American legal approaches to ensuring that Russia pays reparations to Ukraine: feasibility and reality

  • 06.09.2022

Prof. Charles Szymanski

1. Introduction

The Russian invasion of Ukraine in February, 2022 did not go according to plan.  Stiff Ukrainian resistance, along with material support from the United States, Canada, and many European states, slowed and even stopped the Russian advance. The capital, Kyiv, was not taken, and the Russians shifted the focus of their invasion to the south and east of the country, especially in the Donbas.  As of August, 2022, there was no end of the war immediately in sight, and projections were made that the conflict might go on for even years.

While Ukraine’s independence was preserved in the face of the planned blitzkrieg, the war has devastated the Ukrainian economy.  The illegal invasion and partial occupation has caused death and destruction in its own right, and the resulting damage has been compounded by Russian war crimes, including the targeting of civilians and non-military infrastructure. As the aggressor, Russia is responsible for paying these damages, that much is clear.  More ambiguous is when and how Russia will pay reparations.

There are means to obtain reparations from a state that has launched a war of aggression under public international law.  However, even under normal conditions international law works very slowly and inefficiently, if it works at all (as illustrated by the invasion itself, launched by a permanent member of the United Nations Security Council).  Ukraine needs compensation right now.  In light of this reality, different proposals have been made for individual states – especially the United States – to take quick action under domestic law to seize Russian assets found in their jurisdiction, and distribute them to Ukraine. This would avoid the quagmire of international public law, and has the potential to provide prompt financial relief to Ukraine.  This article addresses the legal possibilities of the United States taking such actions, and examines how feasible and realistic they may be in practice.

2. The problem with international law and reparations

Historically, questions over reparations have been handled at the end of a conflict, where the loser of the war agrees to pay a predetermined amount in compensation, typically as specified in a treaty. After World War II, doubts arose about the wisdom of imposing an excessive reparations burden upon a defeated power, which might then seek revenge in the future by starting another war.[1] Still, states allied with Germany agreed to pay specific sums of reparations in their own respective peace treaties.[2] Moreover, subsequently, West Germany signed treaties with various states that it had occupied during the war, paying certain (generally modest) amounts of reparations in satisfaction for any claims.[3]

In the post-World War II context, states engaged in military or other conflicts have agreed on claims commissions or arbitration to resolve disputes over compensation for war damages. A famous example was that of Eritrea and Ethiopia.[4] A claims commission was also created by the United Nations Security Council in the wake of Iraq’s illegal invasion of Kuwait and its subsequent military defeat by a coalition led by the U.S. This commission used revenue from Iraq’s oil income to pay claims arising from the war, and over time paid out a significant amount of funds.[5] 

The International Court of Justice (ICJ) also has decided claims of war reparations, most recently in the Armed Activities on the Territory of the Congo (Democratic Republic of the Congo v. Uganda (Feb. 9, 2022)) case. That case arose out of Uganda’s invasion of the Congo some 25 years earlier.  Both parties agreed to the ICJ’s jurisdiction to decide this question, and in the end the court ordered Uganda to pay a relatively low amount to the Congo in compensation ($325 million). [6] 

All of these mechanisms have serious flaws in the context of providing immediate reparations to Ukraine.  The conflict may last years, and negotiating a formal peace treaty may take even longer.  Moreover, Russia would likely not agree to any of the following: pay any reparations, set up a kind of claims commission to resolve the question of reparations, giving the ICJ jurisdiction to decide this issue, or allowing the UN Security Council to set up a claims commission. Even if Russia would consent some form of dispute resolution, it would not be a swift process and would not provide full and timely compensation to Ukraine.

Outside the context of a peace treaty or claims commission, the countermeasure doctrine in international law has some capacity of providing an immediate penalty against Russia, but not direct monetary compensation to Ukraine.  Under this doctrine, states may take immediate proportional countermeasures against another state to force it to stop any unlawful actions.  Such countermeasures could include freezing assets, and in fact many states have frozen various substantial Russian assets in response to the Russian invasion.  However, most experts agree that freezing assets and seizing and distributing such assets are two different things. As a countermeasure, freezing an asset can have the effect of pressuring the aggressor state to end the war:  once the aggression has stopped and troops are withdrawn, the assets may be unfrozen.  In contrast, if the assets are seized and distributed, Russia no longer has a chance of getting them back, and this type of action would not necessarily give any incentive for Russia to stop the war.  Consequently, seizing an asset would not be an appropriate, legal countermeasure. [7]

As a result, a domestic American legal approach may be preferred, given the poor alternatives offered by international law. 

3. Possibilities for American unilateral action

Certain kinds of direct action taken by the United States to provide remedies to Ukraine have numerous advantages over public international law. The main one is  time- money can be distributed relatively quickly, with potentially limited judicial review, and no time-consuming international law procedures.  Again, time is critical as the economy of Ukraine is being destroyed by the illegal war.  Theoretical international law approaches, that may or may not work years from now, offer no relief.  Specifically, the constitutional authority of the President of the U.S., together with existing and/or proposed legislation, may enable the U.S. to seize Russian assets in the U.S. and distribute them to Ukraine.

There are two types of relevant Russian assets, those held by Russian oligarchs and those of the Russian Central Bank. Of these two types of assets, those of the Russian oligarchs are more problematic from the legal point of view. First, they are relatively small, only $20-30 billion, as opposed to those held by the Russian Central Bank, which amount to over $300 billion.  Second, because of constitutional due process protections under American law and the opaque ownership structures holding the oligarch’s funds (typically offshore shell corporations), it may be difficult to prove that any given asset is actually connected to the Russian state or a particular Russian oligarch.  Years of litigation may ensue, tying up these funds in the process and keeping them out of reach of the U.S. and ultimately, Ukraine. The Russian Central bank assets are therefore a much better target, as they are clearly owned by the Russian state.[8]

Article II of the U.S. Constitution gives the President wide authority over foreign affairs and national security.  In the context of freezing, transferring and distributing assets, Article II, along with related federal legislation, makes some parameters of this authority clear.  The President has the constitutional authority to recognize governments. The International Emergency Economic Powers Act of 1977 (IEEPA)[9] gives the President the right to freeze and transfer foreign assets.   In Dames and Moore v. Regan, the Supreme Court ruled that President had the right enter into an agreement to transfer frozen Iranian assets to a claims commission. This commission would subsequently evaluate the claims of the parties and determine how the funds would be distributed.[10]  Read together, the constitution and the IEEPA likewise gives the president the power to transfer  frozen assets to an alternative government of a given state. For example, in the case of Venezuela, the President transferred frozen Venezuelan assets claimed by the Maduro government to an opposition government recognized by the U.S.  Afghan assets claimed by the unrecognized Taliban government, likewise, have been frozen and allocated (at least in part) to fund the satisfaction of claims of victims of terrorism, where no other Afghan government has been recognized by the U.S. [11] These actions were taken within the scope of the President’s Article II powers over foreign affairs and national security.

Applying these principles to Russia, certainly the President can freeze Russian assets as part of his power to conduct foreign affairs. Arguably, he could also transfer them to a fund or commission, that could then distribute money to Ukraine, just as frozen Iranian, Venezuelan and Afghan assets were transferred. However, this authority to transfer and distribute frozen assets to Ukraine is only arguable, because of additional language found in the IEEPA, and since there are important differences between the Ukrainian and Iranian/Venezuelan/Afghan examples.

The IEEPA contains a separate provision stating that the President has authority to seize assets of a country that is in a military conflict with the U.S.  Russia is not at war with the U.S., and therefore the language could be logically construed as prohibiting any seizure of Russian assets.[12]  The linguistic debate would then hinge on the meaning of the term “transfer” of assets, which the President does have the authority to do, and whether transferring Russian assets to a claims commission or trust for eventual distribution is something different than seizing them. 

While the Iranian, Venezuelan and Afghan cases would on the surface suggest that transferring and distributing would be permissible, those situations are somewhat distinguishable.  Iran and the U.S. had both agreed to the establishment of a claims commission and the transfer of funds to that commission.  Therefore, the President’s action was more in the form of carrying out an agreement with Iran, as opposed to unilaterally freezing, transferring and distributing funds. The transfer of Venezuelan and Afghan assets, likewise, were directly connected with the non-recognition of the regimes of those states, while here, the U.S. currently recognizes the Russian government. [13]

It is difficult to predict with any certainty how a court would construe these terms in the IEEPA.  Both arguments have merit.[14]  Still, with such large sums of money at stake, the better course of action would be for Congress to pass additional legislation, making the President’s authority absolutely clear in this matter. Since the Ukrainian cause has garnered general bipartisan support in Congress, the passage of such legislation is actually realistic. Indeed, one non-binding bill on this issue passed the House of Representatives, and another bill is pending. 

4. Proposed legislation

Pursuant to the Asset Seizure for Ukrainian Reconstruction Act, the President should seize assets of Russian oligarchs, where they are connected to Putin and worth more than $2 million. Assets should be used for Ukraine’s post-conflict reconstruction, humanitarian assistance, to help refugees,  to pay for security assistance for Ukraine, and also support internet availability in Ukraine.  This bill passed the House of Representatives, but is only a sense of Congress – it would not be binding law. [15]

The “Reparations for Ukraine through Sovereign nation Support and Integration Act” or the “RUSSIA Act”, HR 7724, is a bill introduced on May 11, 2022. Its purpose is to use frozen assets of the Russian Central Bank of Russia for the reconstruction of Ukraine.  The President would be given the authority to transfer frozen Russian assets to an international financial institution, which would determine damages incurred by and payable to  Ukraine, and distribute these assets to Ukraine after the war. [16]

Another idea that has emerged is to pass a law that would make an exception to the Foreign Sovereign Immunities Act, which generally prohibits lawsuits against states and the resulting seizure of their assets, and is consistent with customary international law on this issue.  This exception would allow direct legal action to seize and distribute Russian Central Bank assets, or to make this money available to satisfy private legal claims.  Russia could challenge such a law on constitutional grounds, arguing that this seizure violates due process protections, although there is precedent that foreign countries are not protected by the due process clause of the constitution.[17] Russia could also bring a claim against the U.S. in the ICJ alleging a breach of the customary international law on immunity, although there would be some irony in Russia – which breached core international law principles by invading Ukraine- seeking relief from an international court.[18]

5. Disadvantages of reliance upon American law

To the extent there is any ambiguity in the right of the U.S. to seize or transfer and then distribute Russian assets to Ukraine as war reparations, Russia may file a due process claim in U.S. courts or a claim in international courts (for a violation of sovereign immunity, for example) to get their money back. If any of these claims are successful, ultimately Americans would be paying reparations instead of Russia, an entirely unacceptable result.[19]

Russia may also seize U.S. assets in retaliation, although for the most part U.S.  firms have already exited the Russian market and have abandoned or sold off all their assets, making this threat negligible. Depending on the nature of the U.S.’s seizure of assets, the U.S. may also suffer some reputational harm and retaliatory consequences from other states (directed at U.S. assets abroad) for violating principles of international law. [20]

6. Conclusions

Ukraine needs immediate financial help, as a result of the illegal war and related destruction caused by Russia.  International law remedies are too weak and in any case would take too long to provide any meaningful relief to Ukraine. As a result, domestic law of states in which Russian assets are located – particularly the U.S. - should be carefully examined as an alternative means for Ukraine to obtain faster reparations from Russia.  In the American example, a legal roadmap does exist in which the U.S. government may freeze and possibly transfer assets of the Russian Central Bank to another entity for eventual distribution to Ukraine.  To the extent there is any ambiguity in the law, additional legislation may be passed to ensure the ability of the U.S. to take such actions.  While not all Russian Central Bank assets are located in the U.S., the distribution of these assets to Ukraine would provide some relief and moreover, may prompt other countries holding frozen Russian assets to take similar actions. 

 

 

 


[1] Michael E. Korte, Ending Wars Well: Order, Justice, and Conciliation in Contemporary Post-Conflict, 2014-SEP Army Law. 56, 58-59 & n. 40  (Sept. 2014) (book review);  Jessica Wang, Looking Forward in a Failing World: Adolf A. Berle, Jr., The United States, and Global Order in the Interwar Years, 42 Seattle U. L. Rev. 385, 391 (Winter, 2019).

[2] Richard M. Buxbaum, A Legal History of International Reparations, 23 Berkeley J. Int'l L. 314, 344 (2005).

[3] Id. at 345-346. 

[4] Won Kidane, Civil Liability for Violations of International Humanitarian Law: The Jurisprudence of the Eritrea-Ethiopia Claims Commission in the Hague, 25 Wis. Int'l L.J. 23, 24-25 (Spring 2007).

[5] Gabriella Blum, Prizeless Wars, Invisible Victories: The Modern Goals of Armed Conflict, 49 Ariz. St. L.J. 633, 680 (2016).

[6] Armed Activities on the Territory of the Congo (Democratic Republic of the Congo v. Uganda)(Feb. 9, 2022) ICJ General List No. 116.

[7] Scott R. Anderson, Chimène Keitner, The Legal Challenges Presented by Seizing Frozen Russian Assets, (May 26, 2022), at  https://www.lawfareblog.com/legal-challenges-presented-seizing-frozen-russian-assets , see also Cynthia Barmore, Chris Miller, Dumping Debt And Seizing Assets: Ukrainian Countermeasures for Russian Aggression, 67 Stan. L. Rev. Online 67, 71 (Dec. 1 2014) (arguing Ukraine had the right to freeze Russian assets as a countermeasure, “wielded for the purpose of getting Russia out of Ukraine” in the context of Russia’s first invasion of the Donbas and annexation of Crimea in 2014. “The moment Russia ceases its destabilizing actions in Crimea and Eastern Ukraine, Kiev can resume debt payments and unfreeze assets”).  But see, Philip Zelikow, A Legal Approach to the Transfer of Russian Assets to Rebuild Ukraine (May 12, 2022), at https://www.lawfareblog.com/legal-approach-transfer-russian-assets-rebuild-ukraine , taking a contrary approach. 

[8] Zelikow, supra, n. 7.  Other estimates put the value of accessible assets of the Russian Central Bank at $350 billion. Robert Liton, Russia can be made to pay for Ukraine damage now, (March 17, 2022), at https://www.brookings.edu/opinions/russia-can-be-made-to-pay-for-ukraine-damage-now/

[9] International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-1707.

[10] 453 U.S. 654 (1981);  Zelikow, supra, n. 7. 

[11] Kevin Liptak and Natasha Bertrand, Biden unfreezes Afghan funds for in-country relief and 9/11 legal fight, CNN Feb. 12, 2002, at https://edition.cnn.com/2022/02/11/politics/executive-order-afghanistan-9-11-humanitarian-aid/index.html ;  Edward Wong, Venezuelan Opposition Leader Guaidó Controls U.S. Bank Accounts, State Dept. Says, N.Y. Times, Jan. 19, 2019 at https://www.nytimes.com/2019/01/29/us/politics/venezuela-bank-accounts-guaido-pompeo.html

[12] Paul Stephan, Giving Russian Assets to Ukraine—Freezing Is Not Seizing, (April 26, 2022), at https://www.lawfareblog.com/giving-russian-assets-ukraine-freezing-not-seizing

[13] Id.;  see also Anderson and Keitner, supra, n. 7. 

[14] Lee Buchheit and Mitu Gulati, Alphaville’s guide to seizing Russian assets, Financial Times, March 29, 2022, at https://www.ft.com/content/50aae1a2-088a-47f9-b936-30fa02cf03de (noting that the issue is debatable, but concluding that IEEPA does not provide the President with the authority to dispose of Russian assets). 

[15] H.R.6930 - Asset Seizure for Ukraine Reconstruction Act, at https://www.congress.gov/bill/117th-congress/house-bill/6930#:~:text=This%20bill%20establishes%20a%20working,leadership%20and%20addresses%20related%20issues. ;  New bill aims to use assets seized from wealthy Russians to arm and rebuild Ukraine, PBS April 28, 2022 (transcript) (Bill is non-binding), at https://www.pbs.org/newshour/show/new-bill-aims-to-use-assets-seized-from-wealthy-russian-to-assist-ukraine

[16] H.R. 7724, at  - https://www.govinfo.gov/content/pkg/BILLS-117hr7724ih/pdf/BILLS-117hr7724ih.pdf

[17] Stephan, supra, at n. 12 (collecting cases, although ultimately concluding that a state might nevertheless be entitled to some due process protection). 

[18] Anderson and Keitner, supra, n. 7 (outlining the problems with violating the international law principle of sovereign immunity);  Zelikow, supra, n. 7 (noting the irony of Russia seeking relief with the ICJ). 

[19] Stephan, supra, at n. 12. 

[20] Id.