Piercing the Immunity Protecting Russian Central Bank Assets: Not Yet?

The Russian full-scale re-invasion in Ukraine that occurred on 24 February 2022 has already inflicted billions of damages. Ukrainian defensive efforts are supported by diplomatic and economic pressure put on Russia. In this vein, sanctions and asset freezing have become one of the main mechanisms used by the international community to make Russia cease its aggression and atrocities.

In the course of asset freezing, many states have frozen assets of the Russian Central Bank. The most known example is the freezing of Russian exchange reserves in the USA. But can this go one step further? Could frozen assets become not a mere instrument of pressure, but also be used for compensation of damages caused by Russian aggression?

Leaving aside the matters of adjudication of the caused damages, the most practical issue will as always lie at the point of enforcement. As a general rule, assets of central banks enjoy immunity from execution. Admittedly, there appear to be no cases in which foreign currency reserves of foreign central banks have been subject to successful enforcement yet. Nevertheless, there are chances that this could change in the near time as the discussions about appropriate mechanisms to execute are undergoing. The dices are already in the air, let’s look at the board.

What are the assets in question?[1]

Russian Central Bank (RCB) has accounts with foreign banks and central banks. Large assets of RCB are held with different foreign central banks, as for example Federal Reserve Bank of New York (USA), Bank of England, Banque de France, Bundesbank, Bank of Japan, Bank of Canada, Reserve Bank of Australia, People’s Bank of China and the Central banks hold for RCB bonds, gold, foreign currencies, and other assets. It has been reported that RCB holds its gold in Russia, so we are most probably looking into the possibility to execute at the expense of bonds and foreign currencies.

Separately, central banks hold assets of the Russian special Welfare Fund whose legal status is a separate question. Its legal status is also complicated. In any event, this fund is known for its more aggressive and commercial nature than the foreign exchange reserves (the latter mainly act as a monetary regulation instrument).

What is the legal protection?

When contemplating piercing the immunity to execute against RCB`s assets one will face several layers of defense[2]. It should be understood that the ‘legal’ protection is of composite nature:

  1. National laws at every jurisdiction of potential execution:
    1. State property is usually immune from execution (sovereign immunity);
    2. Assets of central banks are regularly granted separate, and often higher level of protection;
    3. There are sometimes exceptions in place that provide for lifting of immunity. For example, the US legislators lift immunity for execution in terrorism-related cases (further discussed below).
  2. United Nations Convention on State Immunity (UNCSI), dated 2004:
    1. The convention provides immunity for central bank assets;
    2. But, the UNCSI is not yet in force. Nevertheless, some claim that it is part of the international customary law. Others disagree suggesting that the current customary law provides for full state immunity.

United Nations Convention on State Immunity

It is reasonable to discuss the UNCSI, regardless of the matter of its binding force, since it has a formative influence on the approaches to state immunity. Many national legislations take a similar approach or even adopt similar wording.[3]

UNCSI confers on central banks` assets near-absolute immunity from execution. Article 19 UNCSI provides for immunity from post-judgment execution, with an exception for property used for “other than government non-commercial purposes”.

At the same time, Article 21 of UNCSI designates certain categories of property as not coming within that exception, including ‘property of the central bank or other monetary authority of the State’.

The UNCSI, however, envisaged two exceptions under which the state assets can be executed. That is, first, when the ‘indebted’ state expressly consented to execution or, second, when it has allocated or earmarked property for the satisfaction of claims in specific proceedings. This is, however, doubtfully, the case for Russia.

Nevertheless, the UNCSI has not yet come into effect thus it is not binding as an international treaty. But, as said above, it can be found binging, and the most expected forum for that adjudication is ICJ. Another option, UNCSI can come into force when reaching the required 30 signatory states.

 Local legislation: what`s on the menu

RCB has recently published the list of states holding their exchange reserves. Most of the major holders (except China) have frozen RCB assets.

Nevertheless, potential execution is subject to national immunity legislation. This is even further complicated by the fact that each of the holding states regulates state immunity, central bank immunity, and potential exceptions differently.

In principle, the most amenable to piercing state immunity jurisdictions are the USA, Canada, and arguably the United Kingdom. On the other hand, the general approach in continental Europe is more lenient towards full immunity/fewer exceptions.

As ICJ Judge Abdul G. Koroma stated in his separate opinion in a case on Jurisdictional Immunities of the State: “[I]n the past century, the law on state immunity has evolved considerably in a manner that has significantly circumscribed the circumstances in which a state is entitled to immunity. It is possible that further exceptions to state immunity will continue to develop in the future.” This further development is specifically what Ukraine is looking for. But such development would require joined efforts of many states united in one move to bring Russia to accountability for its atrocities, compensate damages and fulfill its international obligations. The change may first materialize in the approaches taken by one state, then joined by others, finally becoming a prevailing view.

A closer look at the USA national law on state immunity

The USA has probably the greatest number of exceptions as well as peculiarities of state immunity legislation. The US Federal Reserve Bank of New York also holds approximately 6.6% of RCB foreign exchange reserves. The US Foreign Sovereign Immunities Act (US FSIA) provides that State property is immune from execution. The law then sets out exceptions to that immunity, (28 U.S.C. Articles 1609, 1610 US FSIA) and then (like the UK and similar statutes) has specific language protecting central bank property that might otherwise fall within an exception (Article 1611(b)(1) US FSIA).

The US FSIA protects the property of a foreign central bank ‘held for its own account’ from measures of execution, although it allows post-judgment execution against the central bank assets based on an explicit waiver of immunity and to enforce certain terrorism-related judgments.

Having the political will to execute against the assets of foreign central banks, the US Congress passed legislation allowing the execution of terrorism-related judgments against the assets of the Iranian Central Bank. The US FSIA permits suits for personal injury or death caused by certain acts of terrorism, but only allows such suits against foreign States designated as ‘State sponsors of terrorism by the president’ (Art.1605a US FSIA). Reportedly, terrorism-related judgments against Iran, most or all of which have been entered in default, now total more than 50 billion dollars.

These events led Iran to initiate an ICJ case against the USA, alleging in part that the execution of judgments against central bank assets violates the 1955 Treaty of Amity, Economic Relations, and Consular Rights between the United States of America and Iran (Treaty of Amity). The Treaty of Amity does not explicitly provide for immunity protections, but Iran argues that by denying immunity from execution to Iranian State-owned corporations, especially its central bank, the United States is in violation of general protections afforded by the Treaty. These protections include Article III(2), which requires ‘freedom of access to the courts’ in ‘both defense and pursuit’ of rights. Iran also argues that the denial of immunity violates Article IV(2), which requires the ‘constant protection and security’ of property, which Iran argues means in ‘no case less than that required by international law’.

The ICJ can potentially avoid deciding whether central bank property is entitled to immunity beyond that accorded to State-owned assets generally by holding that the assets would be entitled to immunity even if they were not central bank assets (but merely state assets). Iran’s application alleges that the USA has violated customary international law governing immunity but does not specify how exactly. This thus unties the ICJ`s hands to rule.

The USA may have violated customary international law if the property in question was for a non- commercial use or purpose. The assets in question include what were once bond assets that matured, leaving the cash proceeds held in the US banks. The assets were blocked in 2012 by executive order and were subsequently designated as subject to execution by the Iran Threat Reduction Act, without regard for their intended use or purpose. Iranian Central Bank characterizes the assets at issue as ‘part of its foreign currency reserves. On the basis of this representation, the assets are intended for a government, non-commercial purpose and thus entitled to immunity, at least to the extent that State property is protected from execution based on its purpose. Note that many countries do not address this question because central bank assets are accorded greater protection than other State-owned property, often by deeming them non-commercial, so there is no need to determine whether they are entitled to protection under the analysis generally applicable to State-owned property.

In a potential scenario with Russia, the fact the USA and Russia do not have an amity agreement can change the playing field. This would not, however, completely lift the issue of immunity under customary law.

What shall Ukraine be doing now?

In the meantime, Ukraine has a lot to do to be prepared to make use of any scenario when the war ends. It is of utmost importance to properly and timely document all damages inflicted by Russia and its instrumentalities, as well as committed war crimes. This would allow forming a precise and well-evaluated set of claims beforehand and being ‘first in a queue’. Noteworthy, this exercise can come in handy regardless of what specific mechanisms for compensation of damages will become available.

Another aspect to hold the grip on would be following the updates in foreign national legislation on immunity (especially exceptions from sovereign immunity), as well as following the ICJ case law on the same. For example, Ukraine needs to follow closely how the ICJ case Iran v. USA will end up. If the USA wins and clears the way for execution against sovereign assets of the central bank, we can expect greater moves towards this potential route for Ukrainian execution attempts.

Should the way to execute against RCB assets become available, the money can be channeled to rebuild critical infrastructure, compensate for damages caused to housing and businesses, victims of war crimes, and potentially, foreign investors.

There are also suggestions to amend Ukrainian national legislation or even adopt a special Russia-focused law that would allow lifting the sovereign immunity. Arguably, this would not be yet enough to pierce the customary law restrains, if Ukraine is not joined by a significant number of allies. Nevertheless, this work shall continue as it will help gain momentum, either legal or diplomatic.

Instead of conclusion

In March 2022, Anonymous, a decentralized international activist and hacktivist collective, was reported to have leaked 20 Gb of the RCB`s documents. The documents provided to the public domain, however, do not contain anything blatant that would immediately help to pierce the central bank`s immunity. For example, the leak does not include agreements, correspondence, money transfers, or secret economic reports.

Basically, the available documents are of two categories:

  • Publicly available various yearly reporting and audit reports by Russian commercial banks and non-banking financial organizations;
  • Statistics about the Russian economy e.g. statistics on foreign trade, foreign direct investments into Russia, cross-border transfers of individuals. This type of info can be useful for intelligence people for prognosis, but I doubt we can make any use of it.

Thus, the matter of piercing the central bank`s immunity remains under very precise review. While no mechanism is yet on the table, it may occur at any moment, and for that, Ukraine as much as the international community must be ready.


Vladyslav Bandrovsky, Vice Head of International Law Committee of the Ukrainian Bar Association; international arbitration associate at Sayenko Kharenko

The author would like to extend his gratitude to Mr. Amirreza Vahedi LL.M. for kindly sharing his expertise on Iranian legislation and case law.


[1] General information about RCB banking is based on the now unavailable report by Russia’s Central Bank saved by the web archive tool Wayback Machine. Available at: https://web.archive.org/web/20220224182023/http://cbr.ru/Collection/Collection/File/39685/2022-01_res_en.pdf

[2] Though some layers may turn out to be mutually exclusive, as for example state assets immunity and central bank assets immunity may be regarded as supporting each other or excluding the one that provides lower standard of protection.

[3] Arguably, when assessing customary law, regard can also be given to European Convention on State Immunity as well as the ICJ decision in the case Germany v. Italy.

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