Neil Goteiner is a leading United States attorney and partner at the national law firm Farella Braun + Martel. David Hofmayer is a partner of Farella. Both have reviewed and advised on sanctions and confiscation issues.
Russia’s barbaric aggression threatens the very survival of the Ukrainian people and economy. Meanwhile, Moscow plods along, playing the long game, bumpy but undeterred by sanctions and its tactical escapes.
Although, so far, Ukraine’s most immediate need vis-à-vis its international allies has been military support, economic support is undoubtedly a close second. The World Bank estimates that Ukraine’s economy will be cut in half this year, with losses and infrastructure reconstruction costs running into hundreds of billions of dollars.
For this, the country will undoubtedly seek international aid, but how to compensate for such losses? And why not force Russia to compensate Ukraine for the damage? The fact remains that there is no real plan to force Russia to do so – although it is not a legal impossibility.
We live in a time when the word “reparations” resonates both nationally and internationally. Authorities in Europe and the United States have already seized extravagant yachts and lavish villas from so-called Russian oligarchs, and frozen hundreds of billions in Russian sovereign wealth funds. There is now considerable interest in taking the next step to permanently confiscate these assets for the benefit of Ukraine – but that is easier said than done.
A US legislative effort, the “Yacht Act for Ukraine”, has already been scuttled after the American Civil Liberties Union raised concerns that the confiscation would violate the right of Russian citizens to a regular procedure. This is partly because it is not clear that these ultra-rich Russians actually influence Russia’s invasion and war decisions. Their best economic interests thrive in peacetime, not in Russian President Vladimir Putin’s imperialist fever dream.
As for confiscating frozen Russian state assets, Treasury Secretary Janet Yellen and other U.S. government officials have cooled the idea, fearing that other countries might then be reluctant to leave assets to the states. United.
But there are essentially two separate questions at play here: is confiscation legal? And is it a good idea? We think the answer to both questions is yes. But we think policymakers should focus on Russian sovereign assets rather than those of individual Russians.
There are more sovereign assets at stake; they are more liquid; and there is a clearer legal and moral connection between them and the invasion of Russia. Their confiscation raises fewer constitutional and civil liberties issues and, at least in the United States, plausible legislation could strengthen the legal authority of such confiscation – here’s how.
Is confiscation legal?
Interestingly, law professors Lawrence Tribe and Philip Zelikow agree that in the United States, forfeiture may already be authorized by law.
Tribe focuses on the president’s authority under U.S. law, specifically the International Emergency Economic Powers Act (IEEPA), to “direct and compel, rescind, nullify [or] to forbid. . . any . . . possession, use, transfer or exercise[e]. . . of . . . any right, power or privilege with respect to . . . any property in which any foreign country. . . has an interest,” once declaring an emergency under the law – which was done here. The same IEEPA status has recently been used to prevent the Taliban from accessing Afghan foreign reserves.
Tribe also points out that, under current precedent, foreign states are unlikely to be “persons” with constitutional due process.
Meanwhile, Zelikow bases his analysis primarily on the international law concept of “countermeasures,” which can compel a wrongdoing state actor to compensate its victims.
There are, of course, other views among jurists. Professor Paul Stephan argues that the IEEPA does not grant such broad authority, as a different section of the same law only grants forfeiture authority “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 for sovereign procedure is unclear at best.
In turn, Tribe responded that Congress in thus amending the IEEPA after the 9/11 terrorist attacks was simply intended to provide examples of the President’s broader authority under the law to expropriate foreign property in case of emergency.
Stephan is more optimistic about Zelikow’s approach to international law, although he still thinks it is premature and risks backfire on the United States if it engages in foreign military activities that other countries deem illegal.
Overall, the most realistic confiscation scenarios likely hinge on expanded executive authority, which would also be a target of challenge in US courts. As such, we believe that a feasible and constrained approach would be for Congress to grant the President express and narrowly tailored authority to confiscate Russian sovereign assets in response to Putin’s illegal war. Support for Ukraine is currently one of the few issues where bipartisan support is reliable.
In order to avoid an unintended precedent and the risk of excessive expansion of executive power, the options for such narrow adaptation would be to limit statutory expansion to Russia’s invasion of Ukraine.
It is not at all unusual to tailor legislation to a specific country or even a dispute. A section of the IEEPA already codifies a wide range of laws and decrees specifically sanctioning Iran, Iraq, Libya and other “rogue” countries. Adding a “sunset provision” — or time limit — may also make the proposal more appealing to those rightly concerned about expanding presidential power.
Following Zelikow, the American authorities can also turn to international law. For example, Article 51 of the United Nations Charter, to which the United States is a signatory, preserves “the inherent right of individual or collective self-defence in the event of armed attack on a member of the United Nations”. Congress and President Joe Biden could claim this power to confiscate Russian assets as an exercise of this right to collective self-defense.
Is confiscation a good idea?
Critics of confiscation also say it is simply bad policy.
They argue that any property grab should go through the courts to show America’s commitment to the rule of law; that confiscation is always a slippery slope to further civil liberties incursions; that other countries will use US confiscation to justify the taking of US assets in response to potential aggression from Washington; and that other countries will no longer view the United States as a safe place to invest.
We do not agree.
Expanding executive authority to confiscate Russian sovereign assets can be done without too much judicial backsliding, international protests, or fear of later reprisals. And additional congressional findings on Russia’s wrongdoings in this conflict, bolstered by comparable international determinations in the UN and the International Court of Justice, would help ease any due process issues.
By limiting confiscation to Russian sovereign assets, rather than seizing property from Russian individuals, and tying the legislation to this specific conflict, the United States would also sufficiently manage any risk of precedent to freedoms. civil.
And with fewer sovereign assets in foreign jurisdictions, the United States is itself less vulnerable to asset confiscation.
The power and influence of the United States are largely the result of moral authority. This authority has already taken a beating for turning a blind eye to human rights abuses and corruption for financial and geopolitical reasons – see, for example, its latest report flip-flop in Saudi Arabia.
Yet the practical and moral arguments for confiscation are strong. With a focus on restitution, it is right for Russia to pay for the harm it caused and the assets it criminally expropriated from Ukraine.
So far, the United States and other powers have sensibly self-regulated their military interventions, but the result is that Ukraine is crushed by the Russian war machine. The global community must act aggressively, using all economic and legal tools at its disposal.
It’s time to act, no compromise.