Strasbourg seeks Russian assets: can Russian funds be transferred to Ukraine pursuant to an ECtHR ruling?

Last year, following the European Council's decision on a two-year, €90 billion aid package for Ukraine – funded against future reparations from Russia – which temporarily met Ukraine's needs, public discussion within the EU on the fate of the Russian Central Bank's frozen assets ceased. This was not solely because the loan amount was unprecedented for the EU.

Equally significant was the fact that the political and legal debates surrounding the use of frozen assets – ongoing throughout the previous year – appeared to have hit a wall.

Resistance from certain EU member states prevented the adoption of radical decisions on the use of frozen assets, measures that, at least at certain stages, would have required unanimous approval.

However, as autumn approaches, the issue of frozen assets is once again moving to the forefront of the agenda. Defense funding shortfalls for this year and next necessitate securing an amount of capital comparable to the loan already allocated. European Pravda has previously reported on the ideas being discussed within the EU.

At the same time, a practical proposal on the transfer of Russian assets to Ukraine has emerged from Strasbourg – specifically from the Council of Europe (CoE). The proposal suggests transferring Russian funds to Kyiv on the basis of a court ruling, namely one from the European Court of Human Rights.

Here, we are explaining the details of this initiative.

What the Council of Europe can do

From the very beginning of Russian aggression, the Council of Europe has taken a firm pro-Ukrainian stance: in addition to expelling Russia from the organisation, it has supported international efforts to hold the aggressor accountable. It was under the auspices of the Council of Europe that the Tribunal for the Crime of Aggression was established, and the organisation consistently condemns Russian crimes in Ukraine.

This international organisation has been raising the issue of reparations for Ukraine and the confiscation of Russian assets almost since the onset of Russian aggression. As early as April 2022, the Parliamentary Assembly of the Council of Europe (PACE) called for assets belonging to sanctioned Russian citizens – sanctioned due to their responsibility for the aggression against Ukraine – to be confiscated and used to compensate Ukraine and its citizens for damages caused by the Russian Federation's war.

Furthermore, the Register of Damage for Ukraine was established and the agreement to create the International Compensation Commission was signed under the auspices of the Council of Europe; these are two key elements of the international compensation mechanism that Ukraine has been working to establish since May 2022.

However, the specific issue of confiscating Russian sovereign assets remained outside the Council's operational focus for a long time – likely because the organisation lacked the necessary leverage in this area.

The organisation is involved neither in the custody of Russian funds (it is worth recalling that the majority of the Russian Central Bank's assets are held in Belgium at the Euroclear depository) nor in decisions regarding their legal status. Council of Europe bodies can only issue non-binding recommendations in this regard – something they have done at times: in its resolutions, PACE has called on states to cooperate on this matter and to adopt appropriate national legislation enabling confiscation.

However, in early September, the PACE Committee on Legal Affairs and Human Rights approved a report calling for a more active role for the Council in the confiscation process.

What is the "Tony Vaughan report", and how will it help address the issue of Russian funds?

The report, which has made headlines, was prepared by Tony Vaughan, a PACE member from the United Kingdom.

This is not the first expert document addressing the potential confiscation of Russian assets; legal memoranda on this subject were previously prepared by a group of prominent lawyers – including Dapo Akande and Philippe Sands (the Akande Memorandum) – and by Philippa Webb for the European Commission's research service.

However, there has been no such document within the framework of the Council of Europe until now.

The core idea of Tony Vaughan's report is for member states to use Russian assets frozen within their jurisdictions to satisfy European Court of Human Rights (ECtHR) rulings on compensation – referred to as "just satisfaction" in the Court's terminology. This primarily concerns rulings in interstate cases between Ukraine and Russia, as well as other judgments for which Russia has failed to pay the awarded satisfaction.

To this end, he proposes either establishing a special Council of Europe trust fund to which these assets would be transferred, or implementing the relevant ECtHR rulings at the member-state level – a move that might require amending national laws or adopting a specific recommendation from the Council of Europe's Committee of Ministers.

The idea of using Russian assets to enforce European Court of Human Rights judgments is not fundamentally new; it has been raised in previous years. However, this is the first time the issue has been formally considered by one of the Council of Europe's institutions.

What comes next, and is the idea realistic?

The Vaughan Report and the communication from the Council of Europe's Legal Committee have garnered media attention; however, the proposal itself is outlined in rather broad strokes and may serve merely as a starting point for discussion on the Council of Europe's role.

We must be realistic in our assessment, as this is certainly not yet a final decision.

Moreover, experts question the feasibility of using Russian assets to enforce ECtHR rulings. According to expert analysis, such an approach would require either political decisions by individual Council of Europe member states seeking to implement the rulings, amendments to the European Convention on Human Rights itself (unrealistic, given the need to ratify changes to this international treaty), or a specific decision by the Council of Europe's Committee of Ministers.

Without this, it is unlikely that individual states – primarily Belgium and Luxembourg, which hold the lion's share of the Russian Central Bank's reserves within their jurisdictions – will take such action.

This stems not only from fear of the Kremlin's reaction but also from concern that such a practice could be extended to other cases, bypassing the established procedures associated with the European Convention on Human Rights.

However, if even some progress is made in this direction, it could act as an "icebreaker", paving the way for the use of Russian sovereign assets to provide compensation to Ukraine.

Currently, the compensation amounts awarded by the ECtHR are small relative to the total value of the assets. Yet the ECtHR has issued rulings involving billions – such as the €1.86 billion awarded in compensation to Yukos. However, on the major interstate cases against Russia before the Court – concerning violations during the annexation of Crimea, violations in Donbas since 2014, and the onset of the full-scale war – no decision on awarding satisfaction to Ukraine has yet been reached. Should a payment mechanism emerge, the Court might show greater boldness in awarding a specific sum.

It must be borne in mind, however, that the Court lacks jurisdiction over events occurring after 16 September 2022, the date Russia's membership in the Council of Europe definitively ceased.

That said, the likelihood of utilising these assets through the ECtHR appears slim

"The Council of Europe can certainly play a role in the matter of confiscating Russian assets. After all, at one time, no one believed that a tribunal for the crime of aggression would be established under its auspices," comments a co-author of the "Akande Memorandum" on this initiative.

Yet the decisions leading to this depend not merely on Strasbourg – where the Council of Europe is based – but primarily on Brussels. It is the European Union and its decisions that determine the fate of Russian assets; should initiatives to place these assets under direct EU jurisdiction be implemented, that role will only grow.

Ultimately, the fundamental problem remains unchanged: it is not a lack of legal instruments or arguments, but an absence of political will in key European capitals to make difficult decisions.

Ivan Horodyskyy,

Lawyer, Director of the Dnistrianskyi Center

This material was prepared with the support of the International Renaissance Foundation within the framework of the project Compensation4UA / Compensation for War Damages for Ukraine. Phase VI: International Compensation Mechanism for Ukraine – Challenges, Effectiveness, and Prospects for International Support.