The yachts and lavish houses of Russian oligarchs that have been seized under EU sanctions could be confiscated to finance Ukraine’s post-war reconstruction, the European Commission has proposed in a new plan set to raise a plethora of legal questions.
Since the invasion of Ukraine began on February 24, EU countries have seized and frozen almost €10 billion in physical assets. They have also blocked €196 billion worth of financial transactions.
European Commission President Ursula von der Leyen, the Baltic states and Slovakia are among those who have voiced their support for the proposal, arguing those responsible for the damage should foot the huge bill, instead of the EU bearing the burden on its own.
A recent report by the Kyiv School of Economics revealed that direct and indirect losses from the war range from $564 billion to $600 billion (€568 billion), and could increase even further as the conflict drags on.
The draft directive means member states will have to introduce new laws or adapt their current legislation in order to facilitate judicial procedures to go after the assets.
“For the moment, what we are doing is to say that if there is a confiscation with a judicial procedure it will be possible for the member states to put the result of the confiscation,” Didier Reynders, European Commissioner for justice, said.
“So the total amount of money [will be put] in a common fund for the Ukrainian victims and maybe to take part in the first steps in the rebuilding of Ukraine, but, of course, to do that you need to have a transfer of ownership from the freezing to the confiscation. With a judicial decision, it will be possible to organise that.”
However, the actual implementation of confiscating assets could face difficulties in all 27 countries.
“The EU here is taking a further step by effectively instituting a confiscation order at the European level that will have to be applied by national authorities,” Federico Fabbrino, professor of EU law at Dublin City University, told Euronews.
“Because ultimately this is a directive, the states will have to follow up on it and adopt their own domestic legislation or an administrative measure to give effect to the provisions.”
The proposal unveiled on Wednesday is only the first step. The European Parliament and the EU Council have to negotiate and amend the draft directive before approving a final version.
It’s unclear whether there’s enough political will to take the step. Experts have warned it would take years to get anything done, with little reward.
A debate has also emerged around the future of the Russian Central Bank’s foreign currency reserves. It is estimated that around $300 billion (€283 billion) is frozen globally.
It’s a legally tricky process because, as of right now, assets owned by the Russian state are protected under international law.
In a separate legislative proposal, the Commission plans to turn the violation of EU sanctions into a EU-wide crime, making it possible for agencies on the continent to investigate and prosecute sanctions-dodging.
It comes as a growing number of European energy companies are opening rouble-denominated bank accounts to pay for gas. The highly controversial move is meant to comply with a decree issue by Vladimir Putin but appears to contravene EU sanctions because it gives the Central Bank direct access to euros.
The Commission says around 97 per cent of EU gas contracts signed with Russia explicitly estipulate payments must be carried out in either euros or dollars.