Russian Government prepares legal procedures bill to retaliate against confiscation of Russia’s assets

The Russian Government is expected to submit draft legislation to the State Duma which sets detailed procedures for taking foreign-owned assets as compensation in response to possible confiscation by foreign states of assets owned by the Russian state and the Russian Central Bank.  

In May 2024 President Putin issued a decree enabling Russian authorities to take the assets of US persons in Russia as compensation for damages in case the assets of the Russian state or the Russian Central Bank are confiscated by the US.

In detail

Whose assets may be confiscated?

The draft bill is designed to enable the confiscation of assets of any foreign states, as determined by the Russian President, and of persons connected with such states, in case the assets of Russia or its Central Bank are confiscated by such states.

The draft bill provides that the Russian Federation and its relevant state bodies, as well as the Central Bank, may file claims with the Moscow Region Commercial Court, in case their assets are taken by a foreign state, and get compensation for damages by taking both sovereign assets and the assets of foreign individuals and entities associated with such foreign state.

Does this mean that the assets of any persons from the state that confiscates Russian assets may become targets?

New legislation is worded quite broadly and appears to enable this. However, according to the Government’s note to the draft bill, foreign person’s assets may be taken only if such person has contributed to the confiscation of Russia’s property. Foreign banks, depositories and the persons receiving proceeds from Russian assets are named as examples.

What assets may be confiscated?

The draft bill states that the Russian Government Commission for Control over Foreign Investments will prepare a list of assets that can be confiscated and make their valuation for the court.

The criteria and procedure for including assets in the list as well as the method for valuation have yet to be established.

What are the features of the asset confiscation court proceedings?

A notice of dispute shall be served on the foreign state in accordance with international treaties.

Private owners of the assets will be involved in the case as co-defendants along with the foreign state.

The court may suspend the proceedings pending the response from the Government Commission with a list of assets that can be confiscated.

The award is subject to immediate enforcement.

When will this start to apply?

At this stage there is no clear timeline, as the draft bill has not yet been introduced by the Government to the State Duma. We expect the bill to be adopted quickly if the Russian sovereign assets are expropriated anytime soon. 

Contacts:

Alexey Frolov, partner, Moscow

Maxim Kuznechenkov, partner, Moscow

Pavel Novikov, partner, Moscow

Vladimir Efremov, partner, Moscow

Anton Maltsev, partner, Moscow

Maxim Kalinin, partner, Saint Petersburg