Seizing Russian assets

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The Russian invasion of Ukraine prompted much of the West—the USA, many European states, Australia, Canada, Japan, New Zealand and South Korea—to respond with economic sanctions.¹ These include bans on travel and business transactions. The interesting legal issues, however, arise from asset freezes. Under a freeze, the sanctioning state forbids, under penalty of law, anyone within its jurisdiction from transacting in any way with assets belonging to designated persons. Those designated by the Russian sanctions include both private persons and public entities such as state-owned businesses and banks.²

An asset freeze destroys the immediate economic value of property owned by sanctioned persons, including cash deposits in financial institutions. What it does not do is change the ownership of these assets. Drawing on game theory, one can think of freezing as a kind of hostage taking.³ The sanctioning state takes control of the property but holds out the prospect of its return upon a satisfactory settlement. Typically, the ransom on which the settlement can rest entails an end to the behaviour that provoked the sanction and, if feasible, payment of reparations for the provocative acts.