No Rights for the Wicked (Part I)

Examining the academic arguments and legislative proposals to turn over massive Russian funds to Ukraine

By: Jared Sloan (1L)

Credit: Creative Commons

To seize, or not to seize, that is the $300 billion question. 

This monstrous sum represents the now-frozen foreign-held assets of the Russian central bank, immobilized by G7 and other countries following Russia’s invasion of Ukraine on February 24, 2022. But as the war grinds on and funding for Ukraine becomes harder for its allies to sustain, some nations – Canada included – are weighing a more punitive proposal: confiscating Russia’s frozen riches and delivering them to Ukraine. The New York Times reported last month that the Biden administration has begun “pressing Britain, France, Germany, Italy, Canada and Japan to come up with a strategy by Feb. 24, the second anniversary of the invasion.” 

As appealing as this idea sounds from a moral perspective, there has been an active debate since the start of the war as to whether domestic and international law allow Western governments to actualize such goals. This column does not intend to wade into the debate, other than to say that the experts advocating for this plan have laid out a very clear and convincing case. 

So, with a major decision potentially in the offing, I wanted to better understand the context – how we’ve arrived at this point, why this proposal is legally controversial, and how Canada is playing a role in these unfolding events – by working through some of the big questions. 

Watch this space in the months ahead. 

Let’s dive right in – what exactly is the proposal, and what is the underlying legal theory?

If you’re looking for the full legal arguments, there are some wonderfully thorough versions available, most notably in a September 2023 report by the Renew Democracy Initiative (RDI), authored by renowned legal scholar Laurence Tribe and others. For a Canadian-focused view, it is worth reviewing the white paper on Bill S-278, tabled by Senator Ratna Omidvar this past October. 

Drawing mainly from these two sources, I would summarize the legal underpinnings of this proposal as follows:

1. Under customary international law, there are robust protections for a state’s sovereign assets – often referred to as “sovereign immunity.” This shields a state from the judicial authority of foreign courts, but it does not – according to this argument – provide protection from the actions of another state’s executive or legislative branches. Per the white paper: “The international law doctrine of state immunity bars the national court of one state from adjudicating in proceedings involving another state. It does not, however, prevent the Parliament of another state from mandating the state’s executive arm to take action against the assets belonging to a foreign state.” 
2. Ordinarily, such actions would violate customary international law pertaining to a state’s obligations not to interfere with another state’s sovereign property. (Note that these obligations do not stem from the “sovereign immunity” doctrine, but rather the “interrelated principles of reciprocity, comity, and fair compensation for expropriation” which govern normal legal relations between countries.) However, the international law doctrine of countermeasures would, in the current circumstances, permit states such as Canada to “suspend customary international obligations with respect to Russian state assets,” so long as such measures meet certain criteria (more on this to come). 

Based on the above, the RDI report says that “G7 countries can and should amend their sovereign-immunity statutes to remove any doubt that a state like Russia is not entitled to the protections of sovereign immunity when it so blatantly violates international law.” As it so happens, Senator Omidvar’s proposed legislation provides a perfect example of how this can be done. As stated on her website, Bill S-278 would “amend the Special Economic Measures Act to allow for a legal pathway to seize and repurpose state assets, including central bank reserves, of perpetrators that breach international peace and security and redirect them to the victims that have had their lives shattered. The bill would allow the Governor in Council to dispose of a foreign state’s assets seized under the Act if the seizure occurred without a judicial order.” This proposal was last debated during its second reading in October. 

For Canada, however, there is one problematic detail: just prior to its illegal full-scale invasion of Ukraine, Russia appears to have transferred nearly all of the central bank reserves it kept in Canada – as in all but CAD $100-200, or just slightly less than the $1 trillion or more which may be needed to rebuild Ukraine. But in Senator Omidvar’s speech at the second reading, she explained that even if there was just $1, “the principles and objective of my bill still apply, and they are as follows: to create a legal avenue for Canada to seize state assets and, more importantly, to create a legal precedent that can be followed by other like-minded jurisdictions.”

As noted at the start, recent reporting suggests that the Biden administration now believes that there is indeed a legal way for other countries to follow Canada’s lead and hopefully establish a collective plan to seize and dispose of Russia’s frozen funds, the bulk of which lie in Europe (and Belgium in particular, where Russia moved the CAD $16 billion in reserves previously held in Canada). Such plans have been talked about for some time now; an official statement by the European Union in February 2023 expressed a commitment to support Ukraine’s reconstruction by “striving to use frozen and immobilized Russian assets in accordance with EU and international law.” And the RDI report goes to great lengths to demonstrate that the International Emergency Economic Powers Act provides the necessary authority for the U.S. President to transfer sovereign assets from Russia to Ukraine through executive action – much as Senator Omidvar’s proposed amendment would allow the Canadian government to do. 

Of course, there arises the question of why countries are pursuing this avenue after two entire years of the untold death and destruction visited upon Ukraine. Part of it has to do with the evolving dynamics of both the war and political support abroad; the NYT piece referenced earlier cited the view of a senior Biden administration official that “eroding support for the war effort among Republicans and Ukraine’s increasingly precarious military position made it clear that an alternative source of funding was desperately needed.” 

There are also a number of concerns about the potential fallout of the planned asset transfer, particularly in relation to possibilities of damaging the position of dollars/euros as preferred global reserve currencies, and exposing the assets of Western governments/investors to retaliatory expropriations. These points have been contested, but that is not the focus of the coverage here. 

Rather, the next article in this series will explore the question at the heart of the ongoing debate in international law circles: Can the seizure and transfer of Russian assets be lawfully performed under the doctrine of countermeasures? 

In the meantime, it is useful, I think, to remind ourselves just what is at stake in this moment, and why this transfer of funds, along with immediate and more effective support from Western governments, represents a moral and strategic imperative. By all accounts, there may be many hard months ahead before Ukraine has another chance to turn the tide on the battlefield. The West needs to reaffirm that it is in this for the long haul. 

Or there is the alternative scenario – increasingly and depressingly imaginable – in which the West, after squandering the best chance of a total victory for Ukraine and then failing to position it for a successful counteroffensive in 2023, now forecloses any path to an acceptable resolution by allowing assistance to run dry. As Lee Hockstader wrote last month in The Washington Post:

That would leave Ukraine’s government unable to maintain basic services, and its military increasingly short of artillery ammunition, air defense capability and other equipment. Ukraine’s already badly battered front-line forces would become more brittle. Russian territorial gains would be accompanied by murders, rapes, kidnapping of children and other Russian war crimes on a chilling scale.

This revanchist evil must be defeated at all costs. And who better to pay the costs than those who perpetrate the crimes.