The International Registry of Damages from the russian-Ukrainian War was presented in Reykjavík. How can Ukrainians take advantage of it?
And why is the process of claiming compensation from the aggressor country progressing so slowly?
On May 17th,a political declaration was signed, establishing the International Registry of Damages suffered by Ukraine as a result of the full-scale invasion by russia during the Summit of Heads of State and Government of the Council of Europe in Reykjavík. Forty-three countries became signatories to this registry. Its purpose is to determine guidelines for russia's payment of compensation to Ukraine for the moral and material damage inflicted by the war. Financial claims of the affected parties against russia will also be included in the database. One of the main potential sources for such payments could be the funds frozen in Western countries that belong to russia. Initially, the focus will be on the money already held in accounts by Ukraine's Western partners. The rest of the compensation will have to be sought from russia through mechanisms that have not yet been fully developed.
According to reports from the Ukrainian Ministry of Justice, the amount of russian state funds frozen in the West exceeds $350 billion.
However, Western media has begun to publish articles suggesting that after the war, the frozen russian assets may need to be returned to russia.
Mind has been closely monitoring this topic since the beginning. We have been examining the issues surrounding Ukraine's compensation at this stage of the war, whether they can be overcome, and how to potentially exercise the right to reparations from the aggressor country in the future.
Why has the issue of reparations to Ukraine become relevant once again? Two events that have global significance for Ukraine's restitution from russia will take place in May. Firstly, on May 16th and 17th, the International Registry of Damages was presented at the Council of Europe Summit. The office responsible for its administration is expected to be located in The Hague.
According to the Ministry of Justice's data, on February 17th, the Dutch government officially gave its preliminary consent to Ukraine's proposal to establish an international organisation, the Registry of Damages Suffered by Ukraine due to russian aggression, in The Hague. The registry will contain information on the damage inflicted by the war on citizens, businesses, and the state.
Secondly, on May 22nd, the Law of Ukraine "On Compensation for Damage and Destruction of Certain Categories of Real Estate as a Result of Hostilities, Terrorist Acts, and Sabotage Caused by the Armed Aggression of the russian federation against Ukraine" and State Register of Property Damaged and Destroyed By Hostilities, Terrorist Acts, and Sabotage Caused by the Armed Aggression of the russian federation against Ukraine will come into effect.
Thus, a similar register will be activated in Ukraine itself.
Is it a new practice for the international community? No, it is not. After major and devastating wars, it is customary to seek compensation from the aggressor country for the benefit of the affected states.
The most well-known cases are the payments made by Germany following the First and Second World Wars. Jewish survivors, prisoners of German concentration camps, and Righteous Among the Nations still receive some of these funds.
There are also more recent examples in the historical context, such as the payments made by Iraq to Kuwait. "Perhaps the example that most closely resembles our situation is the aftermath of Iraq's invasion of Kuwait in 1990. The United Nations Security Council intervened in the case. It established the United Nations Compensation Commission (UNCC), which considered claims for compensation brought by affected individuals, companies from Kuwait, and the state itself. The Commission operated for over 30 years and made payments to the victims of this war totalling $52.4 billion," explains lawyer Markiyan Kliuchkovsky.
The most recent payment for reparations to Kuwait for the Gulf War was made by Iraq in 2021.
Can this experience be applied to Ukraine'carbon-copy'? Kliuchkovsky says that the fundamental difference between Kuwait situation and ours was that a method was found to make Iraq pay compensation. The UN devised a mechanism whereby Iraq directed 35% of its oil revenues to the compensation fund established by the UNCC.
"The scale of the damage inflicted on Ukraine is tens of times greater, so we need to find ways to ensure a more efficient process. However, its overall architecture is entirely replicable. The Ukrainian working group, which is working on the creation of a compensation mechanism for Ukraine, takes into account all the lessons of the UNCC, both positive and negative," says Kliuchkovsky.
Currently, there is no talk of such complex but obvious mechanisms as transferring a percentage of russian oil or gas sales to Ukraine. Lawyers believe that russian funds frozen in EU and US accounts should be returned to Ukraine.
"In my opinion, sovereign assets of russia located abroad should be the first priority. This includes gold and currency reserves, funds of the Central Bank, the russian national wealth fund, and so on. Additionally, a significant amount of assets belonging to russian agents was seized in February-March 2022. All these funds and the proceeds from the sale of assets should constitute the financial pool for compensating the damages caused to Ukraine by the war," says Anatoliy Rybachok, Head of Dispute Settlement at Juscutum.
Photo: UNIAN
Who determines the amount of damage inflicted on Ukraine, and who collects evidence of the losses? In the words of Markiyan Kliuchkovsky, there are many organisations involved in collecting the evidence base for assessing the damages. This includes the government, state and municipal structures, international organisations, NGOs, and various private initiatives.
As early as on March 26, 2022, the Procedure for Submitting Information on Destroyed and Damaged Immovable Property was approved, which is still in effect today. "Information can be submitted through the Diya application, an administrator at the Administrative Services Centres, or a notary. The comprehensive list of data to be included in the notice is also specified in the mentioned procedure. The document applies to both individuals and legal entities but pertains only to real estate (including parts of buildings and unfinished constructions)," explains Mr. Rybachok.
In May 2022, the State Register of Property Damaged and Destroyed by russian aggression was created. And in May 2023, the corresponding law, mentioned earlier, will come into effect.
Read also: Destroyed flats are to be compensated in cash or housing certificates. How the compensation mechanism for war-damaged real estate will work
In November 2022, the United Nations General Assembly adopted a resolution titled "Ensuring Means of Legal Protection and Reparations in Connection with Aggression against Ukraine." This document contains three main points: condemnation of the fact of russian aggression against Ukraine, the development of a mechanism by the UN in collaboration with Ukraine for the payment of reparations, and the creation of a registry of inflicted damages, both material and non-material.
"Resolutions of the UN General Assembly are of a recommendatory nature. As far as I know, Ukraine is currently working on the creation of a Register of Damages caused by the armed aggression of russia, encompassing individuals, legal entities, infrastructure, the environment, and more. It pertains not only to material but also moral damage," says lawyer Kateryna Gutgarts.
There are also projects and NGOs that document the damages inflicted on Ukraine by russian aggression in various forms. It allows for broader coverage and a more thorough analysis of the collected information. However, there are risks associated with a lack of coordination, different methodologies for collecting, storing, and evaluating materials, as well as duplication of certain information.
That is why Ukraine has proposed the establishment of an international Registry of damages. "The document is in the final stages of preparation, and its creation will be announced by Ukraine and our partners in the coming weeks. This will be an important first step towards restoring justice and compensating for the damages inflicted by the aggressor," says Markiyan Kliuchkovsky.
Photo: UNIAN
If a person has been affected by the actions of the russian federation, can they receive compensation in the future and what should they do now? Lawyers that Mind has spoken to recommend that individuals affected by the actions of russia start legally documenting their claims now by submitting statements to the relevant authorities and keeping certified copies of their submissions. "Law enforcement agencies, the Authorised Human Rights Representative to the Verkhovna Rada of Ukraine, and the Ministry of Justice of Ukraine are primarily responsible for this. As for the courts, it can include the European Court of Human Rights (ECHR) and other international courts that have jurisdiction over such disputes," explains Rostyslav Kravets, a lawyer at Kravets & Partners firm.
Katerina Gutgarts clarifies that Ukrainian citizens who seek compensation for the damages suffered in the future need to take the following steps: "Report the crimes committed against them or their property to law enforcement agencies for documentation; gather all possible evidence, including through expert assessments, to calculate the extent of material and moral damages; file lawsuits against the russia in national courts for the recovery of damages."
According to her, it can serve as a basis for inclusion in the register and obtaining reparations in the future. It is worth noting that in March 2023, Ukrainian Prime Minister Denys Shmygal stated that a special mechanism for reparations payments was already being developed. It is expected to be approved through an international treaty with Ukraine's partner states.
Has Ukraine won any international courts against russia? Yes, there are several examples. One of the most notable victories is the decision of the Arbitration Institute of the Stockholm Chamber of Commerce regarding the gas contracts of 2010, which was issued in 2019. According to this decision, russia was ordered to pay Ukraine compensation of nearly $3 billion.
Another significant victory is the case of Oschadbank in courts against russia concerning damages incurred due to the annexation of Crimea. On December 7, 2022, the Court of Cassation in France upheld the Ukraine’s Oschadbank, confirming the decision of the Arbitration Court in Paris dated November 26, 2018. The amount of compensation awarded according to the arbitration decision is $1.5 billion.
"The case has been under consideration in courts for over six years. Oschadbank is the first state-owned company and the first banking institution to win a case against the russian federation regarding damages incurred as a result of the annexation of Ukrainian Crimea. This success was achieved through fruitful cooperation between the legal team of Oschadbank and the engaged legal advisors in documenting the inflicted damage, developing legal positions, and more. Currently, the bank is working on transforming this decision into concrete compensation amounts. Recently, Oschadbank filed an application to recognize the arbitration decision within the territory of the United States," said to Mind Arsen Milutin, Deputy Chairman of the Management Board and responsible for NPL operations at Oschadbank.
In addition to these cases, on December 8, 2022, Oschadbank completed complex expert and legal work and lodged a complaint against russia to the European Court of Human Rights.
At the end of April, information appeared in Western media that the frozen EU assets of the russian central bank would be returned to moscow. How threatening is this scenario for Ukraine? Although the simplest and most obvious solution would be to transfer the russian assets that are already frozen in Western banks to Ukraine, it is a complex task from a legal perspective.
"There is no mechanism that can overcome the existing property guarantees in the Western world, as well as international legal categories such as sovereign immunity, which protects russia's sovereign assets," explains Markiyan Kliuchkovsky. However, the search for such a mechanism has been underway since 2022.
The good news for Ukraine, according to Kliuchkovsky, is that the US and the UK have already developed draft laws that could allow the confiscation of russia's sovereign assets. This primarily refers to the reserves of the russian central bank. In Canada, such a law has already been passed, and the initial procedures for confiscation have begun. In the EU, the process is somewhat more complex, as it requires coordination of positions among all 27 member countries and the peculiarities of their legal systems.
"In November of last year, the European Commission published a so-called Options Paper, which presented its vision of how this process could look like. It contains interesting ideas on how to use russia's assets even before their confiscation – for example, actively managing them and directing the profits towards reparations to Ukraine," Klyuchkovsky explains. "The headlines that recently appeared in the media suggesting that the EU believes that russia's assets should be returned sooner or later are a response to this document."
According to the lawyer, this statement is indeed included in the Options Paper, but it stems from the nature of the sanctions' regime freezing these assets, which is temporary by definition. "However, the document contains a key phrase stating that the return of russia's assets can take place in the form of 'offsetting' against russia's obligation to pay reparations. In other words, all options remain on the table, and EU countries are actively searching for options that will eventually work," concludes Markiyan Kliuchkovsky.
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