A New Look at Confiscating Russian Assets

Should the ECtHR issue such an order on compensation, this will raise the question of how it will be paid for. Russia has already announced that it would not comply with any rulings of the Court following its expulsion from the Council of Europe in March 2022. Voluntary payments by Russia are thus not to be expected. But – and this is where the crucial question arises – would there be a possibility of enforcing a just satisfaction award against Russia in a third state holding Russian state assets?

The report ‘Legal Possibilities of Using Russian Central Bank Assets to Enforce European Court of Human Rights Judgments’ recently published by the OSJI examines this untested possibility in Belgium, France and the United Kingdom. All three states have frozen Russian Central Bank assets due to economic sanctions that were imposed following the full-scale invasion of Ukraine in February 2022. Should the ECtHR compensation awards be enforceable in these countries, these assets could become subject to confiscation.

Domestic laws and procedures in the three countries do not contain specific rules on the enforcement of ECtHR judgments against another state. Combined with the lack of previous case law on this matter, the answer to this question remains uncertain. The two main issues revolve around the ability of national courts to recognise a judgment by an international court and the obstacle of state immunity protection for sovereign assets.

Recognition of judgments

Regarding the first issue, domestic courts in all three countries first need to recognise foreign national judgments before enforcement measures, such as confiscation, can be imposed on the defendant’s assets. In this preliminary stage of recognition, the national court aims to ascertain that the foreign judgment is a valid basis for enforcement even though it was rendered by a court in a different country. Requirements for recognition vary by country but typically include that the foreign court had jurisdiction, that due process was respected, that the judgment is final and conclusive, and that it is consistent with public policy.

The majority of scholars agree that ECtHR judgements are not directly enforceable without being recognised by domestic courts. Consequently, it is likely that a domestic court in any of the three countries will also require a recognition process first before confiscation is possible.

The report shows that while in France the chances of such a recognition are low, it could be argued for in Belgium and the United Kingdom. In France, the rules for recognition are designed for judgments by foreign national courts, and the ECtHR might not be considered equivalent. In the absence of applicable rules, French courts are thus likely to decline recognition.

Even though the Belgian rules of recognition are equally considered not applicable to ECtHR judgments, scholars have suggested that a simplified procedure, focused on merely checking their authenticity, could be used to recognize ECtHR judgments as enforceable title. In the United Kingdom, on the other hand, courts might simply apply the same rules for foreign national judgments to recognise ECtHR judgments. A definite answer to this question will have to wait for the issue to be litigated.

State immunity

Regarding the second issue, under customary international law, states are generally immune from the jurisdiction of foreign courts, which could be put forward as an argument against the confiscation of Russian Central Bank assets to pay for compensation awarded by the ECtHR. All three countries protect sovereign assets, that is, any property owned by a state or a state entity, and central bank assets in particular, from enforcement measures. This is because such actions by one state against another are inherently coercive and seen as an infringement on the other state’s sovereignty. State immunity for state assets would certainly arise as an obstacle to successful enforcement of ECtHR judgments.

Potential ways under international law to overcome this obstacle in relation to Russian state assets have been discussed at length (see notably Philippa Webb’s comprehensive overview here). In brief, proposals for how to address state immunity include the arguments of countermeasures to justify confiscation, the adoption of national legislation to develop new international customary law exceptions to sovereign immunity, and exempting enforcement of international judgments from the purview of state immunity. The last proposal in particular could apply to the enforcement of ECtHR judgments.

Within national legal frameworks, Belgium offers an interesting possibility by explicitly making state immunity ‘subject to the application of mandatory supranational and international provisions’. It could be argued that this applies to Russia, given its announcement not to comply with ECtHR judgments, because the obligation of Council of Europe Member States to pay ECtHR compensation awards is a mandatory supranational and international provision, and therefore state immunity cannot be invoked by Russia to avoid this responsibility. Thus, Belgian courts arguably might have a legal pathway to order the confiscation of Russian funds held in Belgium. However, this provision’s exact implications remain unclear and Belgian courts have not yet ruled on the question of whether the enforcement of ECtHR judgments could fall under this caveat.

Shifting winds

The OSJI report comes at a time when the wind appears to be shifting, as Anton Moiseienko recently discussed on the Blog. In the initial days of the war, states that imposed sanctions on Russia were unwilling to consider confiscation of Russian state assets for political reasons (such as the risk of retaliatory measures by Russia), legal reasons (in particular state immunity), and economic reasons (namely international investors’ trust in the securities depository system). However, recent developments have led to a re-thinking. For one, continued financial support by the United States, the main contributor to Ukraine’s war efforts so far, is uncertain under the new administration. Secondly, the looming expiration of European Union sanctions on state assets in July may result in the release of Russian assets.

As recently as May, the UK has proposed to move frozen Central Bank assets to a separate investment fund instead of keeping them at the international depository for securities Euroclear in Belgium, which could be a first step towards confiscation. Keeping the funds at Euroclear make them dependent on the extension of sanctions which require a unanimous approval by all European Union Member States, some of which (in particular, Hungary) can threaten to veto extension due to their relations with Russia. Transferring them into a separate mechanism could open up the possibility for decisions to be made by a smaller number of states allied with Ukraine, including on the question of confiscation. In the same month, Lithuania called for the confiscation of such assets to fund support for Ukraine. At the same time, some voices in the United States are identifying judicial pathways to confiscation of Russian sovereign assets, arguing that certain options are possible despite state immunity.

Redressing harm

Most of the debate on confiscation, however, focuses on funding the military defence of Ukraine without sufficient consideration of reparation for victims. Using Russian Central Bank assets to enforce ECtHR judgments could ensure that any payments obtained would be directed to affected communities to redress harm suffered as a consequence of violations of the Convention. This would apply to both individual and inter-state claims against Russia. In the latter case, just satisfaction awards are intended to benefit victim communities, represented by Ukraine as their home state.

Importantly, any enforcement measures based on rulings by the ECtHR would carry legitimacy as it would be based on an international judgment which sets out their justification (in the form of violations of the Convention) and scope. This would be preferable to arbitrary or untransparent allocation of funds.

Broader implications

Nevertheless, the broader implications of enforcing an ECtHR ruling against a third state are considerable. Member States of the Council of Europe might worry that such a precedent could be applied against their state assets in the future. These concerns could be allayed by pointing to the present particular circumstances: Russia was expelled from the Council of Europe and explicitly declared its refusal to comply with compensation awards. This is a fairly unique scenario and it would be well within the power of Member States to avoid such actions.

Some might argue that another consequence of this approach would be a competition of claimants to access Russia’s state assets. However, the competition has already begun – with private companies and investors winning the race. In May, Euroclear has started to confiscate and redistribute some of the frozen assets of Russian individuals and entities to compensate Western investors whose assets were taken in Russia. Even though Central Bank assets were not included in this confiscation, it shows a trend favouring corporate claimants over victims of the war. Enforcing ECtHR judgments might make sure that victims can compete in the race at all.

Outlook

In light of the obstacles it faces, the option of enforcing a just satisfaction award against Russia in a third state holding Russian state assets is by no means a guaranteed path to successful confiscation of Russian Central Bank assets. One of these obstacles – the uncertainties around recognition of ECtHR judgments – could be resolved through legislative action. None of the countries surveyed have legal rules to recognise (and subsequently enforce) ECtHR judgments, even though their binding force is explicitly set out in Article 46(1) of the Convention. The OSJI report therefore recommends amendments to national laws giving domestic bodies the power to recognise ECtHR judgments as an enforceable title through a simplified procedure to pave the way for potential enforcement. This could follow the example set in Belgian law where the recognition of judgments of the Court of Justice of the European Union are administered by the Minister of Foreign Affairs. The limitations of this would be, however, that state immunity against confiscation of state assets would still have to be overcome using one of the untested theories above.