Switzerland rules out confiscating Russian assets over Ukraine war

Switzerland has said it is legally impossible for it to confiscate the assets of sanctioned Russians held in the country, dealing a blow to European efforts to use that wealth for Ukrainian postwar reconstruction.

Until now, Bern has moved in line with the EU in freezing the assets of high-profile Russians connected to the regime of President Vladimir Putin. Switzerland holds more than SFr7.5bn ($8.1bn) in frozen Russian assets nearly one year after the invasion of Ukraine, according to the Swiss ministry of finance.

But as calls in Europe intensify for the seizure of Russian wealth held abroad to help fund Ukraine’s defence and reconstruction, Switzerland has made clear that any permanent moves against assets held in its borders would be illegal.

“The expropriation of private assets of lawful origin without compensation is not permissible under Swiss law,” the government said on Thursday.

“The confiscation of frozen private assets is inconsistent with the constitution,” it added, and “violates Switzerland’s international commitments.”

The most recent report by Switzerland’s State Secretariat for Economic Affairs (SECO) showed that by June 2022, the entity was notified of SFr46.1bn in deposits held by Russian nationals and legal entities at Swiss banks.

The Swiss decision comes as EU capitals are exploring ways to make it easier to confiscate assets of Russian oligarchs who are under sanctions. The EU wants to make sanctions evasion a crime across the EU, which would facilitate the seizure of assets.

The heads of EU institutions have also been vocal in calling for legal options in using Russia’s wealth towards Ukraine’s reconstruction. Russia said last year that central bank sanctions imposed by the EU and its allies had frozen about $300bn out of its foreign-exchange reserves.

European Council president Charles Michel, who represents the bloc’s 27 national leaders, told the Financial Times in January that he wanted to explore the idea of actively managing the Russian central bank’s frozen assets to generate profits.

These, he said, could then be earmarked for reconstruction efforts, calling the matter “a question of justice and fairness”.

The underlying assets would be returned to the Russian state if a peace agreement were signed, according to a draft proposal by the European Commission, which stressed the need for co-ordinated action at an international level.

EU officials have acknowledged the idea would be complicated under international law. Some argue it could trigger financial stability risks by raising questions about the safe-asset status of foreign reserves.

The EU set up a working group to explore its legal options this week, led by Anders Ahnlid, the head of Sweden’s National Board of Trade, a government agency. It aims to inform European leaders at a summit at the end of March. A key question will be whether to seize private assets as well as those of the state, an EU diplomat said.

“We have no illusions. A decision will no doubt be challenged in court. But we find it politically absolutely necessary to move.”

Russia would likely retaliate by “confiscating foreign states’ property”, Russian politician and lawyer Andrey Klishas told media outlet RBC last month.

Additional reporting by Daria Mosolova in London and Andy Bounds in Brussels

Articles You May Like

Black Friday bonanza could lead to a festive hangover for retail
Hut8 Mining operates as U.S.-domiciled entity following USBTC merger
Google DeepMind researchers use AI tool to find 2mn new materials
Elizabeth Sutton Opens A Gallery And Retail Experience
Australia’s confusing new crypto tax guidance is ‘toilet paper,’ says law firm