International law requires Russia to cease its more than ten-year long aggression against Ukraine and its other illegal activity. It also requires Russia to compensate Ukraine and Ukrainians for the damage it has caused. These legal principles are supported by a number of decisions of the International Court of Justice and the U.N. General Assembly.
Without its consent, however, the mechanisms for bringing international legal responsibility to Russia are limited. Some eminent international law scholars have proposed that Russia’s State assets held abroad be seized by executive or legislative action and transferred to Ukraine for its defense and reconstruction. These proposals have inched forward, but have not yet come to fruition.
Ukrainian businesses and individuals have, thus, looked to national and foreign courts as another avenue to pursue the vindication of their rights.
Despite fluctuations in the American president’s support for Ukraine, United States courts remain open to certain kinds of claims from Ukrainian businesses and individuals.
Below, we address the key issues related to obtaining jurisdiction over Russia in United States courts for injuries resulting from Russia’s unlawful invasion. We consider two promising approaches and explain how two other approaches – which got some attention – would likely fail.
Bringing Suit Against Russia: Overcoming Sovereign Immunity of the State
The U.S. Foreign Sovereign Immunities Act (FSIA) begins with a presumption that a foreign State cannot be a defendant in U.S. courts because it enjoys jurisdictional immunity from suit. Similarly, the property of foreign State is presumed to be immune from attachment or execution.
The FSIA provides a list of exceptions when a foreign State can be a defendant in U.S. courts and when and what property of a foreign State can be subject to seizure based on a U.S. court decision. A plaintiff must penetrate both the immunity of the State and the immunity of an asset in order to ultimately recover. This is true whether the action is commenced in the United States as in initial matter or begins with a judgment entered abroad (e.g., in Ukraine).
When the FSIA was enacted in 1976, it was intended as a codification of existing customary international law, so most of the exceptions to immunity in U.S. law are familiar and generally recognized sovereignty exceptions also recognized under international law (waiver, enforcement of arbitral awards, acts of a commercial nature, limited categories of torts, etc.).
Thus, like many other counties, the United States follows the framework under which foreign States are typically immune from claims arising out of their governmental acts (acta jure imperii), but subject to suit for claims arising out of their commercial acts (acta jure gestionis). Acts of war are generally regarded to be governmental instead of commercial. Indeed, the International Court of Justice held squarely that international law requires that States enjoy jurisdictional immunity from claims arising out of torts committed by their military during war.
Importantly, however, American foreign sovereign immunities law has developed separately from customary international law in certain situations. Indeed, the United States sometimes permits foreign States to be held to account for their quintessentially governmental conduct. We address these situations below. We also address other approaches to obtaining jurisdiction that have been proposed, but are not viable.
Two Viable Strategies for Obtaining Jurisdiction
1. Russia Can Be Sued in the United States to Enforce Arbitration Awards
Russia could be sued in the United States by a private party seeking to enforce an arbitration award, whether or not the underlying dispute has any connection to the United States. 28 U.S.C. § 1605(a)(6).
Under the bilateral investment treaty (BIT) between Ukraine and Russia, Ukrainian companies have successfully obtained arbitration awards against Russia arising out of its purported annexation of Crimea in 2014. Russia’s purported annexation of Luhansk, Donetsk, Kherson, and Zaporizhzhia opens the door to additional arbitration claims being brought by Ukrainian companies and individuals under similar legal theories. In essence, the Ukraine-Russia BIT requires Russia to compensate business that have suffered expropriations, including war-related expropriations. According to the established precedent, only businesses with assets in regions that Russia claims to have annexed may take recourse in investor-state arbitration (but other theories such as effective control might apply).
Investment arbitration awards could be enforced against some, but likely not all, of Russia’s assets in the United States. In particular, Russia’s central banking assets enjoy an additional level of immunity that is addressed below.
2. Russia May Be Vulnerable to Suit Under the Expropriation Exception to Immunity
A foreign State will also be subject to suit in the United States for committing a “taking in violation of international law.” 28 U.S.C. § 1605(a)(3). There are two important limitations on the scope of this expropriation exception. The first is the “domestic takings rule,” under which a State will not be held liable for takings from its own nationals. See Ivanenko v. Yanukovich, 995 F.3d 232, 237 (D.C. Cir. 2021) (finding Ukraine immune from a lawsuit alleging expropriations from Ukrainian individuals and businesses). The second is the requirement that the expropriated property, or property exchanged for it, must either be located in the United States or “owned or operated” by an “agency or instrumentality” of the State that does business in the United States. 28 U.S.C. § 1605(a)(3). Generally speaking, an “agency or instrumentality” is a corporation that is at least 50 percent owned by the State.
In light of these requirements, the expropriation exception has a narrow, yet potentially extremely powerful, application to the war in Ukraine: if a Russian State-owned company owns or operates an asset expropriated from a Ukrainian and the Russian company does business in the United States, it will not be immune from American jurisdiction for claims arising out of the expropriation.
For example, in Altmann v. Republic of Austria, 541 U.S. 677 (2004), the Supreme Court of the United States found that Austria was not immune from a claim arising out of the alleged expropriation of six Gustav Klimt paintings from a Czech national during World War II.
The facts of the case are explained in greater detail in the underlying opinion of the U.S. Court of Appeals for the Ninth Circuit that the Supreme Court affirmed. Altmann v. Republic of Austria, 317 F.3d 954, 962 (9th Cir. 2002). The Austrian Gallery, a State-owned museum, possessed the paintings for many decades following the war. Then, in 2000, the museum published a single book through Yale University Press. In doing so, it engaged in commercial activity in the United States and inadvertently unlocked jurisdiction over expropriation claims asserted by the heirs of the Czech national.
There are three important aspects to Altmann. First, the Supreme Court and Ninth Circuit did not merely find jurisdiction over the Austrian Gallery, which likely lacked assets in the United States sufficient to satisfy a judgment. Instead, they found that Austria itself lost immunity because of the commercial activity of its State-owned company in the United States. This is a controversial holding, but it is consistent with the plain language of the FSIA, which defines a foreign State to include its agencies and instrumentalities and states that the “foreign state shall not be immune” if one of the FSIA’s exceptions applies.
Second, the Supreme Court and Ninth Circuit did not insist that the Austrian Gallery’s commercial activity be ongoing at the time the suit was filed. Instead, they looked back months prior to the initiation of the lawsuit. This could be important because many (but not all) Russian State-owned companies are now subject to sanctions prohibiting them from engaging in commercial activity in the United States. Under Altman, the commercial activity in the United States that triggers jurisdiction need not be ongoing.
Third, the Supreme Court and Ninth Circuit found jurisdiction under the FSIA notwithstanding the fact that the takings occurred in the context of war. In typical American fashion, neither court considered what international law has to say about wartime takings.
Two Other Strategies to Obtain Jurisdiction Have Been Proposed, But Are Not Viable
1. Designating Russia a State Sponsor of Terrorism Would Do Little to Unlock Jurisdiction
Some have suggested that the designation of Russia as a state sponsor of terrorism would unlock American jurisdiction for war-related claims. 28 U.S.C. § 1605A. This is accurate only in a very limited sense. The FSIA’s strips immunity from state sponsors of terrorism, but only for claims brought by nationals of the United States, members of the U.S. armed forces, U.S. government employees, and those who were preforming under a contract awarded by the U.S. government. Id., § 1605A(a)(2). Accordingly, designating Russia a state sponsor of terrorism would have very limited effects on its jurisdictional immunity for claims brought by most Ukrainian parties.
2. Obtaining a Foreign Court Judgement Is Also a Nonstarter
Likewise, some have proposed obtaining a judgment against Russia in Ukraine or a third country and then seeking to enforce that judgment in a U.S. court. We do not see a significant jurisdictional advantage to this approach.
The recognition and enforcement of a foreign judgment against a foreign State or its agency or instrumentality requires filing a new lawsuit and then penetrating both the immunity of the State and the immunity of its assets, just as with a lawsuit that was originally initiated in the United States. See, e.g., SI Group Consort Ltd. v. Ukraine, Ivano-Frankivsk State Admin., No. 15 CV 3047-LTS, 2017 WL 398400 (S.D.N.Y. Jan. 30, 2017) (refusing to enforce judgment against Ukraine on the grounds that no FSIA exception applied to the underlying dispute). In other words, there is no general exception to the jurisdictional immunity of foreign States for the enforcement of foreign judgments in the United States.
Obtaining Jurisdiction Over Sovereign Assets
As mentioned above, the FSIA not only protects States from lawsuits, it also separately protects State assets. It begins with a presumption of immunity from attachment and execution for all assets of a foreign sovereign. It then carves out exceptions to that immunity that draw important distinctions between: (1) assets of the foreign State and its treasury; (2) assets of State-owned companies; and (3) central banking assets.
A plaintiff seeking to enforce a U.S. or a domesticated foreign judgment would have to show that one of the enumerated exceptions to execution immunity contained in 28 U.S.C. § 1610 applies (waiver, enforcement of arbitral awards, expropriation, a judgment arising out of a commercial activity related to the asset, sponsor of terrorism, etc.).
Assets held in the name of the Russian Federation or its treasury (as opposed to its central bank) should be subject to attachment and execution if they are used for a commercial activity in the United States and an exception to execution immunity applies (waiver, enforcement of arbitral awards, expropriation, a judgment arising out of a commercial activity related to the asset, state sponsor of terrorism, etc.). 28 U.S. Code § 1610. In addition, the assets of Russia’s State-owned corporations are subject to seizure to satisfy a judgment against Russia itself provided that one of the exceptions to execution immunity applies, although this may require a demonstration that Russia controls the corporation.
True “central banking” assets enjoy the strongest protection from attachment and execution. 28 U.S. Code § 1611(b)(1). They may only be seized if the foreign State has “explicitly waived its immunity from attachment in aid of execution.” Id. Importantly, however, this highest level of protection is reserved for assets that the central bank holds for its “own account.” Id.
It is hard to estimate the value of Russian assets in the United States that would be vulnerable to attachment and seizure to satisfy a judgment. Owing to its status as a global financial center, the U.S. is a favored and much-utilized jurisdiction for enforcing judgments and arbitral awards. There have been widespread reports of roughly $6 billion in Russian State assets frozen in the United States, but it is hard to know how much of this consists of protected central banking assets. Identifying assets subject to seizure would likely require complex discovery and Russia can be expected to obstruct such proceedings to the extent possible.
Conclusion
The United States offers avenues for holding Russia accountable for injuries caused by its unlawful invasion of Ukraine under the arbitration and expropriation exceptions to foreign sovereign immunity. A judgment entered against Russia in an American lawsuit premised on these FSIA exceptions would be enforceable in the United States against any assets owned by Russia used for a commercial purpose, including the assets of State-owned businesses, except property owned by Russia’s central bank used for central banking purposes.
The Ukrainian government, Ukrainian businesses, and individual Ukrainians may look into the United States jurisdiction as another avenue to pursue the vindication of their rights, carefully considering the discussed limitations which exist in getting redress through U.S. courts.
FEATURED IMAGE: Ukraine, Kyiv Oblast, Pripyat, Interior of long abandoned building with completely broken out windows
