Neil Goteiner is a leading American lawyer and partner at the national law firm Farella Braun + Martel. David Hofmayer is a Farella associate. Both have considered and advised on sanctions and forfeiture issues.
Russia’s barbaric assault threatens the very survival of Ukraine’s people and economy. Meanwhile, Moscow plods along, playing the long game, dented but undeterred by sanctions and its tactical fumbles.
Although, thus far, Ukraine’s most immediate need from its international allies has been military support, economic backing is undoubtedly a close second. The World Bank estimates that Ukraine’s economy will be cut in half this year, and the losses and costs of rebuilding infrastructure will run into the high hundreds of billions of dollars.
For this, the country will no doubt seek international aid, but how can it be compensated for such losses? And why not force Russia to compensate Ukraine for the damage? The fact remains that there is no real blueprint for forcing Russia to do so — although it is not a legal impossibility.
We live in an era where the word “reparations” resonates both nationally and internationally. In Europe and the United States, authorities have already seized extravagant yachts and lavish villas from so-called Russian oligarchs, and they have frozen hundreds of billions in Russian sovereign funds. There is now considerable interest in taking the next step to permanently confiscate these assets for Ukraine’s benefit — but this is easier said than done.
One US legislative effort, the “Yachts for Ukraine Act,” was already scuttled after the American Civil Liberties Union raised concerns that confiscation would violate Russian citizens’ right to due process. This is in part because it’s not clear that these uber wealthy Russians are actually influencing Russia’s invasion and war decisions. Their best economic interests prosper in peace times, not in Russian President Vladimir Putin’s imperialistic fever dream.
As for confiscating the Russian state’s frozen assets, Treasury Secretary Janet Yellen and other US government officials have cooled on the idea, fearing other countries would then hesitate to leave assets in the US
But there are essentially two distinct questions at issue here: Is confiscation legal? And is it a good idea? We think the answer to both questions is yes. But we believe that policymakers should focus on Russian sovereign assets rather than those of individual Russians.
There are more sovereign assets at issue; they are more liquid; and there is a clearer legal and moral connection between them and Russia’s invasion. Their confiscation raises fewer constitutional and civil liberties concerns and, at least in the US, plausible legislation could solidify legal authority for such confiscation — here’s how.
Is confiscation legal?
Interestingly, law professors Lawrence Tribe and Philip Zelikow agree that in the US, confiscation may already be authorized by statute.
Tribe focuses on the president’s authority under US law, specifically the International Emergency Economic Powers Act (IEEPA), to “direct and compel, nullify, void [or] forbidden . . year . . . holding, use, transfer, or exercises[e]. . . or . . any right, power, or privilege with respect to . . . any property in which any foreign country. . . has any interest,” once declaring an emergency under the act — which has been done here. The same IEEPA statute was recently used to prevent the Taliban from accessing Afghan foreign reserves.
Tribe also points out that, under current precedent, foreign states are likely not “persons” according to constitutional due process.
Meanwhile, Zelikow grounds his analysis primarily in the international law concept of “countermeasures,” which may compel a wrongful state actor to compensate its victims.
There are, of course, other views among legal scholars. Professor Paul Stephan argues that the IEEPA doesn’t grant such broad authority, as a different section of the same law grants confiscation authority only “when the United States is engaged in armed hostilities or has been attacked by a foreign country or foreign nationals.” He also believes that the precedent on sovereign due process is at best unclear.
In turn, Tribe has responded that Congress, in so amending the IEEPA after the 9/11 terrorist attacks, merely intended to provide examples of the president’s broader authority under the act to expropriate foreign property during times of emergency.
Stephan is more sanguine about Zelikow’s international law approach, however, although he still thinks it’s premature and risks boomeranging on the US if it engages in foreign military activity that other countries deem wrongful.
Overall, the most feasible confiscation scenarios probably hinge on broadening executive authority, which would also be a target for challenge in US courts. As such, we believe a workable and constrained approach would be for Congress to grant express and narrowly tailored authority to the president to confiscate Russian sovereign assets in response to Putin’s illegal war. Support for Ukraine is currently one of the few issues for which bipartisan support is reliable.
In order to avoid unintended precedent and risk of excessively broadening executive power, options for such narrow tailoring would include limiting the statutory expansion to Russia’s invasion of Ukraine.
It’s not at all unusual to tailor legislation to a specific country or even dispute. A section of the IEEPA already codifies a wide range of laws and executive orders specifically sanctioning Iran, Iraq, Libya and other “rogue” nations. Adding a “sunset provision” — or time limit — may also make the proposal more attractive to those justifiably concerned with the expansion of presidential power.
Following Zelikow, the US authorities can also turn to international law. For instance, Article 51 of the Charter of the United Nations, to which the US is a signatory, preserves “the inherent right of individual or collective self-defense if an armed attack occurs against a Member of the United Nations.” Congress and President Joe Biden could assert that authority to confiscate Russian assets as an exercise of this right to collective self-defense.
Is confiscation a good idea?
Critics of confiscation also argue that it’s just plain bad policy.
They argue that any taking of property should go through the courts to show US commitment to the rule of law; that confiscation is always a slippery slope to other civil liberties incursions; that other countries will use US confiscation to justify taking US assets in response to possible aggression from Washington; and that other countries will no longer view the US as a safe place to invest.
Expanding executive authority to confiscate Russian sovereign assets can be done without too much judicial pushback, international protest or fear of later tit for tats. And additional Congressional findings as to Russia’s wrongdoing in this conflict, bolstered by comparable international determinations in the UN and the International Court of Justice, would help assure any judicial due process concerns.
By limiting the confiscation to Russian sovereign assets, rather than reaching for the property of Russian individuals, and by tethering the legislation to this specific conflict, the US would sufficiently manage any precedential risk to civil liberties as well.
And with fewer sovereign assets in foreign jurisdictions, the US is itself less vulnerable to asset confiscation.
US power and clout results in large part from moral authority. That authority has already taken a beating from turning a blind eye to human rights abuses and corruption for financial and geopolitical reasons — see, for example, its most recent flip-face in Saudi Arabia.
Yet, both the practical and moral case for confiscation is strong. With a focus on restitution, it’s only right that Russia pay for the harm it has wrought and the assets it has criminally expropriated from Ukraine.
So far, the US and other powers have sensibly self-regulated their military interventions, but the result is that Ukraine is being ground down by the Russian war machine. The global community must act aggressively, using all the economic and legal tools at its disposal.
It is time to act, not compromise.