Published by The Lawfare Institute
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Editor’s Note: This piece is adapted from the author’s forthcoming law review article on central bank immunity.
As the terrible war in Ukraine grinds on, there is growing pressure on the Group of Seven (G-7) to use frozen Russian central bank assets to fund the war effort or to compensate Ukrainians for Russia’s aggression and the devastation it has caused. Well-settled international law makes that difficult, however, because the confiscation of central bank assets would almost certainly violate foreign sovereign immunity. Unless, that is, confiscatory actions qualify as lawful “countermeasures” in response to Russia’s clear violations of international law. Those who support confiscations all argue that the doctrine of countermeasures (or related doctrines) applies here; opponents disagree. The term “confiscation” as discussed here does not include “freezing” assets, but it does include all measures that would turn assets over to new owners on a permanent basis, whether the transfer happens all at once or through a longer process.
Although there are many domestic and international legal questions involved in confiscations, countermeasures are now a central focus of legal analysis. Nevertheless, the debate around countermeasures themselves has unfolded largely in a cursory manner and has generally (but not universally) overlooked their central rationales, ignored the complexities in evaluating state practice in favor of “third-party” countermeasures, and not grappled with the costs and risks of using the doctrine to justify permanent measures by third parties against Russian central bank assets.
For those who have followed the debate on Lawfare closely, this article goes beyond arguments advanced by Paul Stephan, disagrees with arguments about countermeasures made by Philip Zelikow, acknowledges that the customary international law of countermeasures is open to new developments, but also notes that the risks are different and higher than other commentators acknowledge. Other legal analyses of Russian central bank assets have appeared on Just Security and EJIL:Talk!, but none of them carefully address the central issue: countermeasures.
Countermeasures allow injured states to take actions that would otherwise violate their international legal obligations. Injured states may use countermeasures (under certain circumstances) to induce the responsible state to bring its conduct into compliance with international law. The starting point for most discussions about countermeasures under international law is the International Law Commission’s Draft Articles on Responsibility of States for Internationally Wrongful Acts (ARSIWA), which were adopted by the United Nations General Assembly in 2001. Although not codified into a convention, many parts of the draft articles reflect customary international law, and as a whole they have had an extraordinary influence on the decisions of international courts and tribunals and on the development of international law.
The basic framework of countermeasures means that Ukraine, which has been injured by Russia’s illegal war of aggression (one that constitutes an egregious breach of fundamental norms), may take measures against Russia that would otherwise violate Ukraine’s legal obligations to Russia, so as to induce Russia to cease its wrongful conduct. There are a variety of ancillary requirements such as notice of the intention to apply countermeasures and the requirement of proportionality.
By definition, countermeasures are actions that would otherwise be unlawful under international law. Measures to confiscate Russian central bank assets would likely violate the immunity that customary international law requires states to give to property of foreign central banks. Indeed, robust immunity protections for central bank assets under customary international law are uncontested. Immunity is a doctrine that limits judicial power, however, and it does not apply to purely executive actions that have no relationship to judicial functions. It might be possible to avoid foreign sovereign immunity if executive officials effectuate the confiscation with no involvement of the courts (an issue that I do not address here), although such actions would likely encounter domestic legal issues. In Canada, for example, draft legislation that would have given unfettered executive power over the confiscation of Russian central bank assets was amended to provide for a judicial role. And in the United States, such measures by the executive alone might violate the due process rights of foreign sovereign nations. There are similar problems in Switzerland. Note that reparations in other contexts have been legally mandated by U.N. Security Council resolutions or put in place through postwar treaties, but neither applies here.
In any event, if confiscations of Russian central bank assets would otherwise violate international law—as commentators generally assume—then they are defended as lawful countermeasures. Although some observers argue that countermeasures are categorically impermissible if used to deny a state’s entitlement to foreign sovereign immunity, I assume that measures denying immunity can be excused as countermeasures. But they must qualify as countermeasures in the first place. For the reasons that follow, proposals to confiscate Russian central bank assets cannot be justified as a countermeasure under a fair reading of current law. That conclusion applies also to creative and laudable European suggestions to invest frozen assets and turn investment gains—but not the principal—over to Ukraine. If the money belongs to Russia, but is merely frozen, it is difficult to see how other countries have an ownership interest in the profits generated through investment.
Countermeasures: Temporary and Reversible?
Characterizing the confiscation of Russian central bank assets as a lawful countermeasure is difficult for at least four reasons: Countermeasures are supposed to be reversible, they are supposed to be temporary, their purpose is inducement, and the use of countermeasures by third parties (states other than Ukraine) is not clearly established in customary international law. To a large extent, these difficulties are fundamental, meaning that they go to the core of countermeasures and concomitant limitations on their use.
Discussions in the United States have often focused on the requirement of reversibility. Confiscations, critics point out, are not reversible. By contrast, proponents correctly argue that the requirement of reversibility is not absolute under the ARSIWA. Both the draft articles themselves (in Article 49) and the commentary make clear that measures should be reversible to the extent possible, but they also make clear that there is flexibility on this point.
The requirement that countermeasures be temporary is not qualified in the same way, however. Confiscatory measures are not temporary. They turn property over to new owners for good and are thus apparently not permitted. The ARSIWA may take a less permissive approach to temporality than it does to reversibility because even a temporary measure that is lifted when the wrongful state comes into compliance with international law may inflict some harm that is not reversible.
More fundamentally—and moving beyond the specific wording of various requirements—the purpose of countermeasures is inducement. They are not an “equitable remedy” for the failure to pay. They are not a method of compensation. Instead, they are designed to bring the wrongful state into compliance with its obligations. To be sure, the commentary to the draft articles uses the term “reparations” frequently, perhaps leading to the impression that countermeasures can be equated with reparations themselves, meaning that states can use countermeasures as a method of reparations, full stop. The better reading, however, is that countermeasures may be used to “induce the responsible State to comply with its obligations ... of reparations.” In other words, countermeasures may be used to induce another state to comply with its obligation to make reparations. The distinction is important. States make reparations in various ways—through lump sum agreements, claims commissions, and so on—not necessarily by turning over their central bank’s foreign currency reserves to new owners. Countermeasures may be used to induce a state to make reparations, but they do not function as a self-help measure to confiscate foreign central bank assets in the name of compensation.
As the ARSIWA were written and debated, the limitation that countermeasures be used as methods of inducement was not accidental or careless. Instead, allowing the use of countermeasures for additional purposes was not acceptable to states because other purposes are more easily manipulated by states for political purposes. Overriding the well-established norms of central bank immunity to make permanent reparations to Ukraine would be perceived by many countries in exactly this way—as manipulation for political purposes. The sharply divided U.N. General Assembly vote on Russia’s obligations to pay reparations to Ukraine highlights this possibility.
The Erga Omnes Problem and State Practice
Confiscation of Russian central bank assets by G-7 countries and the European Union would also be problematic because the use of countermeasures by third parties is not well established in international law. Russia has violated erga omnes norms by invading Ukraine, meaning that it violated duties that it owed collectively to all states. Note that the duty to pay reparations may not itself be an erga omnes norm. If so, third-party countermeasures—if permissible at all—would be used as an inducement for Russia to end its unlawful war of aggression rather than as inducement for the payment of reparations. In any event, it is not clear that a violation of erga omnes obligations allows all states to use countermeasures in the first place. Violating a collective duty might have many implications in international law without triggering the right of all states to use countermeasures. The issue of countermeasures in response to collective violations was explicitly left open by the ARSIWA. The commentary concludes that “State practice is sparse and involves a limited number of States. At present, there appears to be no clearly recognized entitlement of [third-party States] to take countermeasures in the collective interest.”
It is perhaps for these reasons that the leading scholarly survey of state practice on third-party countermeasures unhappily concedes (on page 299) that, with one possible exception, “third-party countermeasures have simply not been adopted to obtain any form of reparation.” Much of the state practice cited in favor of any third-party countermeasures is of questionable value, in part because states do not say that they are using countermeasures. Here, it is unclear whether they are responding to an erga omnes violation at all, and for a host of other reasons. More fundamentally, much of the state practice cited in favor of all countermeasures simply assumes that sanctions as a whole are otherwise unlawful and thus contribute to state practice on countermeasures. But many sanctions are not clearly unlawful under international law. In other words, what are counted as third-party countermeasures appear to be merely “retorsions”—unfriendly but lawful conduct—a particular problem when states do not identify their own conduct as countermeasures, which is almost always the case. As Tom Ruys has analyzed in detail, those describing state practice in favor of countermeasures often assume that sanctions violate foreign state immunities and would thus otherwise be unlawful. But sanctions imposed purely through executive action do not violate immunity at all.
The claim that G-7 countries can confiscate Russian central bank assets and turn them over to Ukraine as third-party countermeasures to secure reparations finds extremely weak support in the state practice and runs counter to the basic function of all countermeasures. The restraint shown by states around the world that very much want to confiscate Russian assets, but have not done so, is not surprising. It demonstrates a sense of legal obligation (opinio juris) that comes from customary international law, and it further underscores that confiscatory measures would violate international law and could not be justified as countermeasures
Developing the Law: What Is at Stake
Customary international law changes and develops through state practice. Deviations from legal norms may drive positive changes in international law. For example, the move from absolute immunity to restrictive immunity (immunity that does not protect commercial conduct by foreign states) began more than a century ago, when Italy and Belgium started to deny immunity to state-owned vessels used for commercial purposes.
Using the doctrine of countermeasures to justify the confiscation of $300 billion of Russian foreign central bank assets would mark a dramatic—even radical—development in the law of both central bank immunity and state responsibility. There is little or no state practice on countermeasures for reparations, and much of the state practice on countermeasures generally is hard to evaluate. There is little practice of third-party countermeasures, little or no practice of countermeasures used to deny immunity, and no practice that provides clear support for denying central bank immunity as a countermeasure
Yet perhaps confiscatory measures would be a good development in these unsettled areas of law, one that would serve as a positive deterrent for future acts of aggression and as an equitable way of taking money from a country that has inflicted horrible damage and giving it to the victims of that egregious and extremely expensive conduct. Policy concerns around confiscations have focused on the possibility that foreign states will no longer invest their assets in countries making the confiscations and on the immediate economic effects of the measures. These are important potential drawbacks, but another set of considerations has unfortunately been largely overlooked.
As mentioned above, the U.N. General Assembly debate and vote on reparations in November 2022 reveals how deeply contested such economic measures would be globally. Celebratory coverage made no mention of 13 votes against the measure, much less the 74 abstentions. Other General Assembly resolutions condemning Russia passed with large majorities. Not this one—even though it called only for the establishment of a claims register, not the actual payment of any money. The debate around the reparations resolution highlights the frustration around economic coercion in the international legal order as well as the sense that international laws are applied selectively to benefit certain countries. The representative from Eritrea argued that “States suffering from foreign interference, colonialism, slavery, oppression, unilateral coercive measures, illegal blockades and other internationally wrongful acts also deserve the right for remedy, reparation and justice.” Other nations noted that “[d]ouble standards in the application of international law are counterproductive.”
Proponents of confiscation ignore the views of the 87 countries that either abstained or voted no. That is unwise. The international economic order is more divided by the day, with China, the U.S., and to some extent Europe locked in a competition for global economic power and for territorial and economic security. There is also a competition for soft power, moral leadership, and international legal leadership—all of it playing out as part of the response to the war in Ukraine. Confiscation of Russian central bank assets will undermine a key area of global consensus in international economic law: the foreign sovereign immunity of central bank assets, especially foreign currency reserves. It is questionable whether dramatic steps to weaken those norms will ultimately benefit the West, or whether such steps would instead further compromise Western leadership on the war in Ukraine and in other areas.