Estonian precedent: how Tallinn is the first in the world to prepare for confiscation of Russian assets

Long before the beginning of the full-scale invasion of the Russian Federation, Tallinn took an unequivocal position in support of Ukraine.

And now this Baltic country can unexpectedly give impetus to the global process of confiscating Russian assets. Estonia has every chance to become the first country in the world to transfer funds from the sale of confiscated assets of the Russian Federation to Ukraine.

Will this step become an example for other countries? Conversely, will it not lead to a conflict between Estonian and European legislation?

Tallinn shows determination

After the start of the full-scale invasion, Estonia also took a proactive position regarding the fate of the frozen assets of the Russian Federation.

Thus, in May 2022, Estonia, together with Latvia, Lithuania, and Slovakia, called for the use of Russian frozen assets – both state and sanctioned oligarchs – to restore Ukraine.

In the declaration, the country urged the EU and other states to “implement an international war compensation mechanism, using Russian assets to finance the reconstruction of Ukraine.”

Thus, in November, the financial intelligence unit of the Ministry of Finance of Estonia estimated the number of assets of the Russian Federation under Estonian jurisdiction at almost $21 million. At the same time, the Estonian Money Laundering Data Bureau stated that it is impossible to calculate the exact amount and value of Russian private assets in the country due to complex legal schemes. behind which their owners are hiding.

Activation of Estonia’s intentions regarding the future fate of these assets began at the end of last year. Thus, in December, the Secretary General of the Ministry of Foreign Affairs of Estonia, Yonatan Vsevyov, during a visit to Berlin, again stated that Russia should compensate Ukraine: “The war must become so expensive for Russia that it will be forced to end it,” Vsevyov concluded.

At the end of the year, the Prime Minister of Estonia, Kaia Kallas, said that “it is necessary to continue the work of engaging in the cessation of aggression and the use of frozen assets of Russia.”

The year 2023 began with an unexpected statement by another representative of the Ministry of Foreign Affairs of Estonia, Mikael Tamm, about the intention to develop a legal plan to confiscate Russian assets by the end of January this year. Probably, the work in this direction was carried out long before the official statements, since the tasks of the ministers of the government of Prime Minister Kai Kallas were announced back in December 2022.

And the non-publicity for a certain time could be connected with the desire not to make too much noise among Eurobureaucrats and to prevent the Russians from withdrawing or hiding assets.

This initiative of the Estonian government has every chance to find support in the Estonian parliament – the Riigikogu. After all, the parliamentary majority and the opposition declare a clear pro-Ukrainian position there.

Currently, neither the content of the Estonian legislation nor the instruments to be implemented are known.

Estonia’s decision and experience as a pioneer will have important practical significance for the entire further process of working with Russian assets and, perhaps, will become a model for other EU member states sooner than the related projects are developed in Brussels.

Brussels doubts

At the same time, membership in the EU also creates certain restrictions for Tallinn in the matter of confiscation of Russian assets.

Estonia intends to present the plan before the European Commission drafts an EU-wide agreement that would regulate steps to recover Russian sovereign and private assets that are currently frozen.

Although official Brussels welcomed Estonia’s efforts on the way to confiscation of Russian assets, it asked not to hurry with their implementation. European Commission Justice Spokesman Christian Wiegand publicly called for a delay in foreign asset confiscation legislation for Estonian legislation to comply with future EU regulations on the issue.

The European Commission’s concerns may be related to the risks of a potential conflict between Estonian and European legislation.

The Court of Justice of the EU has emphasized in several decisions that in the event of such a conflict, EU norms will prevail, which may lead to confusion with appeals and subsequent enforcement of decisions.

In particular, Estonian non-governmental circles are quite cautious about creating asset confiscation legislation. Instead, they suggest resorting to well-known compensation mechanisms and involving Estonia in them as little as possible.

Ideas were voiced to transfer the task of legally regulating the confiscation of Russian assets to the EU. They also talked about settling the issue by resolution of the UN General Assembly.

Another tool was called investment law, according to which the Russian Federation and Ukraine can settle claims for compensation through international arbitration.

The situation with the confiscation of assets of the Russian Federation is only one of the aspects of the worsening of relations between it and Estonia. Estonia and Russia recently announced the mutual expulsion of ambassadors, and the Baltic state is considering expanding the contiguous zone in the Gulf of Finland, which would allow it to control Russian shipping in this area of the Baltic Sea.

However, the full-scale invasion of the Russian Federation set priorities even more. Estonian interests are pro-Ukrainian and are confirmed every time not only by loud statements but also by real actions. And Estonia’s move to confiscate Russian assets may well turn out to be successful.

Estonia’s military and humanitarian aid to Ukraine since the beginning of the full-scale invasion of the Russian Federation have already exceeded 1% of the GDP of this small country, which is $37 billion.

And if its actions are successful, it will start the process of real confiscation of Russian assets, which can open the possibility for Ukraine to receive sums that exceed ten times the Estonian GDP.

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