No, Biden Can’t Just Sell Off Seized Russian Yachts and Central Bank Assets to Help Aid Ukraine – International Law and the US Constitution Forbid It

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Yves here. It is instructive to see that a law professor who served as an expert witness for Naftogaz, the Ukrainian national oil and gas company, after Russia seixed its operations in Crimea, is concerned enough about the prospect of the Biden Administration selling confiscated Russian assets to speak up and advise against it.

However, I have my doubts that the US has been as scrupulous about not selling assets of sanctioned and belligerent nations as Professor Stephan suggests. Iraq owned a magnificent, very wide townhouse on East 80th Street between Park and Lexington as its embassy. It was promptly seized after the war started and sold within a couple of years. I sincerely doubt the proceeds were remitted to the new government.

By Paul B. Stephan,  John C. Jeffries Jr. Distinguished Professor of Law and David H. Ibbeken ’71 Research Professor of Law, University of Virginia. Originally published at The Conversation

The Biden administration wants to sell off the yachts, homes and other luxury assets it has seized from Russian oligarchs and use those proceeds to support reparations for Ukraine.

As part of his proposal for the latest aid package to Ukraine, President Joe Biden is asking lawmakers for the authority to formally confiscate the assets of sanctioned oligarchs to pay to “remedy the harm Russia caused … and help build Ukraine.” The House has already passed a bill urging Biden to sell the assets, but it didn’t specifically give him the authority to do so.

Others have encouraged the administration to sell off the tens of billions of dollars in Russian central bank assets it has frozen. It’s not clear from the White House statement whether Biden plans to go after state-owned assets too.

That he has gone to Congress to get permission indicates that his lawyers believe, as do I, that current law permits only freezing, and not selling, foreign property in the course of an international crisis.

I’ve studied and practiced international law for several decades and advised the departments of State and Defense on issues like this one. The idea of forcing Russia to pay reparations for the harm to Ukraine has obvious appeal. But the U.S. needs to comply with constitutional and international law when it does so.

Freezing vs. Confiscating

You might ask what the difference is between seizing or freezing property – forbidding anyone to dispose of or use an asset or take income from it – and confiscating it.

Freezing destroys the economic benefits of ownership. But the owner at least retains the hope that, when the conflict is over and the freeze order ends, the property – or its equivalent in money – will return. Confiscation means selling off the property and giving the proceeds, along with any cash seized, to a designated beneficiary – in this case, people acting on behalf of Ukraine.

The International Economic Emergency Powers Act of 1977permits only freezing, and not selling, foreign property in the course of an international crisis. Congress adopted this law to replace the Trading With the Enemy Act of 1917, which gave the president much broader power to take action against U.S. adversaries in and out of war.

Since then, the U.S. has frequently used the power to seize assets belonging to foreign individuals or nations as an economic sanction to punish what it considers bad behavior. For example, after Iran stormed and seized the American embassy in Tehran, the U.S. government seized billions of dollars in Iranian assets in the U.S, including cash and property. The U.S. has also frozen assets of Venezuela and the Taliban over ties to terrorism and Russian individuals considered responsible for human rights violations, thanks to the Magnitsky Act.

In all these cases, the United States held on to the foreign property rather than sell it off. In some cases, it used the seized property as a bargaining chip toward a future settlement. In 2016, the Obama administration famously returned US$400 million to Iran that the U.S. had seized after the embassy siege in 1979 – delivering stacks of Swiss francs stuffed inside a Boeing 737. In other cases, the assets remain under government control, administered by an office of the U.S. Treasury, in hope that eventually some compromise can be reached.

The Patriot Act, adopted in the wake of 9/11, created a limited exception to the confiscation ban in instances in which the United States is at war. The U.S. never has used this authority. And despite the increasingly heated rhetoric, stepped-up sanctions and growing aid for Ukraine, the U.S. is not at war with Russia.

Redressing Gross Violations

A fundamental principle of justice says those who cause harm while breaking the law should pay.

In international law, we call this “reparations.” As the United Nations puts it, “Adequate, effective and prompt reparation is intended to promote justice by redressing gross violations of international human rights law or serious violations of international humanitarian law.”

In recent history, victors have often forced reparations on the losers of war – as was the case following both World War I and World War II – especially when they are deemed responsible for massive death and ruin.

Russia has wrought terrible destruction in Ukraine. Several cities, including Mariupol, are all but destroyed, and evidence of war crimes in places like Bucha is mounting.

So it makes sense that so many scholars, lawmakers and others would argue that the regime of Vladimir Putin and those who benefit from his rule should help pay for it.

Some, such as Harvard legal scholar Laurence Tribe, argue U.S. law already allows the president to use any seized or frozen asset as reparations. But, as other experts have pointed out, doing so has serious problems. The legal issues noted above are one major hurdle and open this up to being challenged in court.

Another is political. Confiscating assets takes away important bargaining chips in any future negotiations, as they have been with Iran and other countries.

Specialists in sanctions lawincluding me – agree with Biden that Congress needs to pass a new law.

Punishing Russia While Preserving the Rule of Law

The question then becomes what that legislation should look like to avoid running afoul of international law and the U.S. Constitution. There still seem to be several limitations on what Congress can do.

The US frozen billions worth of Iranian assets after the siege of the American embassy in Tehran. AP Photo

For example, the Constitution’s Fifth Amendment guarantees due process before the government can confiscate a private citizen’s property. But does this apply to property in the U.S. that belongs to a foreign citizen? The answer seems to be yes, at least according to two Supreme Court cases.

Selling off Russian state property such as central bank assets, creates other problems. International law provides a certain degree of immunity from confiscation to foreign nations and their assets overseas. Outside of wartime, confiscation of state property, including U.S. deposits of Russia’s central bank, runs up against these challenges.

A case currently before the International Court of Justice will decide whether the United States violated this rule when it used funds from frozen Iranian central bank deposits to compensate people who had won a default judgment from Iran for supporting terrorists.

So, yes, I believe that Russia’s invasion of Ukraine is outrageous and demands a response. But that doesn’t mean the U.S. and other countries should ride roughshod over international law and the U.S. Constitution to do so. Congress should be able to craft a law that allows some assets to be confiscated without violating due process or international law.

I predict that disregarding these issues will likely produce embarrassing judicial setbacks that will make it harder to help Ukraine down the road.

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  1. JohnA

    Yes another person who seems to believe the war started in February 2022, and not in 2014 with the US coup in Kiev. How convenient.

  2. Brooklin Bridge

    “I predict that disregarding these issues will likely produce embarrassing judicial setbacks that will make it harder to help Ukraine down the road.”

    I doubt much interest in “helping” Ukraine down any road except the one presumed to harm Russia or the other one for exploiting Russia’s/Ukraine’s resources or finally the one for propaganda, pure propaganda and nothing but propaganda, so help them, gawd.

  3. Carolinian

    Didn’t we kiss international law behind when we invaded Iraq? What was the legal justification for that? And when will we start paying reparations to all the countries we harmed?

    In fact Putin has cited US actions as justification for his own invasion. You can’t be the “Empire of Chaos” and then complain about the chaos.

    1. Bart Hansen

      For the American elites, call them the PMC if you like, Irony is a word missing from their vocabularies.

      1. Milton

        From my perspective, I define the PMC as the managing worker bees for the elite class. They make no decisions that are not first reviewed and OK’d by said overseers.

        1. digi_owl

          Maybe, maybe not. Do not underestimate the ability for the bureaucracy to control the leadership. Often by carefully managing the information flow.

          Was there not a story on here recently about how there was a massive row at UN about the intro text to the intro text of a climate report? Because that part was likely the only part of the report most would have time to read, the leaders of the world included?

    2. PHLDenizen

      Far earlier than Iraq. Several American companies collaborated with Nazi Germany during WW II. The AP helped with censorship, Chase sold German war bonds to the US, IBM provided data processing solutions to manage the Holocaust. Then, of course, there was Operation Paperclip to secretly transport and hide in the US Nazi scientists who would have been prosecuted for war crimes.

      Our rockets used in missiles and space travel stand on the foundation of Nazism.

      And I’m sure there are antecedents for such things in wars prior. I just don’t know history well enough to opine with any authority.

      I’ve always thought it peculiar and hypocritical that Israel, who makes the preservation of Holocaust memories a large part of their identity, has never turned a spotlight on the US’ role in exterminating their people. And helping those war criminals escape prosecution. Maybe they see the vociferous and unyielding support of Israel as sufficient penance.

  4. The Rev Kev

    Thanks for that comment above, caucus99percenter. When I read that bit, I too wondered if that professor had an actual clue what he was talking about. Iran had absolutely nothing to do with the 9/11 but an American court basically said ‘Yeah, but it’s Iran’ and made a judgement to steal their money to pay off those effected families to the tune of $7.5 billion. Even if the International Court of Justice decides that this was a miscarriage of justice, will that New York Court even care? Would the US Justice department?

    Sorry but this professor looking for Congress ‘to craft a law that allows some assets to be confiscated without violating due process or international law’ is like how having professor John Yoo’s legal arguments allowed the Bush White House to use torture as a legal device. Actually, it might be closer to those Civil forfeiture laws in America. The one that allows police to shake down people on the highways, steal their money because they “suspect” that that the money “might” be involved in illegal activities and then keep a cut of that money. Yeah, it is against Constitutional law so lawyers like this professor came up with the device to have police take your money to court. So in a court, they would not charge you that has Constitution protections but charge your money so you would have something like Nevada Police vs. $5,763.96. Law professors like this are enablers.

    1. JBird4049

      Rules for thee, but not for me. Like the comments below on the Japanese internment (many of whom were American citizens) and the stealing of all their property show, the country might supposed to be a nation based on the Constitution and the Bill of Rights, but when it’s the wrong kind of people all that rule of law and civil rights stuff goes away.

      What makes this article sad is that too many people do not realize just how much more this is true now than before; the world in their minds does not exist.

  5. britzklieg

    “evidence of war crimes in Bucha is mounting” – bullshit. Ukraine can repair itself where the nazis roamed.

  6. Mikel

    People actually study it for decades and “international law” is only worth the military might backing it.

    It’s time for discussions about ways to full stop the BS.

  7. Safety First

    If I understand the esteemed professor’s argument correctly, he is suggesting that the US should abide by the norms of international law because failure so to do will…possibly lead to some lawsuits in international courts? Which will be somehow meaningful to the US, because ponies?

    It is one thing if the man had used some sort of a reciprocity argument – we do not do it to you, so that you do not do the same to us. Reciprocal threats have worked in international relations on occasion, even between mortal enemies. For example, during World War 2 neither Nazi Germany nor the Soviet Union ever used chemical weapons against one another, which is amazing, in a way, if you think about it. [Basically, Churchill let the Germans know that if you gas the Russians, we’ll gas German cities, and that was the end of that.]

    It is also one thing if the esteemed professor had fallen back on some marxism-adjacent theory of law. In other words, that the law exists to protect the assets and interests of the economic elites, hence they cannot abide a precedent where the state seizes and sells off the assets of even foreign elites, and so on and so forth. One might agree or disagree with this approach, but at least it’s grounded in some form of reality.

    Instead we get some sort of a rules-based-international-order tripe, which never bothers to answer the fundamental question of – why would the titular hegemon ever bother following any such rules? Who’d tell said hegemon not to?

    Sometimes the mind boggles at the state of American academia.

  8. Jacob Hatch

    One should ask the Japanese-Americans. They lost everything and finally got $20,000 compensation each for losses on average of well over a million dollars, paid out only those those who managed to survive till then. Nothing for survivors of those who were stripped of their assets. Many a white man’s fortune on the West Coast was build on stealing from the First Nations, so they took what they wanted when another opportunity came along. The Constitution isn’t worth the sheep who’s skin it’s written on.

    1. Robert Hahl

      “…they took what they wanted when another opportunity came along.”

      According to Gore Vidal’s “History of the National Security State,” the Japanese attack on Pearl Harbor was so damaging that people in the Senate cloak room were talking seriously about impeaching Roosevelt. He had expected the oil embargo to provoke an attack, but thought it would be Manila; closer to them, less damaging to us. His diversionary tactic then was to insist that “the Japs are coming to invade!” hence internment camps.

      1. lance ringquist

        here is the problem with that scenario. the conservatives and the free traders have been trying to hang our involvement on some sort of clever trick FDR used to get us involved in WWII.

        but japan wanted siberia, russia handed them their heads in a hand basket,

        that forced the japenese to look southwards.

        the dutch east indies, and burma.

        standing in the way was the british at singapore, and america in the Philippines.

        so no matter what, it was gonna happen.

        1. Jacob Hatch

          “…they took what they wanted when another opportunity came along.” I’m not sure what part that played, as it was more an accident that the Japanese because enimies when they were mostly Uncle Sam’s tools, just as they are now.

          Japan went north under the guidance of Teddy R, who gave them Korea as a reward/entanglement. Even FDR in his first term restricted weapons to China, and allowed exports of machinery as well as petroleum hoping to get Japan to go north.

          It was the audacity of both Japan and Germany to sign non-aggression treaties with USSR that sealed their fate, just like the attempt by Viktor Yanukovych to straddle between the EU and Russia that caused his downfall. At least with Hitler it was a hamhanded attempt by Britain and France to reassure Poland of their security that Germany would not eat them up so that they join Germany to assault the USSR that actually caused Piłsudski with UK/French blessing to usurp the government of Lithuania and redraw the borders, and to take half of Czechoslovakia. It was Poland’s failure to give a land bridge to Germany that caused the scheme to go bust, and caught the Allies unprepared for Hitler to turn west. So we can see how accidents saved us from our brilliant, heroic leaders who were still idiots.

          1. Jacob Hatch

            so much for typing on a phone without my readers.
            …Japanese became enemies…

            It was this causing Poland’s failure…

  9. Barry

    If we’re going to talk about this in terms of principles of jurisprudence, don’t we need to address which august judicial body found Russia guilty and determined that reparations are in order?

    What court found that the people of (Western) Ukraine have standing to receive reparations while the people of (for example) Yemen do not?

    1. Polar Socialist

      Also, as it looks more and more apparent every day that passed, what if the most devastated areas (like Mariupol) become part of Russia and Russia rebuilds them? Do they have to pay twice for the destruction – once by reconstructing the Eastern Ukraine and once to Western Ukraine as reparations (for the lost railroad electricity, I guess).

  10. anon in so cal

    In his earlier analysis of Crimea, Paul B. Stephan comes close to (correctly) allowing that Russia’s position was justified. This paragraph would also (correctly) support Russia’s SMO in Ukraine:

    The path from Panama to Crimea is straighter than one might think. In
    between these episodes much changed in the international system. What did
    not change, however, was a widely held view that international law, while
    seeking to discourage uses of force in international relations, tolerates armed
    attacks on another state’s territory with the purpose of controlling and even
    seizing that land, if the attack functions as a proportionate response to a
    grave threat to international peace and prosperity. What also has not
    changed is that significant actors disagree about the application of this
    principle. Sometimes, although not always, these disagreements reflect
    fundamentally different perceptions of international threats that rest on
    systematic variations among states in history, culture, and interests.

    The bulk of this earlier article, however, locates Stephan squarely in the Nuland/McFaul/Blinken camp.

  11. Khanz

    Zelensky claimed that Ukraine lost 600 billions USD due to the war. I definitely doubt this amount as his plan to cover up the corruption and money laundering by his clan, and Biden wouldn’t miss this opportunity to sell overpriced weapons of US war complex through the so called Lend-Lease 2.0 with the budget of 600 billions, stolen from Russians and approved by US war elites.

  12. lance ringquist

    the PROF. does not know what he is dealing with. when the biden administration went to china to demand they not support russia, china repeatedly said yugoslavia over and over again.

    as bad as we have been in the past, this was out in the open fascism, with george soros after a mineral mine, and albright after yugoslav infrastructure, and nafta billy clinton proclaiming that the real reason why was not kosovo, but that yugoslavia refused to free trade.

    that set the stage for openly advocating for the spoils of war over oil in iraq.

    kosovo was a outright breaking of international law, and nafta billy got that law changed because he feared it could be used against him someday.

    so nafta billy set the stage for the crimea, and now the ukraine.

    the free traders are cornered wild animals, like the central european fascists in the 1930’s, they turned the law upside down, or any way that pleased them, as long as they got what they wanted.

    whats mine is mine, whats yours is mine also. there will be no discussions period.

    in the eyes of the free traders, if they lose this one, its over with. but the dim wit free traders still do not get it, 2008 was the year free trade collapsed.

  13. David in Santa Cruz

    Congress has not declared war on Russia. There is no legal basis for seizing and forfeiting the assets of the Russian government or Russian private citizens. There is another name for the American “Rules-Based Order”: Making Pschitt Up.

    The U.S. government is simply randomly seizing assets in an Orwellian violation of U.S. and international law, just like they did to Indigenous Americans and Japanese-Americans. That is theft. Why after this act of piracy and the 2008 frauds any non-U.S. investor would deposit their assets in a U.S. bank or investment vehicle is beyond me.

    1. c_heale

      The Somali pirates came into existence because the EU was stealing their fish.

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