EU moves to confiscate Russian oligarchs’ assets

The European Commission will on Wednesday propose a way to criminalize sanctions evasion at the EU level — providing legal grounds for the confiscation of Russian oligarchs’ assets seized by EU countries.

A draft of the directive, seen by POLITICO on Tuesday, proposes to establish a common legal framework for how to deal with assets frozen in connection with crimes of EU relevance, including establishing new grounds for confiscation, as first reported by POLITICO. Under a separate directive, also to be published Wednesday, EU countries would need to agree on making sanctions evasion an EU crime.

Confiscation is currently a matter of criminal law in many EU countries, requiring a conviction, while sanctions are an administrative procedure. The draft provides for “a new confiscation possibility where assets are frozen based on suspicion of involvement in organized crime activities.” This bar is cleared if “the national court is convinced that the assets in question derive from criminal activities,” without needing a conviction.

Under the draft proposal, countries could also sell frozen assets before a confiscation order is issued and charge the costs for the management of frozen assets to the beneficial owner. Asset owners, meanwhile, are given safeguards, including the right to be heard.

“There would be a separate offence. There would be a sanctioned individual but there would be the offence of evading or violating the sanctions,” explained Jan Dunin-Wasowicz, a lawyer at Hughes Hubbard & Reed LLP who focuses on sanctions compliance, commenting ahead of the proposal. “On that basis, one could imagine having a legal instrument that would allow member states to proceed with the confiscation of the assets.”

Some EU countries — namely the Baltics and Slovakia — have been calling for such a proposal. But others have expressed skepticism, arguing that even if agreed on and implemented, such a proposal would produce years of litigation for relatively little gain.

“Moral justness, unfortunately, doesn’t get you very far in criminal law,” said an EU diplomat.

Higher hurdle

The avenue toward freezing Russian state assets — such as the nearly $300 billion in Moscow’s foreign reserves held by seven sanction-imposing countries — is an even higher legal bar to clear, as state assets are protected by international law. Ukraine is pushing for this more radical step and some EU countries are open to the idea.

The Commission, for its part, has said that it’s exploring that option but remains cautious. “Everything we do needs to be based on the rule of law,” a Commission spokesperson said Tuesday.

Moving to expropriate those assets could also destabilize financial markets, as reserve currencies such as the dollar and, to a lesser extent, the euro would be seen as unsafe havens by countries at odds with the U.S. or Europe.

U.S. Treasury Secretary Janet Yellen touched on that issue last week while in Europe, cautioning that such an option is “not something that is legally permissible in the United States.”