Paper Tiger: Frozen Assets and Russia’s Litigation Mirage

This is an English-language translation of an article originally published in De Standaard in Belgium. You can view the original piece (in Dutch), linked here. 

Why did the Russian Central Bank just sue Belgium’s Euroclear in a Moscow kangaroo court? To intimidate skittish EU governments into backing away from the European Commission’s plan to fund Ukraine through a roughly €210 billion “Reparations Loan.” But the move exposes Russia’s Achilles’ heel: judgements from Russian courts are unenforceable abroad, and Moscow has no viable path to even having a case heard in Belgian, EU, or international courts—much less winning it. That is the key conclusion of a paper released this week and endorsed by international lawyers from around the world. A separate legal opinion published by Covington & Burling LLP last week came to the same conclusions.

Both analyses conclude that the risk of any litigation succeeding, or even being admitted for consideration, is negligible, akin to nuisance or speculative claims. The key question on Russia’s hypothetical legal retaliation has always been the same: where, exactly, could Russia sue? Russia cannot sue in a European national court without surrendering its sovereign immunity—the core legal shield that prevents foreign courts from exercising jurisdiction over state assets. In other words, the moment Russia files a claim in a Belgian or other European court, it would give up the very protection it is trying to invoke. That is a legal own goal Moscow would not risk.

European national courts are therefore off the table. No international court offers options either. The European Court of Human Rights applies only to Council of Europe members—a club Russia was expelled from in 2022— and is designed to protect private individuals from state abuse, not adjudicate disputes concerning sovereign assets. The International Court of Justice can hear cases only in narrowly pre-defined circumstances, none of which apply here. Russia has not accepted the ICJ’s compulsory jurisdiction, and it is implausible that Belgium, the UK, or any other state participating in the Reparations Loan would consent to litigate this dispute before the ICJ. Some point to the 2004 United Nations Convention on Jurisdictional Immunities of States and their Property. But that Convention is not in force, and claims under it cannot be brought, let alone won. Most importantly, one of the states blocking its ratification is Russia itself.

What about arbitration under bilateral investment treaties (BITs) between Russia and EU member states? Here, too, Russia’s options are limited. BITs are designed to protect private investors, not state entities acting in a sovereign capacity. Even if a tribunal were to somehow assert jurisdiction, measures taken to support Ukraine would almost certainly be seen as legitimate, lawful, and proportionate responses to Russia’s own violations of international law. The very basic principle is that a state that creates an unlawful situation cannot then claim damages arising from it. Bearing all this in mind, it is no surprise that Russia sued Euroclear in the only forum guaranteed to entertain its claim—its own court. While that decision is meant to intimidate Euroclear and Belgium, it instead reveals Russia’s legal weaknesses. It can only succeed in courts that can be relied on to find for Russian state interest.

This claim also distracts from the fact that the Reparations Loan does not confiscate any RCB assets. The Commission’s proposal takes nothing from the RCB. Russia’s bank balances remain unchanged, and the assets held by the banks holding its assets remain unchanged. Rather than seizing funds from Russia, the plan swaps accumulated cash balances held at European banks for AAA-rated European Commission bonds, which the Emergency Economic Measures Regulation treats as “equivalent to cash” for accounting purposes. In practical terms, this is a cash-for-bonds exchange with European banks—not with Russia. It is an elegant solution that unlocks liquidity for Ukraine while returning Euroclear and other banks to holding debt securities instead of large cash deposits. Ratings agencies have recently stated that neither Belgium nor Euroclear’s credit ratings will be impacted by the Reparations Loan proposal.

So, if the EU plan isn’t taking Russia’s money, why is the RCB suing Euroclear? Because Russia isn’t worried about having its money taken. It’s worried about the EU funding Ukraine and having to one day pay reparations. Russia understands that if the EU plan is approved, Ukraine will have the ability to fight and retain what is has, marking the end of the Russian/American surrender plan and setting the stage for more balanced negotiations. Russia also understands that once the EU does this, it will honour its promise not to release Russia’s money until it pays the reparations owed to Ukraine—something the G7 has promised but that Russia hopes to negotiate away. The recent EU decision to immobilize the assets indefinitely also allows the EU to keep this promise, as there is no longer the risk of the assets returning to Russia due to a breakdown in EU unanimity over extending sanctions. 

The bottom line is simple: Ukraine needs to be funded in the interest of all of Europe’s security and Russia cannot successfully sue. Judgments from its own courts are unenforceable abroad. International courts do not have jurisdiction. Investment treaties do not apply. And the Reparations Loan creates no new cause of action because nothing is taken from Russia in the first place. The threats of litigation are legal theatre, not law. Europe should treat them as such—and move forward with saving Ukraine, and itself.

Aaron Gasch Burnett is a Senior Security Policy Fellow at the European Resilience Initiative Center. Jamison R. Firestone is a sanctions and human rights lawyer based in London.