Mainpage > News > The first decision to confiscate the property of a Russian oligarch has been made. What does this mean for Ukraine?

The High Anti-Corruption Court (HACC) has ruled to confiscate the assets of Vladimir Yevtushenkov, one of the richest men in Russia. What does this decision mean?

Source: Ekonomichna Pravda

In a little over six months of full-scale war, Ukraine has suffered enormous economic losses, about 14 million people have become internally displaced, and tens of thousands of Ukrainians have been killed by the occupiers.

With every day of the war, these figures are growing, and the amount of economic losses of $750 billion stated by economists will continue to change.

One of the challenges facing the country today is to make Russia and those who contribute to the aggression pay for their crimes, at least in terms of money.

And while this issue is being resolved on the global political stage, today the High Anti-Corruption Court (HACC) ruled to confiscate the assets of Vladimir Yevtushenkov, one of the richest men in Russia. Why is this decision important?

In the six months of full-scale war, Ukraine has suffered enormous economic losses, about 14 million people have been internally displaced, and tens of thousands of Ukrainians have been killed by the occupiers.

With every day of the war, these figures are growing, and the amount of economic losses of $750 billion announced by economists will continue to change.

One of the challenges facing the country today is to make Russia and those who contribute to the aggression pay for their crimes, at least in terms of money.

What kind of Russian money can we really count on?

Assets that can be confiscated from Russians are divided into two types: private and sovereign.

Sovereign assets are directly owned by the Russian Federation as a state. As of August, about $580 billion of Russian sovereign assets were placed abroad. At the end of February, states that expressed support for Ukraine decided to freeze such assets. Their estimated value is approximately $300bn.

Many EU countries have frozen private assets belonging to individuals or companies that contribute to the war in Ukraine. For example, Belgium has blocked $50.5bn of private Russian assets, the UK - $13bn, Switzerland - $6.8bn, Poland - $2.7bn, Italy - $1.7bn, France - $1.2bn.

Of course, this is not even half of the frozen sovereign assets of the Russian Central Bank, but the total amount of blocked private assets is constantly growing. Even this amount would already be enough to cover most of the direct losses from Russian aggression, which, according to the Kyiv School of Economics, amount to $113 billion.

In addition, it is clear that the freezing of both sovereign and private Russian assets has not affected the position of either Russia or most of the individuals subject to such sanctions. It is unlikely that even the confiscation of sovereign assets will be able to influence the further course of the war launched by Russia, as this money is a reserve and is unlikely to be used by the Putin regime. But it is this money that will be essential for the reconstruction of Ukraine.

On the other hand, the prospect of losing their jobs for every single Russian involved in decision-making about the aggression in Ukraine or financing the war could be a significant incentive for even his closest associates to stop supporting the aggression and Putin's regime.

Meanwhile, the burden of losses and damages caused by Russian aggression continues to be borne by Ukrainian and Western taxpayers. It is the confiscation of Russian assets that should shift the financial burden of Ukraine's recovery to Russia and the Russians.

It is to be expected that Russian oligarchs, who have been enriching themselves for decades thanks to Putin's regime, will spare no expense in hiring the best lawyers to avoid confiscation and preserve their wealth. That is why the development of an effective legal mechanism is so important.

Which countries have joined the sanctions?

Despite the loud statements, Western countries are in no hurry to confiscate the assets of Russian oligarchs and political elite. The biggest stumbling block is how to do this in a way that courts, including international ones, would not recognise as an encroachment on one of the pillars of the Western world - property rights?

Canada was the first and so far the only country, apart from Ukraine, to enshrine such a confiscation procedure in law. Back in June, its parliament introduced amendments that allow for the confiscation of assets of states and individuals who have committed significant violations of international law and order, human rights or significant corruption.

The United States is also looking for legal mechanisms to seize the assets of individuals associated with the Putin regime. The relevant bill has even passed the House of Representatives and has been submitted to the Senate.

Unlike the Americans, who are still thinking about the specifics of implementing such a mechanism, the EU plans to take a more traditional route and recognise evasion of asset freezes and other sanctions as a crime, which would allow assets to be confiscated under a regular criminal court sentence.

Ukraine was the first country to implement the confiscation procedure in practice. That is why the world's attention will be focused on this process, its legality and consequences. The development of good practice will show the rest of the world how ‘civilised’ this tool is and whether it is suitable for developed Western democracies (which are mostly home to the assets of Russian elites).

What happened?

Three months after the law came into force, which allowed for the confiscation of assets of individuals associated with Russian aggression, the Ministry of Justice filed the first lawsuit with the High Anti-Corruption Court (HACC). The defendant is Russian oligarch Vladimir Yevtushenkov, one of the richest people in Russia.

On 31 August, a court hearing was held in this case, and the final decision was made on 1 September. Interestingly, it took the HACC only a day to consider the case and make a decision.

It is equally interesting that it was the Ukrainian side, represented by the Ministry of Justice, that filed a motion to hold the hearing in camera. The reason was that the evidence included pre-trial investigation materials and other classified information. However, the Ministry insisted on a closed hearing format not only for the consideration of ‘secret’ information, but also for all evidence.

As a result, only the introductory and operative parts of the decision were made public.

What did the court decide?

The court upheld the claim of the Ministry of Justice and confiscated the oligarch's assets in favour of Ukraine. These are numerous real estate properties (land plots, apartments, non-residential buildings), as well as stakes in Ukrainian companies, including:

♦ 42.09% in Elektrozavod-VIT LLC (Zaporizhzhia).

59.2% in ITM-Ukraine LLC (Kyiv);

59.2% in Smart Digital Solutions LLC (Kyiv);

34.21% in JSC Ukrainian Research Design and Technology Institute of Transformer Construction (Zaporizhzhia), which Yevtushenkov owns through JSC HC Elektrozavod (Moscow);

42.09% in ZTZ-Service Research and Engineering Centre LLC (Zaporizhzhia).

The defendant did not appear at the hearing and did not even send lawyers or representatives. What does this mean? We can assume that Yevtushenkov plans to appeal the decision.

And there are many reasons for this - from failure to receive a summons or the inability to find a defence lawyer and prepare a response in such a short time (for which the law gives 2 days) to physical inability to come to Ukraine, including fear for his life and personal safety.

The Russian oligarch will be able to appeal this decision by filing an application with the HACC Appeals Chamber within 5 days. It is possible that he will not appeal, but will subsequently try to challenge this decision in international instances, including the ECHR.

What about the $300bn of Russian sovereign assets?

Be that as it may, the largest piece of the pie in the sanctions process is, of course, sovereign assets. These are directly the property of Russia as a state, $580 billion of which are placed abroad.

Despite its uncivilised actions, Russia continues to be part of the global economy. It is vulnerable to sanctions imposed by the largest players in the global market - the United States, Canada, the EU, the UK and others.

But there is a way to get the aggressor's money. Ukraine and its partners are actively discussing options for confiscating Russian sovereign assets and using them to help Ukraine. The world is currently discussing how to recover the assets.

The main problem is an international custom that grants a state immunity from judgment and prohibits the seizure of state property. In 2012, the International Court of Justice made it clear that no national court can deprive another state of its property, even if that state has committed heinous violations of international law. As, for example, Russia has done.

In this situation, states have two types of behaviour. Countries like the United States and Canada are strong players in international politics. They can afford to disregard international law and make their own rules. It is much more difficult for other states to do so.

Firstly, many of them explicitly require compliance with international norms and customs in their constitutions. Also, Russia can complain to the International Court of Justice if it finds grounds to recognise its jurisdiction and win.

And then it will either have to return the confiscated assets back or openly disregard international law. This will have bad consequences, because it is international law that Ukraine and all states that condemn Russia's actions refer to. In addition, Russia would also look like a victim from an international legal perspective.

However, there is a way out. Any international custom is not a permanent rule. It depends on state practice and the reasonable belief of states that they are acting legally.

If many countries sign a multilateral agreement on the confiscation of Russian assets and successfully implement it, a new international custom will be established.

However, it should also be understood that Ukraine will not receive all of the confiscated funds. States that have suffered significant losses due to assistance to Ukraine, citizens and companies from other countries affected by the war will also be able to claim Russian money if the treaty establishes a compensation commission that will consider claims from all affected parties. Therefore, this treaty should enshrine that the interests of Ukraine and Ukrainians are a priority.

In addition, if the US recognises Russia as a state sponsor of terrorism, Americans affected by this war will have a new mechanism for recovering Russian money frozen in the US. This is 10% of all frozen assets in the world. Ukrainians, on the other hand, will not be able to claim these funds under the same procedure.

Of course, all confiscation models have certain risks and disadvantages. However, their proportion is not the same. Ukraine and its allies should bear in mind that international law is still universally recognised and applicable and is still relied upon by most states. Therefore, the signing of a multilateral international treaty will better ensure the effectiveness and legality of asset confiscation than just individual laws.

Undoubtedly, the first court decision to confiscate the assets of a Russian oligarch is a positive signal and at the same time a wake-up call for other aggressors and their accomplices.

Of course, Ukraine is now supported by its partners, but this support will not always be there. That is why the authorities should make efforts to ensure that the practice of confiscation is exemplary and that the process is carried out in accordance with international standards.

Ukraine should cooperate with other countries to conclude an international treaty with a common legal framework for the confiscation of both sovereign and private assets.

In the process of confiscating Russian assets, it should be remembered that these assets are not just a huge financial resource that can be used to rebuild Ukraine. First and foremost, it is a powerful tool to influence the policy-making of the Russian Federation itself and those involved in decision-making.