Main Image Credit Steady progress: Ukraine's High Anti-Corruption Court has seen several successful lawsuits against Russian oligarchs. Image: NurPhoto SRL / Alamy
Ukrainian authorities have been actively using a sanction mechanism to freeze and confiscate assets of individuals and companies that are linked to or support Russia’s full-scale aggression. Among the first successful cases, assets belonging to well-known Russian oligarchs have been confiscated and allocated for the reconstruction of Ukraine.
Due to Ukraine’s historical and economic background, Russian oligarchs own numerous private assets in the country. The majority of these businessmen, including Oleg Deripaska, Arkadii Rotenberg and Yury Kovalchuk, support the full-scale invasion, produce goods for the Russian military, or have demonstrated loyalty to the Kremlin. Their Ukrainian businesses, until recently, continued to generate income and resources for the Russian army. Therefore, the Kremlin’s full-scale aggression prompted the Ukrainian government to introduce legislation allowing for the confiscation of the assets of Putin’s accomplices by the state in order to rebuild the country.
The StateWatch think tank, for which the author works, has launched a register of assets of Russian oligarchs in Ukraine under the investigative project Trap Aggressor. There are already 53 oligarchs on the list. Among them are tycoons from Forbes Russia’s list of the ‘200 richest businessmen’ for 2021 and citizens of Russia under Ukrainian sanctions. Together, they have 112 companies in Ukraine with a total value of $167 million according to the state enterprise register.
The key approach to confiscating Russian private assets is through administrative proceedings in the High Anti-Corruption Court. A new law on sanctions related to the assets of individuals or companies supporting the Russian invasion has been introduced, which the Ukrainian parliament adopted on 12 May 2022. According to the law, the Ministry of Justice contacts state institutions to identify and search for assets of persons or companies that have already been sanctioned, so that those assets can be frozen by the National Security and Defense Council of Ukraine. Then, the Ministry of Justice brings a lawsuit in the High Anti-Corruption Court against the sanctioned individuals or companies and proves that the assets in question belong to them, and that they are associated with the Kremlin regime and Russian aggression in Ukraine. The Ministry of Justice may also prepare a lawsuit to freeze the assets of Ukrainians. In such cases, the ministry, in partnership with other law-enforcement bodies, has to collect evidence proving that these individuals have been engaged in terrorist activity. An asset can be confiscated only by a court decision, based on the presentation of satisfactory evidence. If such evidence is not forthcoming, the court can dismiss the Ministry of Justice’s claim. This approach is considered to be the most effective way of confiscating Russian private assets, but it is only applicable during the current period of martial law. If a person or entity is sanctioned under martial law and the Ministry of Justice brings a lawsuit during the same period, assets linked to them can be confiscated even after martial law has ended.
This mechanism has already produced results. Over the last year, the Ministry of Justice has filed 28 lawsuits at the High Anti-Corruption Court against Russian oligarchs, university rectors, members of the Duma (the Russian parliament), and former Ukrainian President Victor Yanukovych.
The lawsuit against Oleg Deripaska can be considered the first global case of the confiscation of Ukrainian assets belonging to Putin's inner circle
The Ministry of Justice has already shown the effectiveness of its work: 100% of its claims were satisfied partially or entirely by the court, including the forfeiture of prized assets of pro-Putin oligarchs. Some have already been transferred to the State Property Fund to be put up for privatisation or leased. The funds obtained from privatisation would be allocated to the state budget for the restoration of Ukraine.
Confiscated Assets of Russian Oligarchs in Ukraine
Vladimir Yevtushenkov, one of the richest Russian businessmen, was the first to lose his Ukrainian assets. The High Anti-Corruption Court proved that he supported an armed attack on Ukraine, and as a result confirmed the forfeiture of his Ukrainian property. Yevtushenkov lost 17 pieces of real estate, which are mostly industrial premises in Zaporizhzhia, with a total area of about 100,000 m2, as well as his corporate rights in five Ukrainian companies. These assets have already been transferred to the State Property Fund for lease and privatisation. It’s important to note that Yevtushenkov is the beneficial owner of AFK Sistema, a large Russian conglomerate, which in turn owns the RTI Systems group. This group develops drones and special communications equipment for the Russian army which have been used in Ukraine.
In another example, the lawsuit against Oleg Deripaska can be considered the first global case of the confiscation of Ukrainian assets belonging to Putin's inner circle. The court approved the Ministry of Justice’s claim following a case that lasted five months. Deripaska is a Russian aluminium magnate and was alleged by the ministry to be part of the military and political leadership of Russia. On 16 June 2023, the Ukrainian appeal court reported the nationalisation of businesses owned by Deripaska, including the giant Mykolaiv Alumina Refinery. The total value of Deripaska's forfeited assets is around $100 million. Metallurgical enterprises in Ukraine belonging to Deripaska supplied aluminium products to companies which manufactured weapons and ammunition for the Russian army.
This case also shows that the Ukrainian court seriously evaluates evidence brought by the lawyers of both sides. Two assets that were alleged to belong to Deripaska, PrJSC Khustskiy Quarry and PrJSC Zhezhelivskyi Quarry, were not confiscated. Third-party Ukrainian investors claimed and provided documents to prove that the assets were bought by them a few years before the invasion.
A further significant claim by the Ministry of Justice was made against well-known Russian oligarch and friend of Putin, Arkadii Rotenberg – a claim that was recently upheld in both the first and second instances. The major part of the corporate rights of Ocean Plaza, a shopping and entertainment centre in Kyiv – which was until recently under control of the Rotenberg family – was confiscated. The assets of the Rotenberg family in Ukraine are estimated by the Security Service of Ukraine to total $300 million. The intelligence agency reported that money gained from Ocean Plaza in previous years had funded ammunition factories in Russia.
At a time when Ukraine needs all possible sources of funding to support its reconstruction and recovery, the seized funds are welcome, but they fall far short of what is needed
In January 2023, the High Anti-Corruption Court of Ukraine confirmed the forfeiture of the Ukrainian assets of Russian billionaire Mikhail Shelkov. These assets included apartments, cars, funds on accounts, and different businesses relating to the trading and distribution of products from the Demurinsky Mining and Processing Plant, which had been shipping titanium raw material to the Russian defence industry up until the full-scale invasion. Moreover, in early February, the Ministry of Justice, appealing to the court, obtained the seizure of the Demurinsky plant. Shelkov ranks 59th in Forbes Russia’s rich list and headed the investment division of the state-owned company Rostec, which controls Russia's defence contractors.
Recently, the court confirmed the forfeiture of almost 90% of the shares of Yevheniy Giner's PIN bank. Giner is well known as president of the CSKA Moscow football club and a member of the Luzhniki group, which in the 1990s gained control of the Luzhniki marketplace and stadium in Moscow. The Ministry of Justice successfully argued that Giner, through a number of companies, had contributed to Russia’s armed aggression against Ukraine by supplying weapons and financing logistical support.
Lastly, the assets of former President Viktor Yanukovych, Russian businessman Volodymyr Yevtushenkov, and Demurinsky Mining and Processing Plant – which previously belonged to Russian oligarch Mikhail Shelkov – have already been transferred to the State Property Fund, with other transfers pending.
The amendments made to national legislation have allowed Ukraine to confiscate not only the private assets described in this article, but also property and enterprises owned by Russia and its state-owned companies.
At a time when Ukraine needs all possible sources of funding to support its reconstruction and recovery, these funds are welcome, but they fall far short of what is needed to restore Ukraine. It is important therefore that the EU and other countries and international institutions boost their efforts to ensure that there is no doubt that aggressors and their supporters must pay for the damage they cause, as an important mechanism for deterring other such illegal acts of aggression throughout the world.
The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.
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Chairman, StateWatch think tank, Bila Tserkva