If the EU seizes her assets, what litigation options does Russia have?

Russia has already signalled that any move by the European Union to harness frozen Russian sovereign assets for Ukraine will be met with “50 years of litigation”, in the words of VTB chief Andrei Kostin. That threat is not empty bluster. There are multiple pathways for Russia and Russian state entities to harass the EU and its member states in courts and arbitral fora for years. Yet when one disentangles the rhetoric from the hard law, the prospects that such litigation will ultimately force Europe to reverse course, or to pay Russia full compensation, are very limited.

Here we survey the main litigation and arbitration avenues available to Russia, the substantive arguments she might deploy, the defences likely to be available to Europe, and the practical prospects of success.

The measures Russia is threatening to challenge

The EU has immobilised roughly EUR 210 billion of Russian sovereign assets, mostly reserves of the Central Bank of Russia held at Euroclear in Belgium, together with some EUR 28 billion of private Russian assets. Under the latest proposals, the Union would back a “reparations loan” of around EUR 140–90 billion for Ukraine by pledging the windfall profits generated by these immobilised reserves, especially the interest and reinvestment income accumulated at Euroclear.

Politically, Russia presents this as “seizing our money” to “finance war, not peace”. Legally, there is a crucial difference between (a) outright confiscation of the principal of central bank reserves and (b) diversion of the interest or windfall gains while keeping the nominal principal untouched. The EU has been moving, step by step, from simple immobilisation, to skimming profits, and now to using those profits to service a long term loan to Ukraine which is to be repaid once Russia pays reparations. The more the Union avoids formally extinguishing Russia’s title to the principal, the more complex Russia’s litigation prospects become.

Domestic litigation in Russian courts and retaliatory measures

The easiest route for Moscow is to weaponise her own courts. Kostin has already threatened that Russia will seize European investors’ assets in Russia in response. In practice, that involves:

1. Civil suits by Russian state bodies or banks against European companies in Russian courts, seeking declarations that European measures breach Russian law or international law, and authorising seizure of European owned property in Russia as “compensation”.

   
   

2. Legislative measures empowering the Russian state to nationalise, or place under external administration, Western assets on her territory as a countermeasure.

As a matter of international law this looks like a mirror expropriation, not genuine litigation, but for Russia’s domestic purposes it is “litigation”. Such cases can indeed drag on for years, as the Yukos saga illustrates in reverse: the former shareholders obtained arbitral awards of USD 50 billion against Russia under the Energy Charter Treaty in 2014, yet enforcement has been fiercely contested around the world ever since.

This route will inflict losses upon Western businesses trapped in Russia, but it does not compel the EU to abandon its asset plan. It is therefore a retaliatory tool rather than a true legal remedy.

Prospects of ultimate success against Europe: Nil, because this is purely intra-Russian litigation; but high potential for economic pain for Western investors still exposed to Russian jurisdiction.

Litigation within EU and member state courts

A more serious avenue is litigation in the courts of member states, and before the Court of Justice of the European Union (CJEU). Here there are several possible claimants:

1. The Central Bank of Russia or other Russian sovereign entities, acting as foreign legal persons.

   
   

2. Russian state owned banks or companies, to the extent their private assets are diverted.

   
   

3. Private Russian individuals whose assets are frozen or confiscated.

Possible causes of action include:

• Violations of property rights guaranteed by domestic constitutions and the EU Charter of Fundamental Rights.

• Wrongful interference with contractual rights (for example, a claim by the Central Bank that Euroclear is contractually obliged to maintain and return its reserves, rather than allow the EU to hypothecate them).

• Unlawful discrimination or disproportionality in sanctions legislation.

In theory Russia could try to challenge the underlying EU legislative acts before the CJEU. In practice, standing rules are restrictive. Third states such as the Russian Federation have very limited access to the Court. Russian state owned entities might attempt to challenge specific measures if they can show that they are “directly and individually concerned” by an EU regulation, but the CJEU has historically been cautious about entertaining such actions.

Even if access to the CJEU were obtained, the Court tends to treat sanctions and high policy measures as areas where the legislature enjoys a broad margin of appreciation, subject only to a proportionality review. It has already upheld wide-ranging sanctions against Russian banks and officials since 2014.

Moreover by the time the EU adopts legislation using windfall profits from central bank reserves, it will have designed that legislation with litigation in mind, framing the measure as temporary, as a response to Russia’s aggression, and as carefully targeted to avoid arbitrary deprivation of property. The legislative history will be written to withstand the inevitable challenges.

Prospects of ultimate success: Low. One might see modest wins at the margin, such as clarification of due process rights or compensation in individual cases, but it is unlikely that the CJEU would invalidate the core architecture of the measures.

Investor–state arbitration under bilateral investment treaties

This is arguably the most serious external legal risk for Europe. Commentators have already flagged that Russia or Russian state entities could invoke the 1989 Belgium–Luxembourg Economic Union–USSR bilateral investment treaty (BLEU–USSR BIT) against Belgium, where Euroclear and most of the sovereign reserves are located.

Key points:

1. Jurisdiction and standing

The BLEU–USSR BIT protects “investors” of each party who make investments in the territory of the other. There is an active legal debate whether a central bank or a sovereign state entity can qualify as an “investor” under such treaties. Some tribunals have accepted that state owned companies may be investors, provided they have separate legal personality and act in a commercial capacity.

Russian arguments would be that the Central Bank of Russia, or a state fund that formally owns the reserves, made an “investment” in Belgium by depositing assets with Euroclear or Belgian banks. Belgium would counter that these are sovereign reserves for macroeconomic purposes, not an entrepreneurial investment within the meaning of the BIT.

2. Substantive claims

If jurisdiction were accepted, Russian claimants might allege:

• Unlawful expropriation: diversion of profits, or eventual confiscation of principal, as measures “tantamount to expropriation” without prompt, adequate, and effective compensation.

• Breach of fair and equitable treatment: sudden and politically motivated interference with vested rights in a discriminatory manner.

• Discriminatory measures: arguing that Russian assets have been singled out compared with other foreign reserves.

3. Belgium’s and the EU’s defences

Belgium would argue:

• Security exceptions in the BIT: many older treaties contain clauses allowing measures necessary for essential security interests in time of war or public emergency.

• Countermeasures under customary international law: the EU measures are collective countermeasures in response to Russia’s unlawful aggression, designed to induce compliance with obligations to pay reparations to Ukraine. The legality of collective countermeasures is contested, but the argument is not implausible.

• Attribution issues: Belgium is acting as an implementing agent of EU decisions. Belgium might contend that any alleged breach is attributable to the Union, which is not party to the BIT, complicating jurisdiction.

From the Union’s perspective there is also a structural defence: EU law doctrine, as developed in cases such as Achmea, holds that intra-EU investment arbitration clauses are incompatible with Union law. This does not apply directly to Russia, which is not an EU member, but the Court of Justice has also frowned upon external arbitral mechanisms that intrude upon the autonomy of EU law. Member states might therefore be instructed not to comply with adverse arbitral awards.

4. Enforcement of awards

Even if a tribunal were to find Belgium liable and award damages to Russian state entities, enforcement would be challenging:

• Belgium and other EU states would likely rely on state immunity from execution in respect of sovereign assets, particularly central bank assets, which enjoy strong protection under customary international law.

• Other jurisdictions where Belgium has commercial assets might be wary of assisting Russia given her own record of ignoring arbitral awards in the Yukos case and the wider political context.

In effect, Russia could obtain paper victories that she may lack the power to turn into money.

Prospects of ultimate success: Moderate that some tribunal accepts jurisdiction and finds breach of BIT standards in relation to Belgium, Luxembourg, or another key member state; low that Russia actually recovers substantial compensation.

Inter-state litigation before the International Court of Justice and other fora

Kostin spoke of taking cases to “international instances” and “perhaps even the UN court”. The “UN court” must be the International Court of Justice (ICJ). Legally, Russia could attempt to frame claims that:

• EU member states, by confiscating or diverting central bank assets, breach customary international law on state immunity and the inviolability of central bank reserves.

• Such measures amount to an unlawful expropriation of the property of a foreign state.

The problem for Russia is jurisdiction. The ICJ can only hear cases when states have consented. There is no general clause under which EU states have accepted ICJ jurisdiction for all disputes over state immunity or sanctions. Russia might try to rely on compromissory clauses in multilateral treaties to which both sides belong, but it is hard to identify a suitable treaty that clearly covers these measures.

Even if a path to jurisdiction were found, the substantive law is contested. In Germany v Italy, the ICJ held that state immunity from jurisdiction is a strong rule of customary international law, not set aside even by allegations of grave breaches of humanitarian law. Yet that case concerned civil claims in Italian courts against Germany, not measures directed at central bank assets as part of a collective sanctions regime. There is ample state practice suggesting that central bank assets held for sovereign reserves enjoy an especially strong immunity from execution, but there is little authoritative case law on whether that immunity can be qualified as a lawful countermeasure when the reserve-holding state has committed a crime of aggression.

Moreover any ICJ process would be slow, probably lasting many years; and even if the Court found against an EU member state, compliance would ultimately be political. Russia herself has ignored ICJ orders in the case brought by Ukraine under the Terrorism Financing and Racial Discrimination Conventions.

Other inter-state options such as the European Court of Human Rights are no longer available, because Russia left the Council of Europe and the Convention’s jurisdiction over Russia ended in 2022, whereas most of the disputed EU measures will occur later. WTO dispute settlement, in turn, is practically moribund and heavily constrained by security exceptions that states invoke to justify sanctions.

Prospects of ultimate success: Very low, primarily because of the jurisdictional obstacles, the length and political character of ICJ proceedings, and Russia’s own diminished credibility before international courts.

Contractual and commercial arbitration

Separate from treaty arbitration, there may be purely contractual arbitrations, for example:

• Disputes between Russian state entities and Euroclear under contracts governing the custody and management of reserves.

• Disputes between Russian banks and European counterparties over blocked securities, collateral, or derivatives.

Many such contracts provide for arbitration in neutral fora such as London, Paris, or Geneva. Russia could argue that the counterparties failed to perform their contractual obligations by failing to release funds when due. The counterparties would invoke force majeure or illegality defences, on the basis that subsequent EU legislation rendered performance unlawful.

Tribunals in commercial cases are more likely to accept these defences, given long-standing practice that contractual obligations yield to mandatory public law in the forum state. Even if some awards favoured Russian claimants, they would again confront the enforcement problem in the face of sanctions and state immunity.

Prospects of ultimate success: Limited. Useful for generating individual awards and adding to Kostin’s “50 years of litigation”, but unlikely to alter the sovereign asset architecture.

The substantive legal battlefield: immunity, expropriation, and countermeasures

Across all these fora, several substantive themes recur.

1. Sovereign and central bank immunity

Customary international law recognises that states enjoy immunity from the jurisdiction of foreign courts in relation to sovereign acts, and that their property used for non-commercial public purposes is generally immune from enforcement. The ICJ’s judgment in Germany v Italy confirmed the breadth of this rule. Central bank assets, in particular, are commonly treated as especially protected.

Russia will emphasise that her central bank reserves at Euroclear are not commercial investments but sovereign reserves, and that any diversion of their fruits is a violation of immunity.

The EU, in turn, will respond that:

• It is not subjecting Russia to domestic court jurisdiction as such, but legislating to regulate the use of assets within its territory.

• It is not (at least initially) confiscating the principal, but immobilising it and appropriating windfall profits generated during immobilisation.

The battle will therefore focus upon whether using profits, or hypothecating future reparations entitlements, is so close to expropriating the underlying asset that immunity rules must apply.

2. Expropriation and property rights

In investment arbitration and human rights-style claims, the argument will be that the EU measures are a disguised confiscation of Russian property, carried out without compensation and for political motives.

Europe will stress that any taking is directly linked to Russia’s own serious breach of international law in waging a war of aggression, that the sums are to finance Ukraine’s defence and reconstruction, and that the measures are reversible if Russia complies with her obligations to pay reparations. The European Parliament’s own studies and external think-tank analyses already argue that a carefully designed loan scheme backed by profits from frozen assets is compatible with international law, provided that the principal remains intact and that Russia retains an eventual claim to residual value once reparations are paid.

3. Countermeasures and necessity

Perhaps the most important legal shield is the doctrine of countermeasures. Under the International Law Commission’s Articles on State Responsibility, a state injured by a serious breach may adopt proportionate countermeasures that would otherwise be unlawful, in order to induce the responsible state to comply. There is a debate whether third states (not directly injured) may adopt “collective” countermeasures. The EU can argue that every member state is injured by Russia’s aggression against the European security order; and that the Union is acting in support of Ukraine’s rights and the broader international community’s interest in peace.

Russia will reply that countermeasures may not violate peremptory norms such as state immunity, and that confiscating sovereign reserves crosses that line.

This is uncharted territory. It is precisely the sort of complex, unresolved legal question that can generate cases and arbitral awards for decades, without necessarily producing a single authoritative answer.

So what does “50 years of litigation” really mean?

If the EU proceeds with the more ambitious versions of its plan, Russia and Russian entities can realistically:

• Litigate in Russian courts and seize Western assets left within reach.

• Bring individual cases in EU member state courts, and possibly some limited challenges before the CJEU.

• Pursue investor–state arbitrations against Belgium and perhaps other member states under older BITs, with a reasonable chance that at least some tribunals will accept jurisdiction and find violations.

• Bring commercial arbitrations against private counterparties.

• Attempt, probably unsuccessfully, to mount inter-state cases at the ICJ or in other international fora.

The precedent of the Yukos arbitrations shows that a determined litigant can keep a dispute alive in courts worldwide for well over a decade. Kostin’s “50 years” slogan is therefore not absurd as a political forecast: one can imagine a long tail of post-war enforcement attempts, set-offs, and counter-claims stretching far into the future.

Yet “litigation” is not the same thing as “winning”. When one examines the various fora, several themes emerge:

• Jurisdiction is often doubtful or lacking, particularly for inter-state cases and direct challenges to EU legislative acts.

• Even where jurisdiction exists, the EU and member states will have significant defences grounded in countermeasures, security exceptions, necessity, and the special context of Russian aggression.

• Any awards in favour of Russian state entities will be difficult to enforce in practice, because of state immunity rules, sanctions and the political reluctance of third states to assist Russia in recovering sovereign assets while she remains in material breach of fundamental norms.

• Russia’s own reputation for disregarding arbitral and judicial decisions, exemplified in the Yukos saga, will undermine her equitable position before tribunals and foreign courts, even if technically such considerations should not affect the application of law.

Europe is likely to regard the litigation risk as a cost to be managed rather than a decisive obstacle. Member states, especially Belgium, will insist upon burden-sharing and legal guarantees to spread the risk. Legal uncertainty will temper the design of the scheme, pushing the EU towards using profits rather than principal and towards structures that preserve a notional Russian entitlement contingent on future reparations payments.

Russia has genuine legal arguments that diverting sovereign reserves, particularly central bank assets, brushes against the limits of state immunity and property protection. She also has access to enough courts and tribunals to make life uncomfortable for the EU and its member states for many years. In that narrow sense, Kostin’s threat of “50 years of litigation” is plausible.

However the ultimate prospects that such litigation and arbitration will compel the EU to abandon the use of frozen assets, or to pay Russia compensation, are poor. The legal uncertainty, jurisdictional obstacles, enforcement problems, and broader political context all weigh heavily against meaningful Russian victories. The more the EU confines herself to using windfall profits and carefully frames the scheme as part of a collective response to a flagrant breach of peace, the more likely it is that Russia’s lawfare will end in a handful of arbitral awards, some partial settlements, and a large volume of uncollected judgments, rather than a decisive legal triumph.