Freezing vs. Confiscation: How Russian-Linked Property Is Being Seized Around the World
Almost immediately after the Kremlin launched a large-scale war in Ukraine, they began to seize property and assets of the aggressor country, as well as influential individuals and companies involved, abroad, as part of sanctions, writes A business.
The most famous such "seizure" concerned, of course, Russia's gold and foreign exchange reserves. However, it's important to put the word "seized" in quotation marks, as we're not talking about the confiscation of yachts, oligarchs' and politicians' real estate, or corporate assets, or gold and foreign exchange reserves, but rather their freezing and seizure.
A freeze is merely a temporary deprivation of the owner's right to dispose of their assets or property, Tatyana Khutor, head of the Institute of Legislative Ideas think tank, reminds Delo.ua.
Confiscation is a much more profound interference with property rights. This distinction applies to the property and assets of both individuals and companies, as well as the state (in our specific case, the reserves of the Russian Central Bank). Deprivation of property rights is not currently being discussed.
Property can be frozen for years to prevent certain individuals from accessing it, or to influence the owners' behavior. Even when the idea of making the seized properties available for Ukrainian refugees arose, things proved far more complicated.
This refers to an incident that occurred in mid-March, when French activist Pierre Afner entered the Alta Mira villa in Biarrica, owned by Ekaterina Tikhonova, Vladimir Putin's daughter. The activist changed the locks and claimed the villa was ready to accommodate those fleeing the dictator's regime. But French police quickly arrived and escorted the activist off the property.
But confiscation is not at issue here, merely the disposal of the property during its seizure. The same applies to Russia's gold and foreign exchange reserves, which Ukraine hopes to receive as compensation for the damage caused by Russian aggression.
"Russia's gold and foreign currency reserves are frozen, not confiscated. There's a lot of debate about whether they can be confiscated and what legal basis to choose for it. There are a lot of complexities. If the US violates the property rights of any country, it will set a precedent and an example for others," she adds.
Is the transfer of Russia's gold and foreign currency reserves to Ukraine a flagrant precedent?
Ukrainian legislation already provides for the confiscation of property and assets of the Russian Federation and its affiliates, but this is not included in the laws of other countries, which are still developing this mechanism, deciding what and from whom to confiscate. And whether they will do so at all, as experience with this type of sanctions is limited.
As constitutional law expert Alexander Marusyak reminds us in his commentary, history knows of three particularly high-profile cases of confiscating central bank foreign exchange reserves, in which the assets of criminal countries were not only frozen, as is the case with Russia's gold and foreign exchange reserves today, but also transferred to other entities.
"Let me remind you that back in 2003, $1,7 billion of Iran's foreign exchange reserves were seized and subsequently used to aid victims of terrorism. The second precedent was in 2019, when Nicolás Maduro's regime suppressed mass popular protests against election fraud in Venezuela," he says. Following this, the US and UK seized the Venezuelan central bank's foreign exchange reserves, which were then transferred to the control of opposition leader Juan Guaidó. "The third precedent was when the Taliban seized power in Afghanistan. Then, the US seized $7 billion of that country's foreign exchange reserves. Since February of this year, these funds have been used to aid people affected by the Taliban's actions," the expert recalls.
Tatyana Khutor confirms that there is currently a major debate in the US about whether and how to confiscate Russian state assets.
"There's also debate about confiscating Russian oligarchs' yachts, because there's a fear of violating property rights, which underpins the entire democratic world. Even within Europe, countries are proposing their own approaches to confiscation," she notes.
She particularly emphasized that in order for the decision made by the Ukrainian court regarding the assets and property of the Russian Federation and those involved to be recognized and implemented, similar rules must be in effect in other countries.
"Ukraine must be the flagship of the new confiscation model and offer it to the world, but for this to happen, it needs to be high-quality. Then it will be much easier to convince other countries to listen to our solutions," the expert emphasized.
How does arrest and confiscation occur?
The freezing of assets and property abroad is usually carried out administratively rather than through judicial proceedings. However, practices vary among countries. In some, seizures are imposed by court order, while in others, they are imposed by a decision of a justice agency or the president.
"When it comes to freezing, there are many options. But when it comes to confiscation, due to the depth of its interference with property, it must be carried out exclusively through the courts, respecting the owner's rights," explains Tatyana Khutor, explaining international practice.
When making decisions to freeze or confiscate assets or property, the US and EU may focus on the owners' close collaboration with the Kremlin regime, support for terrorism, incitement of ethnic hatred, and war. Everything depends on the wording in current legislation.
The most high-profile cases of seizure of property belonging to individuals associated with the Russian Federation
Back in mid-March, the Italian Financial Guard seized the world's largest motorsailer (a sailing vessel capable of being propelled by both wind and motor power), measuring 150 meters in length and worth €530 million. It belonged to the assets of Russian billionaire Andrey Melnichenko.
Just days later, Croatian police seized Viktor Medvedchuk's expensive yacht, the Royal Romance, one of the five largest yachts in the world, valued at $200 million. Authorities also seized several other luxury vessels linked to Russian oligarchs.
In April, Fiji police seized the yacht Amadea, owned by Russian oligarch Suleiman Kerimov, who is under US, UK, and EU sanctions. The captain was questioned to determine how he had delivered the vessel to the Pacific island nation's port without customs clearance.
And in early May, Italian authorities seized the $700 million yacht Scheherazade in the Italian port of Marina di Carrara, which likely belongs to Putin himself.
France is not far behind. In late April, following the seizure of four yachts belonging to individuals linked to Russia, six helicopters, and approximately 30 villas, three villas belonging to Russian oligarchs in the south of the country were seized. These include the estates of Oleg Deripaska, Putin's former son-in-law Kirill Shamalov, and Chechen businessman Musa Bazhaev.
Also in April, the Greek Coast Guard blocked a Russian oil tanker en route to its destination. The seizure order was issued by the anti-money laundering agency in accordance with the sanctions regulations imposed on Russia by the European Union for its invasion of Ukraine.
In topic: From Perfume to Sausages: What to Do with Russian Business in Ukraine
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