Ukraine Needs Justice, Not Charity
Expert calls for international agreement on the legal basis and conditions under which Russian assets can be used for reconstruction and reparations.
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Tuesday, 30 April ‘24
This week’s overview of key events and links to essential reading.
Efforts continue to find ways to ensure Russia compensates Ukraine for the damage caused by the war. Tetyana Nesterchuk - a barrister and arbitrator at Fountain Court Chambers and UK expert at the Council of Bars and Law Societies of Europe - told IWPR’s Olga Golovina how frozen Russian assets could be used for Ukraine’s immediate reconstruction needs.
Olga Golovina: What are the international legal decisions regarding compensation for damages caused by the conflict in Ukraine?
Tetyana Nesterchuk: There are quite a few but here are the key ones, in chronological order. First, the UN GeneralAssembly Resolution ES-11/5 adopted on 4 November 2022, which recognised Russia’s duty to pay reparations to Ukraine. Second, the establishment of the Register of Damage caused by the Aggression of the Russian Federation Against Ukraine by the Council of Europe on 17 May 2023. This is the first step towards the creation of the international compensation mechanism for all those who suffered harm as a result of Russia’s war in Ukraine. However, the Register will only accept claims for damage caused by Russian invasion after February 24, 2022, which means that losses caused by the invasion and annexation of Crimea and parts of Donetsk and Luhansk regions in 2014 will not be covered by any international compensation mechanism. Third, on 16 April 2024, the Parliamentary Assembly of the Council of Europe (PACE) passed a unanimous resolution calling on member states to develop legislative measures to seize Russian state and private assets and also setting out for the first time its full plans for a comprehensive programme to achieve and fund reparations for victims of Russia's aggression in Ukraine. Finally, and importantly, the passing on 24 April 2024 of the Rebuilding Economic Prosperity and Opportunity for Ukrainians (REPO) Act, which allows the seizure and transfer of immobilised Russian reserves held in the U.S. for the benefit of Ukraine.
Why do you think the compensation mechanism for damages caused by Russia to Ukraine is working so slowly?
The key reason is that the war is continuing and Russia is refusing to recognise that it is in breach of any international laws, despite clear evidence to the contrary: just two of those examples being Russia’s expulsion from the Council of Europe and the UN General Assembly Resolution 11/1 adopted on 2 March 2022 deploring “in the strongest terms the aggression by the Russian Federation against Ukraine in violation of art. 2(4) of the Charter” and demanding a full withdrawal of the Russian forces and a reversal of Russia’s decision to recognise the self-declared People's Republics of Donetsk and Luhansk.
The remaining reason, I believe, is lack of political will and leadership and perhaps a misguided belief by the leaders of democratic countries that Russia can be reasoned with. Russia’s failure to stop the war and continuing attacks on civilian objects and infrastructure must by now have demonstrated to the world that it does not intend to comply with any rules of international law it had previously signed up to. However, both Europe and US are in election season and hence all political decisions are slower than one would expect.
What do you see as possible real steps to make frozen Russian assets work for Ukraine?
I believe that the first step should be an international agreement between G7 + US at least, and perhaps any other countries that may not have Russian state assets but support the establishment of an international compensation mechanism for Ukraine. That international agreement should set out the legal basis and conditions on which Russian state assets would be pooled together and used for the benefit of Ukraine, as well as the mechanism for overseeing the management of those assets and their application towards reparations for victims of the war.
In the absence of such an agreement, I would suggest that those countries which already have legislation that allows Russian sovereign assets to be seized - at the moment, Canada and US -– make provisions to place those assets in a segregated escrow account to be managed for the benefit of Ukraine. I would urge that those assets are allocated towards compensation to victims of Russia’s war – whether through the international compensation fund envisaged by PACE or any other mechanism.
What role do international courts, tribunals, or arbitration mechanisms play in adjudicating claims for compensation related to the conflict in Ukraine?
Ukraine had lodged claims against Russian Federation both in the International Court of Justice, which upheld some but not all of Ukraine’s arguments, and the European Court of Human Rights (where the hearing is scheduled for spring 2024). Private companies are also able to file arbitration claims against Russia under the Ukraine/Russia BIT treaty, which had been terminated but remains subject to a seven year sunset clause. The issue is the enforcement of any judgment obtained against Russia. Whilst arguably a judgement of an international court whose jurisdiction was accepted by Russia should not run into any sovereign immunity restrictions (if one views sovereign immunity as a procedural rule applicable only to the jurisdiction of domestic courts, rather than international courts), there has not been a single domestic or international court decision on this issue.
What additional measures could be pursued at the international level to address losses caused by the war in Ukraine?
I would urge democratic states to critically assess the funding needs of Ukraine. So far, all humanitarian aid to Ukraine was funded by western states who deplore Russia’s unlawful actions. Yet what Ukraine needs is justice – not charity. Hence it is Russia – the perpetrator of harm – who must pay compensation to those who suffered at its hands. I would urge the Ukrainian government and companies to publish a running bill of the losses caused by Russia. There may well be national security and other political reasons against such a publication. However, a clear notice to the world as to the real time cost of Russia’s every strike would serve as a timely reminder to the democratic countries that they cannot delay measures aimed at bringing the aggressor to accountability.
The immobilised Russian funds must not be frozen forever in limbo, waiting until Russia agrees to pay compensation to Ukraine. Western states must consider not only the implications (legal, economic political) of seizing Russia’s assets but also the cost of not using those assets now. The cost of delay in putting those assets to work now, to allow Ukraine to rebuild itself, may well be peace and security of entire Europe, if not the world. And that would surely outweigh any other perceived risks (which, as I understand it, are mostly financial risks to western companies that continue to operate in Russia). We also must not forget that the financial cost of failing to support and that cost must also include the potential cost of the largest refugee crisis Europe has seen since WWII, should Ukraine not be able to rebuild its infrastructure and economy after repeated unlawful attacks on its cities.
Looking at legal measures, I would suggest the following:
- Confiscation of Russian state reserves to fund the Ukraine Compensation Fund which the Council of Europe envisages as part of the international compensation mechanism for Ukraine.
- Streamline the legal process for imposition of fines or confiscation of assets for breaches of sanctions, as well as the introduction of laws permitting any funds so raised to be transferred for the benefit of Ukraine, as was done by the US in respect of funds forfeited by Malofeyev for breach of the US sanctions.
- Support the establishment of the war crimes tribunal to prosecute the crimes of the Russian and Belorussian leadership. This tribunal should also have the power to award compensation to victims and jurisdiction to seize assets belonging to the leaders responsible for any crimes.
- Imposition of trade tariffs on western businesses which continue to operate and pay taxes in Russia and the use of tariff revenues to fund Ukraine Compensation Fund. KSE reports that foreign banks alone paid almost one billion US dollars in taxes to the Russian state. Not only does the continuing operations of western banks allow Russia to circumvent sanctions by accessing western financial systems (such as SWIFT), but the taxes paid by those banks and other western businesses fund the war in Ukraine thus making their continuing operations in Russia unethical and at least partially responsible for losses caused to Ukraine.
- Imposition of tighter controls on companies supplying components for Russian military equipment, for instance by fining those companies and transferring the amounts raised by such fines for the benefit of Ukraine.
- Finally using the 2.5billion pound proceeds from the sale of Chelsea FC by Roman Abramovich, which is currently stuck in a bank account in England allegedly on trust “for the benefit of all victims of the war in Ukraine”, for the benefit of Ukraine e.g. by pledging to transfer those assets to the Ukraine Compensation Fund.
- Reviewing the application of the rules on sovereign immunity when it comes to enforcement of international court or international tribunals’ judgments against states who refuse to pay voluntarily.
