In one week, European Union leaders could approve proposals by the European Commission to “pledge as collateral” Russia’s immobilized sovereign reserves for a “reparations loan” to Ukraine. The vast majority of the Russian Central Bank’s (RCB) assets are located in Belgium (Euroclear), whose Prime Minister has repeatedly warned that transferring these assets for Ukraine’s benefit would trigger large-scale legal action against his country. One can only agree with this warning, because whatever name the EU gives to this operation, it is in fact a confiscation—and a very dangerous precedent.

If this happens, a veritable judicial storm can be expected—before European courts, international arbitration tribunals, the International Court of Justice, and possibly Russian courts and those of third countries.

The very core of the European system will be put to the test. While the freezing (“immobilization”) of Russian assets has already been upheld by European case law, the confiscation of sovereign assets would constitute an unprecedented qualitative leap.

The Russian Central Bank will likely seek to challenge future European legislation governing this “reparations loan” before the Court of Justice of the European Union. Russia will in particular argue that no international court has ordered it to pay compensation to Ukraine and that the confiscation directly violates its property rights and the EU’s fundamental principles.

One can wager that European judges will have to arbitrate between raison d’État and the rule of law—a historic test.

International arbitration: Belgium on the front line

Under the bilateral investment protection agreement in force between Belgium, Luxembourg, and Russia, any expropriation must be compensated. Failing that, the Bank of Russia could bring a claim against Belgium before an international arbitration tribunal. The agreement protects all investors without restriction, and the RCB may rely on it.

The proceedings initiated on this basis by Mikhail Fridman, with a possible decision in 2026, will serve as a barometer.

In arbitration, Belgium will not be able to hide behind the EU or claim that it did not vote for the loan to Ukraine. Indeed, EU powers are based on the principle of conferral, according to which the Union acts only within the limits of the competences conferred upon it by the Member States. In other words, the EU has been delegated powers that fall under national sovereignty. As a result, any EU decision is borne by a country as if it were its own. Nor will Belgium be able to argue that the “reparations loan” does not infringe Russia’s property rights. The Belgian Prime Minister and many others have already publicly acknowledged that this is a de facto confiscation and that Russia should never see this money again.

Before this forum, however, Belgium will certainly be able to invoke countermeasures taken by Russia. Put simply, if Russia compensates itself by confiscating European assets on its territory or in other countries, the RCB will lose its right to seek compensation before the arbitral tribunal. Belgium could also argue that the harm suffered by the RCB is hypothetical if it simultaneously brings proceedings against Euroclear. It should be noted, however, that all these lawsuits are particularly lengthy. Some decisions may be issued more quickly than others, which in practice requires adjusting claims during the proceedings in light of outcomes in other fora. In such a situation, the RCB should logically initiate all proceedings simultaneously.

In December, the European Trade Justice Coalition (ETJC) published a report recommending that European countries terminate their investment protection agreements with Russia. The need for “certain” EU Member States to withdraw from bilateral investment treaties with Russia is also mentioned in the European Commission’s draft regulation on the “reparations loan.” At the same time, the ETJC authors acknowledge that these agreements contain “survival” (sunset) clauses that maintain the guaranteed protection for several years after any termination. In the agreement between Belgium, Luxembourg, and Russia, this period is 15 years.

Finally, it should not be forgotten that there are many other similar agreements concluded with EU countries, as well as with the United Kingdom. Belgium will probably not be the only country to invest the RCB’s assets in an EU debt instrument, which will in turn be used to grant a loan to Ukraine.

European media have reported that part of the RCB’s assets are also frozen in Germany, France, Sweden, and Cyprus.

International Court of Justice of the United Nations: a global confrontation

Russia could bring a case before the International Court of Justice (ICJ) in The Hague for violation of the sovereign immunity of its assets by European states. All the leading professors of international law will be present at this highly political trial. On the defendants’ bench, however, there will be one notable absentee: the EU, since the ICJ can only rule against a UN Member State—and the EU is not one.

The defense of the European states accused will rely on the international law theory of countermeasures, but under the law only belligerent parties may take countermeasures, not third parties. Moreover, confiscation, which is by nature definitive, has never been regarded as a countermeasure, since countermeasures must be reversible.

Of course, an ICJ decision will not make it possible to remedy the damage suffered by the RCB, but it could constitute a symbolic victory for the Russian Federation, intended to demonstrate that it is the EU that is breaching international law norms.

Direct actions against Euroclear

There is no doubt that Euroclear will benefit from a special immunity provided for by the future European regulation. The legality of this immunity will be the first challenge for the courts, as it resembles a mechanism of denial of justice, which is unlawful in a state governed by the rule of law. Euroclear may also defend itself by invoking circumstances beyond its control and, consequently, force majeure. However, this argument is not unassailable. In several European countries, including France and Belgium, the law does not allow a party to be released from a payment obligation by invoking force majeure. Moreover, force majeure is generally understood as a natural disaster, not a decision by the authorities.

Another point of debate is that the RCB could argue that a custodian of Euroclear’s stature had a duty to exhaust all avenues of appeal to protect a sovereign client’s assets. Euroclear appears to have anticipated this: its CEO has mentioned the possibility of challenging the European mechanism—but will this actually be done? Ultimately, the prospect of Euroclear bankruptcy proceedings, also raised by its CEO, is not so far-fetched.

Obviously, the RCB will bring an action against Euroclear before Russian courts or those of friendly countries, where its chances of success will be higher. Admittedly, such decisions will not be recognized in the EU, where a mechanism already exists prohibiting recognition of such judgments, but Euroclear holds reserves in other countries. In any event, Euroclear is getting used to it: the proceedings brought against this entity in Russia are innumerable.

The question remains whether the RCB can bring an action against Euroclear simultaneously in Russia and in Belgium. In principle, no, if the claims are the same. But it will not be difficult to formulate complementary and different claims in order to bring the dispute before all jurisdictions and thus increase the chances of success.

Enforcement of decisions and the hunt for assets

Russia already knows that decisions rendered in its favor cannot be enforced in Europe. However, there are ancillary claims where it could prevail. For example, the RCB could demand in court that Euroclear credit it with the interest generated by its immobilized cash.

The real danger, of course, lies with Euroclear’s assets held in third countries. Russia could already attempt to obtain precautionary seizures of these assets, opening a genuine global battle over European holdings.

In the end, one can see that a strategy presented as bold could turn into a disastrous precedent, durably weakening the reliability of the European legal and financial system.