize the assets of the Russian state and oligarchs, but so far European officials have to admit that this is an unbeaten legal path.

According to a document seen by Politico, the European Commission is exploring legal options to confiscate Russian public and private property as compensation for the restoration of Ukraine.

According to the document, the goal will be “to identify ways to enhance the tracking, identification, freezing and management of assets as preliminary steps for potential confiscation.”

The potential reward will consist of almost $300 billion of frozen assets of the Russian central bank, as well as assets and income of individuals and entities included in the EU sanctions list. The idea was put forward in May, and it is supported by Kyiv, as well as Poland, the Baltic countries and Slovakia. In October, EU leaders instructed the Commission to explore legal options for seizing Russian assets currently frozen under sanctions.

But, writes Politico, the problem for the West is that there is currently no legal mechanism to confiscate Russian assets, as US Treasury Secretary Janet Yellen pointed out back in May.

“There may be a path for the EU to legally confiscate frozen assets under international law, but it is likely a narrow, long and untested path,” said Jan Dunin-Wasowicz, a lawyer at Hughes Hubbard & Reed.

This does not prevent the European Commission from exploring this path, Politico notes.

With regard to private assets belonging to persons or entities under sanctions, Brussels is preparing proposals to make sanctions evasion an EU crime, which would make it easier to confiscate them, but only in the event of a criminal conviction. Even so, the EU would have to take each case to court and would likely have to litigate for years.

This is because many of these assets will be considered foreign investments that enjoy protection from expropriation without compensation and the right to fair and equitable treatment in accordance with the international treaties that Russia has with many EU countries, writes Politico.

The confiscation authority also needs to establish a clear link between the owner of the property and the conflict in Ukraine.

“To ensure proportionality, you will need to look at who is the owner, what they did and so on,” said Stefan Schill, professor of international and economic law and management at the University of Amsterdam.

As for the frozen foreign exchange reserves of the central bank, the largest money bank, the EU chief writes in the document that “they are generally considered to be immune”, with a footnote pointing to the UN convention on jurisdictional immunities of foreign states. and their property, which, however, has not yet entered into force.

“From the point of view of international law, it is quite clear that without the consent of Russia, you cannot use the assets of the Russian central bank,” Shill said.

With regard to the assets of state-owned enterprises owned by Russia, the document notes that they are “in principle” not subject to such a convention, but their seizure could raise problems related to the confiscation of private property, “in addition to the need to demonstrate a sufficient connection with the Russian state.”

The EU is also mulling a “departure tax” on the assets or asset income of sanctioned individuals who wish to move their property out of the EU. This can lead to its own legal problems, as it will target a certain group of people, which is contrary to the provisions of international law on non-discrimination, and they, in turn, may invoke the individual’s right to property as a defense.

To the best of Shill’s knowledge, there is no recent and valid precedent for any of these options. “The EU and member states are trying to introduce a new criminal law,” he said.