When Ukrainian President Volodymyr Zelensky addressed the World Economic Forum, he issued a heartfelt appeal to the West: use the assets seized from the Russian central bank and the country’s oligarchs to fund the estimated USD 500 billion cost of rebuilding Ukraine.
Perhaps surprisingly, the idea to confiscate the frozen Russian assets has run into some resistance in the United States. Top Biden administration officials reportedly think that diverting the frozen funds could be illegal and discourage other countries from relying on the United States as a haven for investment.
One interesting idea which has emanated from Kyiv is for a new UN commission for the “constitutional, legal, transparent and effective” blocking and seizing of assets belonging to those connected with armed aggression. However, Russia’s veto in the Security Council will make it hard to establish such a commission.
Meanwhile, the European Commission has proposed a way to criminalise sanctions evasion at the EU level, providing legal grounds for the confiscation of Russian oligarchs’ assets seized by EU countries.
In Canada, budget implementation bill C-19 has passed into law and includes measures to seize and sell off assets owned by individuals and entities on Canada's sanctions list. Previously, authorities could seize the proceeds of crime but under C-19 they can confiscate the assets of sanctioned individuals, whether they were acquired legally or illegally. Nevertheless, Canadian officials say that procedural fairness is a key consideration and forfeiture proceedings before a judge are not automatic. It can be expected that aggrieved Russian oligarchs will fight the measures in the Canadian courts.
The UK is considering following the example of Canada and seizing the assets of sanctioned Russians in the UK in order to donate them to Ukraine. However, the tools currently available under the Proceeds of Crime Act 2002 may make gathering the necessary evidence on oligarchs’ assets hard to achieve.
Several legal options are currently under discussion in relation to the possible confiscation of assets. One option would be to reverse the burden of proof as to the origin of the assets: should an oligarch fail to demonstrate the lawfulness of his wealth, the frozen assets could be confiscated without the need to commence separate civil proceedings.
Another option to consider is the concept of ‘criminality by association’, such as that which is found in racketeering legislation in the US, under which the general test is whether the defendant knew about the criminal nature of a conspiracy of which they were part.
However, there several significant obstacles to the implementation of such options in the UK. The European Convention of Human Rights protects the right to property, including the right not to be deprived of one’s possessions. Therefore, any interference must be provided for by law and be justified as a proportionate means of pursuing a legitimate aim in the public interest.
The British government would be required to demonstrate that there is a reasonable relationship of proportionality between the means employed and the aims pursued. Case law under the Convention also suggests that measures should be designed to provide an element of independent judicial oversight.
Companies and individuals which are still dealing with Russian assets or projects should bear in mind the possibility that the assets involved could potentially be frozen and subsequently confiscated, and accordingly should conduct a careful due diligence and sanction analysis for any Russian link before pursuing such projects.
