Congress Foreign Relations & International Law

The REPO Act: Confiscating Russian State Assets and Ukrainian Reparations

Lee C. Buchheit, Paul Stephan
Friday, July 7, 2023, 12:30 PM
The bill proposes a flawed and possibly unconstitutional reparations program and needs to be reworked to give Ukraine some chance at a viable post-war future.
Russian oligarch Oleg Deripaska, whose assets were confiscated by the U.S. government and transferred to Ukraine, speaks in Davos, January 26, 2011. (World Economic Forum,; CC BY-SA 2.0,

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Sens. James Risch (R-Idaho) and Sheldon Whitehouse (D-R.I.) and Reps. Michael McCaul (R-Texas) and Marcy Kaptur (D-Ohio) have just introduced the Rebuilding Economic Prosperity and Opportunity (REPO) for Ukrainians Act. Their proposal would enable the president to confiscate currently frozen Russian state assets and use them to Ukraine’s benefit. Congress considered similar legislation last year. Several observers questioned its wisdom and legality at the time, and ultimately nothing on confiscation became law.

With another year of a brutal, terrible war and much reflection since these ideas last surfaced, the introduction of REPO invites a reconsideration of the project of rebuilding Ukraine with Russia’s money. The co-sponsors correctly identify the need to amend existing U.S. law to permit the executive branch to seize, rather than just freeze, these funds. The bill, however, proposes a flawed procedure for the ultimate disposition of the monies after confiscation. Below are some suggestions for what an effective and legally sound reparations program might look like and why enacting REPO in its present form is a bad idea.

The State of Play

The United States and its allies have frozen hundreds of billions of dollars of Russian assets, largely deposits made by Russia’s central bank in Western financial institutions. Some freeze orders go back to the 2014 Russian seizure of Crimea and various human rights violations covered by the 2012 Magnitsky Act, but the invasion of Ukraine provoked broader sanctions and, for the first time, reached the central bank. In the U.S., the Treasury Department’s Office of Foreign Assets Control (OFAC) runs the program. The U.S.’s allies have similar agencies. The western financial institutions holding the frozen assets may not disburse or do anything else with the money without a license from the government. The frozen property still belongs to Russia and its agencies and instrumentalities, but they are unable to earn any return or dispose of it. U.S. law regards foreign relations-based asset freezes as not covered by the Takings Clause of the Fifth Amendment, even though the property of foreign companies, including that of state-owned enterprises, enjoys the protection of that amendment’s Due Process Clause. Outright expropriation, by contrast, triggers at least some constitutional safeguards, unless the country concerned is at war with the U.S.

In the U.S., the government can confiscate frozen assets by tying them to criminal activity. The civil forfeiture power includes property that owners try to hide to avoid a foreign relations sanction. As a civil proceeding, it does not have to satisfy the standards of criminal procedure. Last September, the Justice Department charged Russian oligarch Oleg Deripaska and two associates with sanctions evasion, opening the door to confiscation of the property involved. At the end of its last session, Congress authorized the transfer to Ukraine of any Russian assets obtained by the government under its civil forfeiture authority. The European Union has proposed to adopt similar rules. It seems extremely unlikely, however, that Russian central bank deposits can be linked to violations of existing criminal law and thus may be subjected to civil forfeiture. Yet these deposits dwarf all other sanctioned assets.

The REPO Act would provide a new authority for forfeiture. It would allow the president to confiscate any currently frozen Russian sovereign assets, including Central Bank deposits, and turn over the money to the secretary of state to spend on behalf of Ukraine. It bars the courts from exercising judicial review on behalf of any state entity, including state-owned enterprises. It directs the president to deposit the seized funds in a newly established Ukraine Support Fund, out of which the secretary of state may make disbursements for any and all “purposes as the Secretary determines directly and effectively support the recovery of Ukraine and the welfare of the people of Ukraine.” This limitation on spending can be compared with the previous session’s bill, which allowed the money to be used for postconflict reconstruction in Ukraine, humanitarian assistance, and weapons for Ukraine’s military.

Meanwhile, Ukraine and its supporters have started to plan for postconflict reconstruction. Black Rock and J.P. Morgan are reported to be advising Ukraine on the design of a reconstruction fund. The Chelsea Football Club, previously the plaything of Russian oligarch Roman Abramovich, has raised nearly $3 billion for Ukrainian recovery, although disputes over what it should fund have delayed any disbursements. Ukraine and its supporters are planning for a postconflict Ukraine but understand that much turns on how the conflict ends.

The Case for Confiscation to Fund Reparations

The case for requiring Russia to pay for Ukraine’s recovery is compelling. Its invasion of Ukraine represents a flagrant violation of international law as well as disaster for Ukraine and the region. The U.S. and its allies, as well as much of the rest of the world, wish to end the conflict as quickly as possible on terms that will deter Russia, as well as copycat states such as China and Iran, from engaging in similar outrages in the future. To survive as a viable state and function as a useful part of Europe, Ukraine will require massive sums, perhaps as much as a trillion dollars, to pay for its reconstruction. Those of us who see Russia as an international lawbreaker also believe that international law demands that it pay reparations to Ukraine to compensate for the injuries brought on by its unlawful aggression. Article 31 of the International Law Commission’s principles of state responsibility unambiguously imposes “an obligation to make full reparation for the injury caused by the internationally wrongful act.”

If the war ends in Russia’s abandonment of its invasion, paying for Ukraine’s reconstruction should be easy. Russia would be under a legal obligation to pay as much as it can, consistent with the goal of staving off its collapse into a failed state. Using the frozen state assets, which Russia probably never expects to see again, would be a great start.

What, however, if both countries settle for something less than complete victory as the price of peace? What if a peace agreement does not require reparations for Ukraine, or at least sets the amount at something less than the value of the central bank deposits? At that point, Russia might point at assets still in the hands of the U.S. and its allies and demand the return of the money held in excess of whatever reparations obligation it accepts. It would be, after all, the lawful owner, and the justification for the freeze would have disappeared. Settling this dispute might delay or even scuttle the prospect of peace.

This dispute could not take place, however, if the assets were to pass to an entity that could spend the money only on reparations and if the transfer of the funds to that entity were consistent with widely accepted principles of lawful behavior. The first condition would be satisfied if the recipient of the funds were a body or facility created by an international agreement that clearly limits what the body could do with the funds. As a model, recall the Iranian funds frozen by the U.S. following the seizure of the U.S. Embassy in Tehran, which the 1981 Algiers Accords allowed to go into a dedicated bank account. Withdrawals could be made only with the consent of the parties or upon a determination by an independent body (in the Algiers Accords case, the Iran-U.S. Claims Tribunal) that payment would comply with the terms of the agreement, which sought to provide reparations for illegal actions by both states.

The second condition turns on the lawfulness of the process by which a state confiscates and then transfers the funds. A selfless seizure and transfer of money for a purpose based on international law—here reparation for harm caused by violation of international law—should pass muster as long as safeguards exist to ensure that the money will not be diverted. If the funds are used for other ends, such as the underwriting of military aid that the confiscating country expects to provide anyway based on its national interest, the legitimacy of the transfer, and the immunity of the transfer from clawback by the original owner, lessens.

If a pathway exists for confiscating Russian sovereign assets in a way that minimizes legal risk to the U.S. and its allies as well as obstacles to a peace settlement, it’s better to take that path as quickly as possible. The longer that states hold on to the Central Bank accounts and similar funds, the more likely that complications may arise. Enacting the necessary authorities will take time yet needs to be done before peace negotiations get underway.

If a negotiated peace comes while the U.S. and its allies still hold the funds, Russia might demand its money back. The sanctioning states would not like this but find it difficult to say no. Moreover, other actors with legitimate claims against Russia may step in to obstruct the return of funds that otherwise might go to Ukrainian reconstruction. Some persons already hold judgments against Russia stemming from domestic litigation or treaty-based international arbitration, as one of us discussed on Lawfare in May 2022. These judgment creditors include Ukrainian state-owned enterprises, but not Ukraine itself. Other potential creditors, including victims of Russian war crimes, might reduce their claims to judgment through domestic or international litigation. Both current and future judgment creditors then might try to attach the frozen central bank funds as a means of enforcing their rights, in essence jumping ahead of reparations.

These line-jumping lawsuits would have to overcome several legal obstacles before paying off. The creditors would have to prove either that their claim is against the owner of the targeted property or that the nominal owner is legally the alter ego of their judgment debtor. Thus, persons with claims against Russia might argue that the central bank is the country’s alter ego. The International Court of Justice recently rejected this argument as to Iran’s central bank, but neither the Supreme Court nor other domestic judicial bodies are necessarily bound by that precedent.

Second, the claimants would have to find an exception to sovereign immunity, such as the one applicable to enforcement of arbitration agreements. Finally, they would have to obtain a license from the administrator of the sanctions. In the case of the Carter administration’s Iran sanctions, the government licensed attachments, but not execution, with respect to frozen assets. It does not appear that the OFAC has licensed any attachments with respect to Russian central bank property.

Still, at least some of the existing creditors might be able to overcome these hurdles, and others could use litigation to slow down the process of distributing money for Ukrainian reparations. The Biden administration might find itself unable to resist pressure to issue OFAC licenses for attachments. As long as the assets are only frozen, and not confiscated, these risks will only grow. If the administration wants to prevent these future issues, it needs to create a process for the confiscation and transfer of the frozen funds in a manner that will ensure their use solely for Ukrainian reconstruction. Doing this will make the claims of either Russia or its creditors irrelevant.

The Case for International Cooperation

Section 105 of the REPO Act endorses efforts by the president to create a common international compensation mechanism through international agreements, which is a good move on their part. What the bill does not do, however, is tie confiscation of Russian sovereign assets to the exclusive use of this mechanism, which is a mistake. To explain why, consider what a lawful and effective reparations process might look like. 

An international mechanism to hold Russian assets and determine their use for Ukrainian reconstruction is not simply desirable, but essential. First, an international body defined and restricted by international law would be insulated from Russian demands. Second, this body can make credible determinations about the size and destination of reparation payments. Given the risk of diverting these funds, as well as the underlying complexity of some of the claims, disinterested if expedited assessment based on acceptable evidence and fair processes is essential.

There are at least two precedents for such a mechanism. The aforementioned Algiers Accords, which created the Iran-U.S. Claims Tribunal to find an ultimate destination for the Iranian funds frozen by the U.S. in 1979 and 1980. The second is the Compensation Commission created by UN Security Council Resolution 692 to pay reparations to the victims of Iraq’s invasion of Kuwait. The former, stemming from a stand-off rather than a victory for one side, uses an adversarial judicial process and includes claims made by the two adversary states against each other. The latter, imposed on a defeated state after the fighting had ended, took a more bureaucratic approach and precluded consideration of any claims in mitigation by Iraq. Which template to adopt in the current scenario will depend largely on how the states creating the mechanism expect the Russia-Ukraine war to end.

As noted already, if Russia suffers a clear defeat, these devices are not necessary. If, however, the outcome is a negotiated settlement that leaves both sides not fully satisfied, the credibility and power of the international body in control of the confiscated Russian sovereign assets becomes critical. One thing the U.S. can count on is that the United Nations will not bail it out here by adopting anything like Resolution 692. Russia’s veto power on the Security Council precludes any help there. The General Assembly hypothetically could create a reparations-administering entity over Russian (and likely Chinese) opposition, but it almost certainly lacks the authority to require Russia to accept that entity’s authority.

The challenge becomes designing a mechanism for dealing with confiscated assets that Russia and its sympathizers (countries such as Brazil, China, India, Indonesia, and South Africa, which do not support the invasion but also criticize the response of the U.S. and its allies) will accept, even if they do not join the agreement creating the mechanism. Here, something like the Iran-U.S. Claims Tribunal seems to be a better fit. First, using disinterested third-party adjudication, with a balanced selection process for adjudicators, is likely to create less pushback than a tribunal formed by and reflecting the interests of only the sanctioning states. Second, leaving the forum open to claims from both sides seems necessary.

What do we mean by “both sides”? Russia is clearly the only aggressor in this war, and there is a view that the duty to pay reparations after a war applies only to aggressors. Modern international law, however, has moved in the direction of requiring all violators of international law to provide reparations, including those who suffer from another state’s transgressions. Article 31 of the principles of state responsibility says this clearly: “The responsible State is under an obligation to make full reparation for the injury caused by the internationally wrongful act.” It is possible for a victim of aggression itself to violate the law of war, for example, by targeting civilians and civilian infrastructure in the absence of military necessity. The duty to make reparations is distinct from criminality: Military personnel can break the law of war without committing the kind of “grave” violation that demands criminal punishment.

It seems implausible to rule out categorically that Ukraine, in its existential desperation, has not breached the limits of the law of war in ways that have caused harm, or will not do so in the future, even if these acts do not qualify as international crimes. Were it to transpire, for example, that the people who blew up the Nord Stream pipelines acted on behalf of Ukraine (a claim by no means resolved by the evidence at hand), a case might exist for Ukrainian reparations to the German and Russian owners. Accordingly, for any reparations mechanism to gain at least the grudging support of the affected parties, it would have to be able to consider all possible claims, not just those running against Russia.

The point is not that the international entity that takes title to confiscated Russian assets must look like this. Rather, an entity with these features is less likely to be an obstacle to an undesired but tolerable settlement that ends the fighting. The decisive question remains how Russia and Ukraine understand their military positions. When planning for the disposition of Russia’s confiscated state assets, the U.S. and its allies should not count on achieving the military outcome they hope for, no matter how just that outcome would be.

The Case Against the REPO Act

Seen in this light, the REPO Act has two fatal flaws. One is its permissive approach to the confiscated funds. The bill aspires to do the right thing but allows the U.S. government to spend the money as it wishes, as long as the secretary of state sees some connection to the well-being of the Ukrainian people. This almost certainly would include funding arms supplies to Ukraine. Last year’s bill did this expressly; this version is open ended enough to reach the same result. All the secretary of state has to do is assert that deterring Russian attacks is a prerequisite to any reconstruction. Yet those states that sympathize with Russia will reject that assertion, conclude that the money will not be used primarily for reparations, and maintain that the confiscation of state assets in this manner will itself constitute a breach of international law entitling Russia to reparations.

The REPO Act might solve the risk that Russia’s creditors might tie up the funds, but by casting a cloud on the purpose of the confiscation, the law will strengthen the argument of Russia and its sympathizers that at least some portion of the money must be refunded. Feeding this claim increases the risk that an end to the war (or at least the fighting) might be delayed by Russia’s insistence on its rights, a position that other influential states may support.

The second fatal flaw in the REPO Act is its attempt to preclude judicial oversight of the confiscations. Judicial oversight is not likely to slow down the confiscation process, but it is likely required by the Constitution. EU law clearly requires that the U.S.’s allies in the EU provide access to judicial review. As a substantive matter, no U.S. court could conceivably reject the power of the president and Congress to decide that Russia must provide for reparations to Ukraine. The only plausible constitutional issue would be whether Russia would receive notice of the confiscations and have an opportunity to argue that the funds would not be used for the stated purpose. These are matters that the courts can dispose of with dispatch.

There is a background debate about the power of Congress to strip the courts of the authority to review constitutional claims. Whatever one thinks about these arguments, it seems silly to insist on a radical break with past practice when the measure is completely unnecessary. 

It is time for the Biden administration and Congress to come together on an approach that provides for Ukraine’s future reconstruction without blocking the path to peace. Joining with the U.S.’s allies to create a legally sound reparations mechanism, funded with frozen Russian state assets, is within the U.S.’s grasp. A simple amendment of the freezing authority tied to use of an international reparations mechanism would do the trick. During the time it takes to establish an internationally supported body to hold and administer the funds, the U.S. could transfer the assets to some form of suspense account in the name of the United Nations or the International Monetary Fund. This approach will accomplish the three objectives of displacing Russian legal title to the assets, immunizing the assets against attachments by third-party claimants, and deflecting any suggestion that the countries confiscating the funds have done so for their own benefit. Trying to disguise the repurposing of the money for fighting, rather than reparations, will only delay and distract from what needs to be done to give Ukraine some chance at a viable postwar future.

Lee C. Buchheit retired in 2019 after a 43 year career in private legal practice. He now holds a variety of academic appointments including Honorary Professor at the University of Edinburgh Law School.
Paul Stephan is the John C. Jeffries, Jr., Distinguished Professor of Law and David H. Ibbeken ’71 Research Professor of Law at the University of Virginia School of Law. He served as counselor on international law to the legal adviser of the U.S. State Department in 2006-07 and as special counsel to the general counsel of the U.S. Department of Defense in 2020-21.

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