According to a document obtained by POLITICO, the European Commission is exploring legal possibilities to confiscate Russian state and private assets to pay for Ukraine’s reconstruction.

According to the document, the goal would be to “define ways to enhance tracing, identification, freezing and asset management as preliminary steps to potential confiscation.”

The potential reward would consist of nearly $300 billion in frozen assets of the Russian central bank, as well as assets and income of individuals and entities on the EU sanctions list. The idea appeared in May and is supported by Kyiv, as well as Poland, the Baltic states and Slovakia. EU leaders in October task Commission to explore legal possibilities to seize Russian assets currently frozen under the sanctions.

But the conundrum is that there is currently no legal mechanism to confiscate Russian assets, as US Treasury Secretary Janet Yellen pointed out in May. It would have to be created.

“There may be a path for the EU to validly confiscate frozen assets under international law, but it is likely a narrow, long and untested path,” said Jan Dunin-Wasowicz, a lawyer at Hughes Hubbard & Reed.

This does not stop the Commission from investigating the matter.

As for private property belonging to sanctioned persons or entities, Brussels is preparing proposals to make sanctions evasion an EU crime, which would make it easier to confiscate them – but only if convicted. Even then, the EU would have to argue each case in court, possibly for years.

That’s because many of these assets could be considered foreign investments, which enjoy protection from expropriation without compensation and the right to fair and equal treatment under international treaties that Russia has concluded with many EU countries.

The confiscation authority would also need to establish a clear link between the owner of the property and the conflict in Ukraine.

“To ensure proportionality, you would have to look at who the owners were, what they were doing and so on,” said Stephan Schill, a professor of international and economic law and management at the University of Amsterdam.

With regard to the frozen foreign exchange reserves of the central bank, the largest pool of money, the EU executive writes in the document that they are “widely considered to be immune”, with a footnote pointing to the UN Convention on the Jurisdictional Immunities of Foreign States and Their Property, which, however, not valid yet.

“From the perspective of international law, it is quite clear that the assets of the Russian central bank cannot be used without Russia’s permission,” Schill said.

As for the assets of Russian state-owned enterprises, the newspaper notes that they would “in principle” not be covered by such a convention, but their seizure could raise issues of confiscation of private property, “in addition to the need to show a sufficient connection to the Russian state.”

The EU is also considering an “exit tax” on the assets or proceeds from the assets of sanctioned individuals who wish to transfer their property outside the EU. This in itself could create legal problems because it would affect a specific group of people – contrary to international non-discrimination law – and they could in turn invoke the human right to property as a defence.

To Schill’s knowledge, there is no current and valid precedent for either option.

“The EU and Member States are trying to introduce a new criminal law,” he said.

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