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Following significant US aid to Ukraine, the idea of using frozen Russian assets as a financial solution for the conflict鈥檚 aftermath has gained traction, though it remains highly . The United States has introduced new legal approaches, including the recent  (REPO Act), to manage the challenging international rules about the protection of sovereign assets. 

Experts  that the $60 billion initially allocated serves only as a stopgap, while the complete reconstruction of Ukraine is projected to necessitate at least . As a result, many suggest that the most practical solution involves leveraging frozen Russian assets.

The issue is thorny, but the complex world of international law does suggest some viable approaches to this end.

Problem 

Currently, Ukrainian authorities have not clearly defined their criteria for victory, instead focusing on declarative statements about Zelensky鈥檚  and outlining the  of a potential defeat.

This approach overlooks critical  from international partners urging the resolution of various internal issues. In addition to such long-standing issues as corruption, the communication channels used by Ukrainian leaders have also come under warranted criticism. This criticism substantially diminishes the impact of key arguments, particularly those in the peace formula that address the responsibility of the Russian Federation.

The REPO Act underscores the forward-thinking stance of the United States on this matter. In brief, this legislation authorizes the president to confiscate Russian foreign exchange reserves held in the United States, provided that he identifies these reserves and reports to Congress within a 180-day period.

Paradoxically, the enactment of this legislation represents Ukraine's most significant achievement in securing reparations for the two years of conflict. Previously, discussions regarding the Russian Federation鈥檚 accountability for war crimes and related damages were largely theoretical, yielding no concrete results but political statements.

is likely driven by economic considerations, and invoking 鈥渞eparations鈥� in international law could significantly  international relations.

Although the REPO Act has not yet been implemented, its adoption signals that some nations are prepared to reevaluate some fundamental principles of international law, especially the concept of sovereign immunity.

However, the legal basis for 鈥渇rozen鈥� assets is tenuous, potentially inviting numerous  and reciprocal measures from the Russian Federation. Moreover, Russia's continued integration within the global trade and  provides it with a buffer to sustain a prolonged conflict. While the pace of Austria鈥檚 Raiffeisen Bank鈥檚  from the Russian market, following the  of the European Central Bank to decrease loans, remains to be seen,  pressure illustrates a proactive stance.

Because the West has made little progress in establishing a mechanism to collect damages, whether through the  or another initiative, it is likely that the Russian Federation will eventually challenge the legal basis for asset freezing as part of its lawfare.

Solution 

In my view, vigorously enforcing existing rulings against the Russian Federation鈥攖argeting both its sovereign assets and corporations operating within its borders that finance aggression鈥攃ould mitigate the legal uncertainties surrounding the handling of frozen assets and set the stage for forthcoming legal challenges.

Our previous  of enforcement judgments against the Russian Federation revealed no essential legal barriers to seizing Russian assets, including sovereign ones. This conclusion is also supported by  experts in the field.

On the other hand, enforcing such awards against foreign companies presents significant challenges. Merely paying taxes in the Russian Federation does not constitute intentional war financing. Additionally, these companies could argue that their continued operations result from coercion or blackmail by Putin鈥檚 regime.

Nevertheless, international investment arbitration may provide a remedy. Coercing a company to maintain its market presence could be viewed as a breach of the fair and equitable treatment (FET) and full protection and security (FPS) principles, forming the foundation for a related investment claim. The situation is somewhat complicated by the fact that Russia is not officially at war; however, its initiation of a 鈥渟pecial military operation鈥� can be interpreted as a governmental action that contradicts investors' legitimate expectations, leading to unforeseen financial losses.

Therefore, if a company continues operations in the Russian Federation without clear evidence of unsuccessful attempts to withdraw because of coercion by Russian authorities, we believe it could be deemed complicit in aggression.

As experts in international arbitration , the case , heard before the International Centre for Settlement of Investment Disputes (ICSID), has provided an avenue through which corporate entities鈥攁nd not merely individuals acting in their corporate capacity鈥攁re obligated not to contribute to crimes against humanity.

In this scenario, seizing the accounts of such companies is not impossible and could serve as an effective method to accumulate funds for expenses arising from the Russian invasion. This approach might also include filing claims against these companies by Ukraine and adding their shareholders and management to sanctions lists.

Surely, this will require significant legislative efforts, both domestic and international; however, the ongoing conflict and its aftermath already present a complex array of legal and financial challenges. As the international community considers the use of frozen Russian assets for reparations, it must also address the broader implications such decisions may have on international law and relations. Continued dialogue, transparent decision-making, and proper legal frameworks will be essential in resolving these issues.

The opinions expressed in this article are those solely of the author and do not reflect the views of the Kennan Institute.