Proposed powers to sell, redistribute Russian assets may violate international law, says legal expert

If the House of Commons passes the budget implementation bill as expected this month, the Canadian government could have new powers to seize and sell sanctioned Russian assets to fund the reconstruction of Ukraine, setting up a potential violation of international law.

Chapter 2 of the United Nations Articles on the Responsibility of States for Internationally Wrongful Acts, adopted by the International Law Commission in 2001 and submitted to the General Assembly, laysout rules for countermeasuresmember states may take to hold another member Russia in this instance accountable for its illegal invasion of Ukraine.

Article 49 says countermeasures "shall, as far as possible, be taken in such a way as to permit the resumption of performance of the obligations in question."

That's where the powers Prime Minister Justin Trudeau's government proposesin C-19 allowingauthorities to not just freezeassets held in Canada, asthey can now, but seize these assets andsell offRussian-owned propertyto help Ukraine's recoverystep onto shaky legal ground.

In adopting these articles, UN members agreed that countermeasures must "induce the wrongdoing state to comply with its international obligations,"and be reversible ifa targetedstate endsits unlawful conduct.

"Once those proceeds, and notably Russian assets, have been handed over to, say, the Ukrainian government, they're lost. They cannot be returned," said David Kleimann, a researcher and adviser on international law and visiting fellow with Bruegel, a Brussels-based think tank.

"Thereforethere's no way of inducing the resumption of performance of international obligations."

Kleimann said he understands why Western leaderswant to movefinancially against Russia, particularly now that it's threatening to blockgrain shipments from Ukrainian ports that feed other countries' populations. But after reviewing the proposed Canadian legislation, he has concerns.

"I believe thatthe legal question is relatively clear here,that such an action or such procedures would violate international law," he said.

"That might be a risk that, given the stakes, [the Canadian government is]willing to take."

Value of sanctioned assets unknown

C-19 doesn't specify andministers havenever made clear exactly who could receive Canada's proceeds. Wouldfundsbe transferredto trustedinternational organizations that performhumanitarian orreconstruction work, or handed over directly to the Ukrainian government? And if the latter, what safeguards would Canadaimplement?

CBC News asked the offices of both Finance Minister Chrystia Freeland, in whose name C-19 stands, and Foreign Affairs Minister Melanie Joly, who's responsible for Canada's sanctions regime, whether the Liberal government sought or receivedguidance on whether it complies with international law.

The only response that specifically addressed CBC'squestion was offeredonbackground:all bills go through"rigorous legal analysis" before being introduced.

In a series of escalating pressure tacticsthis spring, Jolyannouncedsanctions against more than1,200 individuals and entities. But adding more and more namesto Canada's list doesn't necessarily meana significant amountof Russian assets havebeen frozen here.

Thepotential valueof real estateor financial assets in Canadasubject tothese sanctions isunknown, so it's unclear how valuable they might be to Ukraine's recovery. It's alsohardto evaluate whether these new powers area significant deterrent forRussia, or merely symbolic.

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Canada co-ordinateswith allies such as the United States and the European Union to prevent Russians frommoving their assets to dodge sanctions in different Westernjurisdictions.

TheAssociated Press reported that during last month'sG7 finance ministers meeting in Germany, Freelandproposed allowing rich Russian oligarchs to buy their way out of sanctions and using their money to rebuild Ukraine. Yet it's unclear how this interacts with the domestic powersFreelandproposesinherbudget bill.

We go back to the law of the jungle, and that makes Western assets very much vulnerable- David Kleimann, international law adviser

Joly told reporters last Tuesday that C-19's measures were "a very important initiativeto make sure that we can help the victims of the war and also participate in the reconstruction of Ukraine."

"The U.S. is now following suit," she said. "The EU is very interested. So that is why we're bringing up solutions at the table."

In fact, there's debate in the U.S. andEU about whether seizing and redistributing Russian assets is a soundmove.

Dangerous precedent?

The U.S. House of Representatives passed a bipartisan bill that encourages the Biden administration to liquidate the properties of sanctioned Russian oligarchs and companiesand give the proceeds to Ukraine.

The administration, however, is wavering on a proposal to seizethe U.S. assets of Russia's central bank, with Treasury Secretary Janet Yellen reportedly cool to the idea amid suggestions itviolates U.S. law and could undermine Americaas a safe place for other countries to invest.

Kleimann, the adviser on international law,saidEuropeans are also reluctant.

Customary international laws like these UN articles are "rather unenforceable," he said.

"Even if they remain unenforceable, we have a problem here thatforeign governments in the future may see this as a precedent and say 'we can do the same' when, let's say the government of Canada, finds itselfin a military conflict or is supporting one side or the other," Kleimann said.

"We go back to the law of the jungle, and that makes Western assets very much vulnerable to seizure, confiscationand using those proceeds for other purposes. And that is not necessarily something that Western countries wouldlike to see, I imagine."

Russia, a permanent member of the UN's security council, showedlittle regard for international lawwhen it attacked Ukraine. But that doesn't free other countries fromthe rules for sanctioning Russia.

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Canadian officials frequently and proudly promotetheir diplomatic efforts to uphold the "rules-based international order."

Even if helping Ukraineishonourable, the Trudeau governmentrisks looking hypocritical as itnow enacts a domestic law enabling its officials to violate international law.

Kleimann said he finds it "relatively odd" there hasn't been moredebate in Canada. But he said this is "a political decision that is made for politicians and not for lawyers."

Opposition focused on other measures

When C-19was introduced and the government revealed it was seeking these sanction powers, NDP Leader Jagmeet Singh agreed that Canada should do more to help Ukraine, particularly on the humanitarian front, and therefore supported powers toredistributesanctioned Russian assets.

C-19 is long and includes a wide range of measures, not all of whichfall under the finance minister's jurisdiction.CBC News asked Christopher Martin-Chan, a spokesperson for the Official Opposition caucus, to clarify whether Conservatives, who are unlikely to vote in favour of thisbudget billfor manyreasons, oppose Freeland and Joly'sapproach to seizing and redistributingRussian assets.

He said that "in principle" Conservatives were amenable. But the MPs on thecommittee werepreoccupied with the impacts of the proposed luxury tax on autos, boats and aircraft. (Liberal and NDPMPsthwarted efforts to stopthattax.)

The committee reported back with a long list ofamendments, but none of themremoveor clarify the newsanctionpowers.

Commons debate continuesMonday on C-19 at report stage, with Liberals and New Democratsexpected to collaborate andpass it over the next week or two.Senators could challenge these measuresafter C-19clears the House, but the budget bill's expected to become law before Parliament's summer recess.