Frozen Assets: A Plethora of Questions and Uncertain Answers

Abstract

This paper discusses the question whether, and if so how, frozen assets belonging to the Russian State, the Russian Central Bank and sanctioned oligarchs could be applied towards the financing of the Ukraine war effort and ultimately towards the reconstruction of Ukraine. An overview is provided of the main legal issues that arise in this context; both issues of public international law, European Union law, private international law and the domestic laws of various countries involved arise, and as this paper demonstrates, there are no easy solutions and answers. While this paper focuses to a large extent on frozen assets in the form of deposits of the Russian Central Bank with Euroclear Bank in Brussels, the approach is broader. For instance, the question whether the US example of legislation known as the REPO Act should be followed in the European Union is also discussed. Likewise, the question is raised what the rights and obligations are of parties that control, or are entrusted with, the safekeeping of Russian frozen assets, and conversely whether the owners of frozen assets have any say as to how such assets are to be administered. 

Uncertainties as to the extent of immunity generally granted by public international law to State owned assets as well as serious concerns about threats to the financial stability of in particular the European Union, unfortunately constitute a serious barrier to the use of Russian assets for the benefit of Ukraine. But there appears little legal doubt that proceeds earned on such assets can be so applied and indeed such application is currently taking place: in particular the substantial profits that Euroclear Bank in Brussels realizes in respect of Russian non-interest bearing central bank deposits, are now being made available for the benefit of Ukraine. Nevertheless, it remains a (at least morally) wholly unsatisfactory situation if indeed the frozen assets themselves cannot be touched.

Keywords: Frozen Russian Assets, Euroclear Bank, Immunity of State owned Assets, set off, expropriation, th U.S. REPO Act, Threat to financial Stability, Rights and Obligations, Custodians of Russian frozen Assets

JEL Classification: K22, K23, G15, G18, K15