At this moment the court practice in Ukraine to enforce such decisions where a counterparty is a foreign state in Ukraine is controversial. For example, a decision made by the Supreme court of Ukraine on 18 May 2022 where court imposes a responsibility on a foreign state contradicts the current legislation of Ukraine and causes problems in the actual enforcement of such a decision.

According to the Law of Ukraine On private international law a person may file a claim against a foreign state or property that belongs to a foreign state and is located on the territory of Ukraine only with the consent of the competent authorities of the foreign state. It is doubtful that Russia will provide such a consent.

Thus, the only one efficient way to compensate damages at national level in Ukraine is to confiscate property rights of Russian Federation and its residents. This mechanism was introduced in March by the Law of Ukraine On the basic principles in Ukraine of property confiscation owned by the Russian Federation and its residents (the Law on confiscation).

Confiscated property (our detailed article on this topic please read here) is transferred to a state ownership from the date of putting into effect the decree of National Security and Defence Council of Ukraine. However, confiscated Russian assets will not be enough to compensate damages caused on the territory of Ukraine.

It is no doubt true a mechanism introduced by the Law on confiscation would make the enforcement of decisions issued by Ukrainian courts in this regard more possible.

The similar mechanism exists in Canada, where the issue of confiscation of Russian assets resolved at the legislative level. The mechanism is provided in Seized Property Management Act (S.C. 1993, c. 37). There are two types of accounts made up for these purposes: the Forfeited Property Working Capital Account and the Seized Property Proceeds Account (the Accounts).

Special Economic Measures Act (the Economic Act) аnd Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) was amended by the Division 31 of Part 5 of the Act on implementation of certain provisions of the budget on 7 April 2022.

The purpose of Economic Act is to enable the Government of Canada to take economic measures against certain persons in circumstances where an international organisation of states or association of states of which Canada is a member calls on its members to do so, a grave breach of international peace and security has occurred, gross and systematic human rights violations have been committed in a foreign state or acts of significant corruption involving a national of a foreign state have been committed (division 3.1).

Also, division 7.1 of Economic Act provided: «The Minister of Foreign Affairs may, with the approval of the Governor in Council, enter into an agreement with the government of any foreign state respecting the use by the foreign state, for any of the following purposes, of amounts that may be paid out under section 5.6»:

The specified funds for the above purposes are the sources of income of the Accounts in accordance with Seized Property Management Act.

A crucial issue for implementation of this mechanism is an agreement between Canada and Ukraine in which the order and mechanism of payment from the Accounts will be determined.

Moreover, the US is considering a bill of Asset Seizure for Ukraine Reconstruction Act. According to this bill the President should use all liquidated funds for the benefit of the people of Ukraine, including for the following:

European Commission created «Freeze and Seize Task Force» (the Task Force) to implement sanctions against listed Russian and Belarusian oligarchs. The Task Force operates together with the G7 countries such as Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, as well as Australia. Elaborated legal grounds to confiscate assets will allow the Task Force to direct such assets to Ukraine.

In 1991 the United Nations Compensation Commission (the Commission) was created to compensate damages caused to private individuals. The purpose of the Commission was to consider claims for compensation caused by Iraqi military invasion in Kuwait.

The Commission received a percentage of revenues received from the export sales of Iraqi oil and petroleum products. The commission considered about 2.7 million applications for a total amount of about 352.5 billion USA dollars, however, the Commission decided Iraq to pay USD 52.4 billion. The last payment was made in January 2022.

In 2014 Russia illegally annexed territories of Donbas region and Crimea. Assets of Chornomornaftogaz (now - NJC Naftogaz) were seized. The cost of damages amounts to US 10 billion.

NJC Naftogaz appeals to Hague Arbitration Court against Russian Federation. Russian Federation was found guilty of asset expropriation by the decision of Permanent Court of Arbitration (the PCA). Arbitration is still in process because Russia officially joined the case as a defendant only after the decision was made. It is conducted pursuant to the Agreement between the Government of the Russian Federation and the Cabinet of Ministers of Ukraine on the Encouragement and Mutual Protection of Investments dated 27 November 1998.

A recent example of an appeal to the European Court of Human Rights (the ECHR) by Rinat Akhmetov in June 2022 regarding compensation for gross violations of property rights by the aggressor state during the war. A claimant is seeking a compensation for the destruction of the Mariupol factory «Azovstal» and PJSC Ilyich iron and steel factory in Mariupol. Damages caused by Russians are around USD 17-20 billion.

The main point is the issue of jurisdiction according to the European Convention on Human Rights and the practice of the ECHR. The ECHR made a decision on the full-scale military aggression between Georgia and the Russian Federation and the separatist groups of South Ossetia and Abkhazia in the case Georgia against Russia (II) [GC] - 38263/08 dd 21.01.2021: «The events that had occurred during the active phase of the hostilities did not fall within the jurisdiction of the Russian Federation for the purposes of Article 1; inadmissible (eleven votes to six)».

The EHCR had established several criteria for the exercise of extraterritorial jurisdiction by a State, which had to remain exceptional, the two main criteria being that of «effective control» by the State over an area (spatial concept of jurisdiction) and that of «State agent authority and control» over individuals (personal concept of jurisdiction).

Subsequently, in Medvedyev and Others v. Russia the ECHR explicitly reiterated, with reference to the Banković and Others decision, that a State's responsibility could not be engaged in respect of «an instantaneous extraterritorial act, as the provisions of the Article 1 did not admit a cause and effect» notion of «jurisdiction» (see also M.N. and Others v. Belgium (dec.) [GC]).

Therefore, damages caused by the active phase of the hostilities (a violation of the right to peaceful possession of one's property, guaranteed by the Article 1 of Protocol No. 1 to the Convention) did not fall within the jurisdiction of the ECHR. The decision can be positive if there is evidence that the territory on which the damage was caused was under control of the Russian Federation.

However, the issue of the ECHR's jurisdiction is controversial because Russia was excluded from the Council of Europe. Moreover, the Russian Federation adopted a law on non-enforcement of the ECHR' decisions made after 15 March 2022.

Special for LigaZakon.