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| 2 minutes read

Freeze to seize to Kyiv - a first step?

On 19 June 2023, the Government announced a new package of sanctions which pave the way for assets frozen under the Russia sanctions regime to be redirected to aid the reconstruction of Ukraine. The announcement was made ahead of the Ukraine Recovery Conference which took place from 21-22 June 2023 in London.

The measures include the following.

  • An amendment to the stated purpose of the Russia sanctions regime such that sanctions can now be made for the purpose of promoting the payment of compensation by Russia for damage, loss or injury suffered by Ukraine on or after 24th February 2022 as a result of Russia’s invasion of Ukraine. The insertion of the additional purpose means that the sanctions are likely to remain in place well beyond the end of the active Russian military action in Ukraine.
  • A mechanism (details of which are yet to be announced) by which sanctioned individuals can donate frozen funds to Ukrainian reconstruction. This is a voluntary process and the Government has made clear that there would be no sanctions relief in return for making a donation. The Government has said that this process is open to designated persons who “say they support Ukraine” – given sanctions are intended to promote behaviour change amongst those who support Russia it will be interesting to see whether this mechanism is availed of and if so, whether designated persons use it in support of designation challenges.
  • A disclosure obligation on designated persons subject to UK sanctions to report the assets they hold in the UK. This proposal was previously advanced by the Royal United Services Institute and Spotlight on Corruption. The Government announcement states that the disclosure obligation is a prelude to the wider obligation on the Central Bank of Russia (CBR), Russian Ministry of Finance (MOF) or Russian National Wealth Fund (NWF) to disclose to the Treasury the assets they hold in the UK.

It is the obligation to disclose assets which has re-ignited the "freeze to seize" debate with the Government announcement stating that the failure to disclose assets "may lead to the imposition of further financial penalties or confiscation of assets". We are not there yet but this is one step further down the road towards asset confiscation rather than simply asset freeze.

Debates over "freeze to seize" are marked by a balancing act with the rule of law, and whether the frozen assets of sanctioned individuals and entities can legitimately be seized in the absence of specific criminality. The Government’s emphasis on the voluntary nature of donations and the absence of any power to confiscate assets preserves this balance - for now.

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litigation, sanctions, blog