Why seizing and selling Russian assets is dogged by legal issues
Several EU capitals are pressing for Russian assets to be used to pay for Ukraine’s reconstruction
One idea that may pop up in the various forums ahead of next week’s EU summit is the idea of seizing and selling off Russian assets to pay for Ukraine’s reconstruction.
We’ll also look at what finance ministers meeting in Brussels today and tomorrow for their regular eurogroup-Ecofin combo are likely to discuss. One emerging prospect is the need for an extra EU budgetary top-up, given all the Ukraine-related expenditure, as the FT reports.
And with the World Trade Organization’s ministerial meeting fast approaching, we examine its checklist of reforms.
EU institutions (and some capitals) are engaging in the tradition of faire le pont (around Ascension day, for those observing), so we’ll be off on Thursday and Friday, and back in your inboxes on Monday.
To confiscate or not; that is the question
Valdis Dombrovskis, European Commission executive vice-president, struck an uncompromising note last week when asked about the idea of confiscating Russian assets to pay for the reconstruction of Ukraine, writes Sam Fleming in Brussels.
There was, he said, a principle of “aggressor pays” that applies, as he called for the net to be cast wide when it comes to examining the confiscation of both private and public Russian assets. “We must make Russia pay for the damage it is creating,” the Latvian commissioner said.
Behind the scenes, the topic is proving a divisive one between member states, some of which are wary of the legal and political tripwires the EU will encounter as it examines asset confiscation.
Diplomats last week debated whether asset confiscation should be discussed at EU leaders’ level as soon as this month’s European Council meeting, after the topic appeared on draft summit conclusions. Opinions varied sharply.
As a reminder, there are two main avenues for Ukraine’s allies to pursue here: either confiscating the frozen assets of Russian oligarchs who have been placed under sanctions, or seeking to liquidate some of the frozen assets of the Russian central bank.
The former route is less lucrative in terms of the money raised, but it may be legally easier to pull off than the latter, which would mark an extraordinary precedent and raise complications within international law.
The draft European Council conclusions would have EU leaders welcoming “efforts made with a view to providing for appropriate confiscation measures, including exploring options aimed at using frozen Russian assets to support Ukraine’s reconstruction”.
But in a meeting of EU diplomats on Friday a number of member states sounded wary about the idea of having a leaders’ debate on the topic, according to people familiar with the meeting, noting how delicate it is, as well as the need to ensure compliance with national and international law.
Among the countries that are cautious in this area is Germany, where even enforcement of asset freezes is patchy, because of constitutional law restrictions. The country’s fundamental law explicitly says that expropriation by the government can occur only “for the public good” and must be combined with compensation — which could open the door for massive compensation lawsuits from Russians hit with sanctions.
The upshot is that it is not yet clear if the wording will make it on to the EU leaders’ menu when they gather a week from now.
That said, the commission is pretty active in this area already. This week it is due to propose a new directive on asset recovery and confiscation, along with a council proposal on adding the evasion or violation of sanctions to criminal law.
The latter is important, because it is easier to engineer the seizure of assets as part of a criminal process, and not all member states currently have sanctions evasion on their list of offences.