Past Time to Liquidate Russian Assets

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This piece is cross-posted on Just Security.

Two long years ago, Russia launched its brutal campaign of aggression and atrocity against Ukraine. That full-scale invasion has now killed more than 30,000 Ukrainians, displaced more than 10 million, and destroyed more than $400 billion of civilian property and infrastructure. The United States and its partners responded by freezing some $380 billion in Russian assets, committing not to return them until after Russia pays for the damage it has caused. Yet despite protracted public debate (including here, here, here, here, here, here, here, here, here, and here), NATO allies have hesitated to take the obvious next step: liquidating Russia’s frozen assets to induce it to end its nakedly unlawful invasion and to compensate Ukraine for its grievous losses. Policymakers have hidden behind the fiction that such a step would pose a “legal problem.” International lawyers have needlessly complicated a straightforward legal issue.

The case for seizing frozen Russian assets is simple. Russia, not Ukraine, should bear the costs of its unprovoked war. Russia’s gross illegality has unjustly enriched Russia, impoverished Ukraine, and imposed huge costs on their neighbors and allies. To help end the ongoing illegal aggression and atrocity, coalition partners are legally entitled to take the next step: liquidating those frozen sovereign assets. Despite some objections, the international law doctrines of countermeasures and sovereign immunity pose no legal barrier to their taking that step.

For centuries, international law has recognized as lawful “countermeasures” otherwise illegal measures of individual and collective self-help that law-abiding countries may take to induce ongoing violators to end illegal action and return to compliance with their legal obligations. The law of countermeasures has been endorsed by the U.N.’s highest judicial body, the International Court of Justice, and the International Law Commission, the body of independent experts responsible for codifying rules of international law. Law-abiding countries have regularly invoked this doctrine to induce compliance with the rules of aviation, trade, and security. In 1983, after Russia illegally shot down Korean Air 007, third-party States applied lawful countermeasures to deny landing rights and suspend air services to induce Russia’s payment of reparations. Far from denying this body of international law, the Kremlin has cynically claimed to be applying countermeasures doctrine to justify illegal retaliatory counter-sanctions against the private property of “unfriendly” investors in Russia.

Collective countermeasures have been found particularly appropriate when taken by specially affected countries or in response to a nation’s violations of legal obligations owed to all other nations (so-called erga omnes obligations). Russia has committed such violations by flouting its international legal duties to abstain from aggression, war crimes, and failure to pay reparations. Russia’s unlawful invasion of Ukraine has created an exceptional threat to the peace and security of the international order. Russia has committed the most egregious campaign of aggression and atrocity in 75 years. More than 140 member States of the U.N. General Assembly initially voted to condemn the invasion, and a follow-on resolution demanded that Russia “must be held to account” for its gross violations of international law in and against Ukraine, including making “reparation for the injury, including any damages.” Less than a month after the invasion, the International Court of Justice overwhelmingly issued a binding provisional measures order directing Russia to “immediately suspend the military operations that it commenced on 24 February 2022 in the territory of Ukraine,” which for two years Russia has blatantly ignored. Last December, the G7’s leaders resolved to “explore all possible avenues to aid Ukraine in obtaining compensation from Russia, consistent with our respective legal systems and international law.”

One such avenue is charted by the International Law Commission’s (ILC’s) Articles on the Responsibility of States for Internationally Wrongful Acts (Articles 36, 42, 48-49, 50, 52): affected States may take “such urgent countermeasures as are necessary to preserve its rights” to induce Russia to stop its ongoing campaign of aggression and atrocity. Lawful countermeasures would include third parties’ “non-performance for the time being of international obligations” normally owed to Russia, so long as those States give notice insisting that Russia perform its recognized legal obligations, offer to negotiate Russian compliance, and continue complying themselves with all other applicable obligations under international law.

The ILC’s Articles would authorize temporary, proportionate, and reversible lifting of the sovereign immunity traditionally accorded to Russian central bank assets to induce it to end ongoing violations of international law. International law does not mandate that protections of absolute sovereign immunity be given to aggressor nations who show their contempt for sovereignty by blatantly attempting to rewrite sovereign borders. As proof that it did not, coalition partners effectively denied such a constraint by imposing a worldwide freeze on Russian central bank assets starting two years ago. Historical precedent shows that any sovereign immunity constraint on national judicial action would not bar multilateral executive action to deny central bank immunity as a lawful collective countermeasure. Executive re-designation of those who may control central bank assets does not violate sovereign immunity. When Iraq invaded Kuwait in 1990, America and European countries placed Iraqi State assets into a compensation commission fund to compensate Iraq’s victims for loss and damage caused by Iraq’s unlawful invasion. In August 2021, the United States similarly created an Afghan Fund incorporated in Switzerland to prevent central bank assets from falling under Taliban control. The British government similarly allowed the Guaido, and not the Maduro, government to gain access to Venezuelan central bank assets in London.

Nor, having started and executed a blatantly illegal war, can Russia now hide behind the claim that central bank assets enjoy sovereign immunity from the reach of domestic courts. Sovereign immunity doctrine was not designed to license Vladimir Putin to violate Ukraine’s sovereignty with aggression, war crimes, and mass murder, then turn around and invoke Russia’s “absolute” legal protections as a sovereign actor. ILC Article 50 pointedly excluded sovereign immunity from the list of fundamental norms of international law that a lawful countermeasure “shall not affect,” because including it would constitute a “quasi-prohibition of countermeasures.” National courts in Belgium and Sweden have recently moderated sovereign immunity when central bank assets are used in ways inconsistent with central banking functions. Temporarily lifting the sovereign immunity of Russia’s frozen assets would similarly warn States not to expect absolute immunity from domestic courts when they would use those assets to fund massive blatant war crimes and aggression.

Here, Ukraine’s compelling and exceptional circumstances justify piercing Putin’s veil of immunity, not to impose punishment or litigate past grievances, but to end its unlawful aggression and atrocity. Temporary and reversible abrogation of Russia’s sovereign immunity would respond proportionately to Russia’s aggression and atrocity and refusal to pay reparations for its illegal destruction. Under Article 51 of the U.N. Charter and customary international law, the violation at issue—an unlawful armed attack on a neighboring sovereign State—is so serious as to confer a right on third States to use force as a measure of collective self-defense.

A fortiori, those States may exercise the lesser right of temporarily abrogating sovereign immunity to tap frozen Russian assets. The reversible step would be suspending sovereign immunity, which could be reinstated once Russia returns to compliance. ILC Article 49 only dictates that countermeasures should be reversible “as far as possible,” and the accompanying commentary acknowledges that “[it]t may not be possible in all cases to reverse all of the effects of countermeasures after the occasion for taking them has ceased.” Such countermeasures as suspending air services are similarly reversible, inasmuch as air services can be reinstated, even if canceled flights or other permanent consequences of the countermeasure cannot be undone. For two years, affected States have unsuccessfully tried other means to induce Russia to return to compliance. Having exhausted other avenues, they now have little choice but to turn to the remaining available countermeasure that is both lawful and effective.

Putin’s manifest lack of respect for foreign sovereignty has caused untold damage. The ILC’s Articles place Russia “under an obligation to compensate for the damage caused thereby.” States holding his frozen assets may thus lawfully ignore his claimed sovereign shield to force him to face financial liability, to discourage other would-be aggressors from doing the same. G7 leaders have already said Russia must cover Ukraine’s damages before any leftover assets may be returned. By starting to relinquish funds to Ukraine, Russia would simply be making a down payment on a massive war reparations debt it would be legally obligated to pay anyway, at war’s end. If Russia refused to pay reparations, it would only constitute another illegal act warranting more collective countermeasures directed against frozen assets. Temporarily lifting sovereign immunity to leverage frozen assets could help force Russia to the bargaining table and finally give it the incentive necessary to start negotiations to end this war.

In sum, no legal obstacle exists to seizing frozen Russian assets to induce the end of ongoing aggression. As a first move, Congress could enact the currently pending bipartisan REPO Act, which would grant the president express, limited, time-bound authority to use the Russian sovereign assets. The REPO Act would authorize the president acting alone, without judicial intervention, to “confiscate” Russian government property in the United States and transfer it to a parallel Ukraine Support Fund. Congress also could amend current U.S. law explicitly denying sovereign immunity to a State that violates international law by engaging in expropriation to cover today’s extreme facts. European States holding frozen assets could then join in, starting with the plainly lawful step of using frozen assets as collateral to generate funds to support Ukraine, pending resolution of the conflict. Short-term lifting of sovereign immunity on Russian assets within several jurisdictions should not trigger a flight from any reserve currency if all States holding frozen assets collectively start liquidating together. Nor would collective liquidation of Russian frozen assets license developed nations to play by a different set of rules. Instead, it would simply ensure that all nations adhere to primary obligations of international law and hold themselves to the same principled limits on the use of countermeasures.

Last week, the Biden administration responded to the horrific death of Russian opposition leader Alexei Navalny by imposing a new wave of economic sanctions. But what Putin really fears is the coalition acting collectively against frozen Russian sovereign assets. That policy option is plainly lawful. The real question now is whether policymakers have the courage to exercise it.

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José Alves says

March 5, 2024

Excellent analysis, Professor Koh. I couldn't agree more with both the legal and political aspects of your post - especially regarding the law on countermeasures. But I wonder if time is also past to freeze and liquidate Israeli assets for what is happening in Gaza, or whether US and UK assets should also be frozen and liquidated for what they did in Iraq and Afghanistan, or if French assets should also be confiscated for what they did in Lybia.