Enacting ECHR compliant measures to confiscate property: imposing sanctions on Russian oligarchs for the invasion of Ukraine

In the wake of Russia’s invasion of Ukraine, there have been widespread calls to expand the sanctions imposed on Russian oligarchs linked to President Vladmir Putin. According to reporting by the Financial Times, civil servants are currently “examining very carefully” what powers are needed to “swiftly acquire specific land and property owned by a sanctioned person, without the need to pay them compensation.” 

It appears that the Government intends to introduce these powers in the Second Economic Crime Bill, due to be introduced in the next parliamentary session. This blog examines whether such measures, if enacted by primary legislation, would be compatible with the United Kingdom’s obligations under international human rights law, including Article 1 Protocol 1 (‘A1P1’), Article 6, and Article 8 of the European Convention of Human Rights (‘ECHR’). 

There is little reported Strasbourg case law on sanctions. According to Richard Gordon et al, this is explained by the existence of the so-called ‘Bosphorus presumption.’ Under Bosphorus, the European Court of Human Rights (‘ECtHR’) presumes that measures adopted by an institution (such as the EU) that guarantees a similar level of human protection are ECHR compliant, unless the human rights protection provided is shown to be ‘manifestly deficient.’ Post-Brexit, this presumption no longer applies, with the consequence that the UK sanctions regime is more susceptible to challenge under the ECHR. 

A1P1 protects the right to property, including the right not to be deprived of one’s possessions. Any interference must be provided for by law, and be justified as a proportionate means of pursuing a legitimate aim in the public interest. Contracting parties to the ECHR are given a wide margin of appreciation to decide when expropriating property is in the public interest (James v UK, at [46]). We think that there are at least three legitimate aims which could be invoked.

First, it might be argued that (threatening) to confiscate UK assets will help exert pressure on oligarchs to persuade Putin to cease waging war in Ukraine. There are some early indications that such measures might be effective. For example, after having been placed on United States and European Union sanctions lists respectively, Russian billionaires Mikhail Fridman and Oleg Deripaska broke ranks with the Kremlin and called for an end to the war. Although most jurisdictions have, in the first instance, merely frozen assets, that does not present a viable permanent solution: should intransigence prevail, confiscation is the next logical step.

Second, it might be argued that confiscation of property is justified by the importance of upholding the international rule-based order. The ECtHR has held that the Convention should be interpreted in a manner so as not to "thwart the current trend towards extending and strengthening international cooperation" (Bosphorus at [108]). For example, the Financial Times reported that France and Germany have impounded super yachts, and that "authorities are seeking to establish a legal framework so that they can be permanently confiscated under the sanctions regime." A robust and unified international response could, for instance, help to deter other States from following in Putin's footsteps (including China, in relation to Taiwan).

Third, confiscation could be used as a mechanism for redistribution in favour of individuals affected by the Russian acts of aggression in Ukraine. According to the Guardian, government ministers are exploring the possibility of seizing oligarchs' properties to provide accommodation for Ukrainian refugees. Similarly, in the United States, legislators have proposed using the proceeds from the sale of seized assets to support refugees, provide weapons for the Ukrainian armed forces, or rebuild destroyed infrastructure. 

The government would be next required to demonstrate that there is a reasonable relationship of proportionality between the means employed and the aims pursued. A “fair balance” needs to be struck between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights (Sporrong and Lönnroth v Sweden, at [69]).

The existence of other alternative, less-intrusive measures (such as freezing assets, rather than confiscating them outright) is a relevant consideration, but not determinative (James v UK at [51]). 

Although no express reference is made to compensation in A1P1 itself, the ECtHR has consistently held that the deprivation of property without compensation will, except in “exceptional circumstances,” generally be considered disproportionate (James v UK, at [54]). In the context of confiscatory sanctions, however, the very objective of the measure would be “undermined or contradicted” by paying compensation (cp. the Northern Rock case, at [56]). 

We think that ensuring there is a close connection between the individuals targeted and the Putin regime will be critical in ensuring proportionality. By drawing on the European Court of Justice’s decision in Pye Phyo Tay Za v Council, we can see that sanctions directed at ‘persons associated with’ the leaders of a given regime must generally be underpinned by an objectively ascertainable basis; a ‘sufficient link’ must exist ([40]). This case illustrates that the mere existence of a familial connection is, of itself, unlikely to establish this link; the individuals must themselves form part of the regime or voluntarily associate with it ([63]). Ensuring that the list of those subject to these confiscatory measures is delimited to those who have influence over or directly benefited from Putin’s regime will help to ensure a rational connection between the government’s legitimate aims and the consequences of confiscation. 

The government would also need to consider the possibility that oligarchs could try to invoke their Article 8 rights, in an attempt to resist confiscation of their residential properties. This article protects individuals’ rights to respect for their private and family life, including their home. Strasbourg jurisprudence establishes that, in principle, secondary and holiday residences may be regarded as an individual’s “home” (Demades v Turkey, at [32]). It is a highly material consideration, however, that many of the properties in question are mostly or entirely uninhabited by oligarchs and their families. If there has been no or minimal occupation by the applicant (either at all or for a considerable period of time),  Article 8 is unlikely to even be engaged (Andreou Papi v Turkey, at [54]). In any event, even if there is an interference, we think that, for the reasons given in relation to A1P1 above, it could readily be justified as a proportionate means of pursuing a legitimate aim. 

Lastly, the ECtHR’s decision in Al-Dulimi establishes that individuals must be given the opportunity to review the arbitrariness of any sanctions against them. Measures should therefore be designed to provide an element of independent judicial oversight in order to comply with the requirements of Article 6(1), as well as the ‘procedural’ requirements of A1P1 and Article 8 (see, for instance Manchester CC v Pinnock). 

By having regard to these considerations, we think that the legislation could be drafted so that it complies with the government’s obligations under ECHR, incorporated into domestic law by the Human Rights Act 1998. Due to the foreign policy and national security context, sanctions are an area in which significant deference is granted to the legislature by the judiciary, notwithstanding the potentially drastic interference with individuals’ rights. Further, both the domestic courts and the ECtHR have accepted that legislation can strike an internal proportionality balance (McDonald v McDonald). Where the fair balance of competing rights and interests has been carefully considered by Parliament, this will be a factor which courts will take into account in proportionality assessments (Animal Defenders at [108]-[111]).

Nonetheless, as it is likely that the proposed legislation would provide the government with a discretionary power to expropriate property (contrast the procedure proposed by Ekins and Laws, in relation to freezing assets), we think that challenges are far more likely to be directed towards the exercise of confiscatory powers in the circumstances of a particular case. Judicial reviews could be brought against such a decision by reference to established (domestic) public law norms, including irrationality and procedural fairness (see Bank Mellat (No.2) and HM Treasury v Ahmed respectively). 

We suggest that the government ought not attempt to take steps to exclude judicial review: the possibility of an independent judicial review of the proportionality of the application of confiscatory measures in a given case will help to ensure compliance with the procedural requirements highlighted above. In any event, it would be beneficial for legislation to clearly set out the criteria as to the precise circumstances which will justify the imposition of confiscation orders, to help a decision maker to defend the proportionality of making an order in a given case. 

In conclusion, we think that it is possible for the government to design a scheme which can be used to confiscate sanctioned individuals’ assets (without paying compensation), provided it carefully considers the proportionality of the interferences with the ECHR rights highlighted above.

--

How to cite this blogpost (Harvard style):

Koch, T., Somers-Joce, C. and Rowland, E. (2022) Enacting ECHR compliant measures to confiscate property: imposing sanctions on Russian oligarchs for the invasion of Ukraine. Available at: https://www.law.ox.ac.uk/research-and-subject-groups/property-law/blog/2022/03/enacting-echr-compliant-measures-confiscate (Accessed [date])