Do Russian Oligarchs Retain Property Rights in the West?

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In response to Russia’s invasion of Ukraine, assets of Russian oligarchs have been frozen in Western Europe and the United States.  Now some leaders in Western countries urge that these assets be assigned to reconstruction efforts in Ukraine.  Are there legal limits on such diversion of foreign-owned property?  Should that matter to U.S. policy?  Is this rough justice or dangerous precedent? Our legal experts will discuss these questions on this timely webinar.


  • Dean Ronald A. Cass, Dean Emeritus, Boston University School of Law; President, Cass & Associates, PC; Former Vice-Chairman and Commissioner, U.S. International Trade Commission
  • Prof. Paul B. Stephan, John C. Jeffries, Jr. Distinguished Professor of Law, David H. Ibbeken '71 Research Professor of Law, University of Virginia School of Law
  • Moderator: Jeremy Rabkin, Professor of Law, Antonin Scalia Law School, George Mason University


As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.

Event Transcript



Chayila Kleist:  Welcome to The Federalist Society’s webinar call. Today, August 16, 2022, we discuss the question: “Do Russian Oligarchs Retain Property Rights in the West?” My name’s Chayila Kleist, and I’m an Assistant Director of Practice Groups here at The Federalist Society. As always, please note that all expressions of opinion are those of the experts on today’s call, as The Federalist Society takes no position on particular legal or public policy issues.


      Today, we are fortunate to have with us as our moderator Jeremy Rabkin, who’s a professor at Scalia Law and has written on international law topics and various forms and serves on the Fedsoc International Law Practice Group. Thank you all for being here. One last note, throughout the panel, if you have any questions, please submit through the question-and-answer feature so that our speakers will have access to them when we get to that portion of the webinar. With that, thank you for being with us today. Professor Rabkin, the floor is yours.


Jeremy Rabkin:  Thank you. So we have two people here who have really quite a lot of relevant expertise. We’re going to start with Paul Stephan. Actually, I’ll introduce them both, but let me start by introducing Paul Stephan. He’s been a professor at UVA Law School for a long time. He was a counselor to the State Department’s legal advisor during the Bush administration and counsel to the Department of Defense General Counsel more recently, actually the beginning of the Biden administration -- or the end of Trump and the beginning of Biden. And I think perhaps most relevant, he is a coordinator reporter for the American Law Institute’s Restatement of—that’s now the fourth—of Foreign Relations Law, so he knows a lot about the relevant law.


Let me just briefly say we also have Ronald Cass, who was for a long time Dean of the Boston University Law School. He was Vice-Chairman of the U.S. International Trade Commission, which looks at complaints about unfair treatment of imports—well, I guess, imports—and U.S. Representative to the World Bank’s International Centre for the Settlement of Investment Disputes Panel of Conciliators—so they have disputes investors being mistreated—and has himself been an arbitration -- sorry, an arbitrator in investment disputes and other kinds of international disputes. So here are two people who have a lot of relevant experience, not calling on either of them for legal briefs, but just kind of overview.


I think many people may wonder when they see in the newspapers, as we’ve seen often in the last few months, “So-and-so is a friend of Putin. His yacht was in a port in some place in Europe or the United States and was seized.” Somebody actually had a yacht that was out on the -- it was in international waters, and I think it was the French sent a boat to chase after it so that it could be seized. All kinds of property of Russian nationals is being seized by various governments around the world. There’s even been a proposal that this, the assets, should be used to help fund Ukrainian reconstruction. So I want to start with Paul Stephan. Oof, what’s the legal basis for this kind of thing? Let’s just start with there’s a statute from the 1970s. What does it authorize the United States government to do when it comes to seizing assets of people we don’t like?


Prof. Paul B. Stephan:  So thank you, Jeremy, for the introduction and the question. Very quickly on the statute, I think a little bit of background might be in order. Its ancestor is the 1917 Trading with the Enemy Act, which gave presidents broad authorities to take measures against enemy aliens in times of war but also -- Sir.


Jeremy Rabkin:  Yeah. These are countries that we are at war with, and in 1917, we still thought war meant we have declaration of war passed by Congress, right?


Prof. Paul B. Stephan:  Term of war, term of art. The disruptor of the term of art was the second President Roosevelt, who in 1933 invoked that statute to access its authorities with respect to national emergencies. This was part of the taking of the U.S. off the -- well, not the international gold standard but seizing all privately held gold. So the idea is that property connected to the outside world can be interfered with by the government under appropriately exigent circumstances. That authority of Roosevelt’s was revived by the men I consider the two worst American presidents in my lifetime—Lyndon Johnson and Richard Nixon, both of whom tried to kill me in Vietnam. They invoked this for more general economic management purposes as part of the general pushback against executive power. Post-Watergate, Congress enacted the 1977 International Emergency Economic Powers Act.


So that’s the statute we live under with one important amendment during -- in the immediate aftermath of 9/11, the Patriot Act amended it so that the power to seize as oppose to freeze proper—that’s to say to vest and transfer as opposed to simply bar transactions in—which exists with respect to enemy aliens still but requires an actual declaration of war, which we haven’t had any in my lifetime—I think the lifetime of everyone here. But, as a result of 9/11, Congress said that being under armed attack counts. So we were authorized to not only freeze but seize access to assets associated with Al-Qaeda as a result of the Patriot Act. So that’s what we have now—a general power to freeze and a very specific and narrow power to seize.


Jeremy Rabkin:  Just state clearly the power to seize is people who are involved in kinetic attacks against the United States.


Prof. Paul B. Stephan:  Or against whom the United States is engaging in kinetic attacks. I mean, the inspiration was 9/11, but actors with whom we are exercising force under proper legislative delegation typically asserting our right to self-defense under the UN charter, we can seize their property too.


Jeremy Rabkin:  And just to be clear about this, the seizing is at the discretion of the executive, and the releasing is at the discretion of the executive. Is that right?


Prof. Paul B. Stephan:  Absolutely true.


Jeremy Rabkin:  Yeah.


Prof. Paul B. Stephan:  What the legislation does is create authorities, but it does not mandate their exercise.


Jeremy Rabkin:  So we say to the oligarchs, “We regard you as threatening, and that’s good enough. And your yacht is here, but you won’t be able to use it now, but we’re not giving it to someone else.”


Prof. Paul B. Stephan:  That’s current law.


Jeremy Rabkin:  Yes.


Prof. Paul B. Stephan:  Unless and until we find ourselves in a state of armed conflict with Russia, which, God forbid, we won’t.


Jeremy Rabkin:  Well, probably it won’t last that long, right? So we don’t have to worry about the litigation.


Prof. Paul B. Stephan:  It depends on how capacious the concept of armed conflict is.


Jeremy Rabkin:  Yes. Yes. And, so, just say a little bit about whether there are any constitutional limits on this. Are courts okay with freezing as long as you don’t transfer ownership?


Prof. Paul B. Stephan:  Yeah. So let me hit both the constitutional and the international law chimes, if you will. Con law, I think it’s pretty straightforward. Its point one, property located in the United States is protected under the Fifth Amendment, which is to say due process rights, no matter who owns it. So foreign-owned property is. Point two, the courts have been quite comfortable with freezing. I’ll note there are now, I guess, powers with respect, for example, tax enforcement against domestic citizens, so it’s not that far out of step. But there are constitutional limits that still apply. And one that I think is relevant in terms of proposals that are kicking around Congress right now is I think a principle of nonretroactivity, even as to civil forfeiture, probably applies. That’s debatable, but I’ve defended that proposition in various venues. And that’s relevant because the legislative proposals that we’re seeing all rely on retroactive application of rules in order to authorize the seizure as opposed to the freezing of already frozen assets.


And then, finally but very quickly, the international law posture. On the one hand, as you know—both you guys know probably better than I—international law is somewhat squishy. It’s not as hard or as clearly enforced or at least authoritatively enforced as our domestic law sometimes is. But I think we have two strands here. One is a general protection of the rights of aliens with respect to their property, something the United States has championed for more than a century. And that would apply to non-enemy aliens, so for example, the Russians and the oligarchs.


Second issue is the law of countermeasures, which is messier. The concept behind countermeasures is that there’s certain kinds of international law violations that a state can appropriately take in response to another state’s international law violation. It requires a prior international law violation. It requires a limited and proportionate response designed to end the other state’s violation. So, in other words, it’s not about retribution. It is about deterrents and leading to a peaceful outcome. And I think, without getting into the messy details, that in principle either freezing or forfeiture might be seen as an appropriate response under international law as long as the state doing that stands prepared to pay compensation upon the settlement of the dispute. So forfeiture is not inconsistent with international law, some believe. As long as when the dispute, the international wrong, is ended, compensation will be paid.


Jeremy Rabkin:  I just want to ask you one quick question, and then we’ll get Ron’s reaction to this. I read just within the last two or three weeks, I don’t know if we are pursuing them, but we have said it’s a good idea to have sanctions against Putin’s mistress/girlfriend, some lady that he’s been involved with who lives in Switzerland. Is that supposed to deter the attack on Ukraine? I mean, what’s the logic of a thing like that?


Prof. Paul B. Stephan:  Well, we’re getting into implementation now. I think the idea is the -- you try and identify pressure points that affect decision makers. Under one theory of the case, there is a apex of power, where a lot of discretionary authority exists in Russia, and any pressure point that’s relevant to that person is fair game as long as the state applying that pressure is prepared to make reparations for its international law violation at the end of the international violation of the Russian state.


Jeremy Rabkin:  Okay. Ron, anything in this survey that makes you nervous?


Dean Ronald A. Cass:  Well, nothing in Paul’s survey makes me nervous. He’s done a good job of stating what the rules are, what the law is. I am concerned about the implementation of decisions to seize and to freeze assets of individuals who are thought to be people who are close to, related to, influential on a world leader that we want to deter from taking certain actions. The same way, I’m concerned about our use of domestic authority to freeze and seize assets in order to accomplish something that we may not be able to accomplish quite as successfully by acting directly though more limited means, going to court, proving a case of making the case that we actually ought to impose certain specific sanctions after a legal proceeding.


Jeremy Rabkin:  In your mind, is there a clear line between seizing the assets and detaining the owner, which after all, we did in the Second World War? I mean, we didn’t say, “Enemy aliens, welcome to America. Try to spend your money in places where people would appreciate your business.” We actually imprisoned a lot of these people, right, although they hadn’t committed a crime?


Dean Ronald A. Cass:  But we also detained people who were not enemy aliens. We detained people who were U.S. citizens. We detained people who were here lawfully and with no particular reason.


Jeremy Rabkin:  But let’s start with we’ve already kind of moved down the slippery slope from actual enemy aliens in a declared war to people who have assets who are from a country that we’re feeling uneasy about, although we’re not in a declared war with them. And I just want to know can we move down from seizing their assets or freezing their assets to detaining them, which is a polite, I think, counterpart to freezing. We’re just going to detain them, not imprison them, but they will be detained in a particular place. Is that something you think is imaginable?


Dean Ronald A. Cass:  Well, I don’t think that is the likeliest outcome of the actions that we’re seeing right now. I don’t think that a step toward detaining individuals is the likely outcome. But I do think that taking assets, even if it’s only on a temporary basis, can have a profound effect on people’s lives. I’m not worried about anyone taking my yacht. But I know that if you have assets that you are using, want to use, have importance to you—and after all, the steps we’re talking about have no meaning unless the assets have some importance to the people involved—if they are important to you, usually you would prefer to live in a system where there are clear rules and a process that includes a hearing on why the assets are being treated this way and what you have done wrong to trigger that.


Now, I understand that law enforcement is important. That’s true with both domestic law and, as Paul said, squishier form of law that usually prevails in international law and that some flexibility is important to law enforcement. But I would very much prefer that we lived in a system where, if we are going to take assets, whether for a relatively limited period or a relatively long period or permanently, that we do it through a process that has someone other than the prosecutor involved in making that determination.


Jeremy Rabkin:  I want to ask you one other question just on this sort of introductory round here. Do you think we have crossed an important line in going from denying let’s loosely call them enemies—but anyway countries that we’re in some kind of confrontational relationship with—denying assets which could be valuable to their military operations or to their foreign policy, on the one hand, and just pinching people who we think might squawk and that would influence policymakers? I mean, isn’t it kind of different to seize ships as we used to do in old-fashioned wars because the ships could be used by them and now they’ll be used by us and going after the girlfriend in Switzerland?


Dean Ronald A. Cass:  This is really akin to hostage taking. And, again, there’s a long history in international relations of people offering hostages or taking hostages. It used to be at times a bilateral agreement in order -- that each side would have a hostage to facilitate or encourage better behavior. But when you take one without agreement, I think you are in a different position and you’re doing something very different than limiting the availability of a particular assets.


Jeremy Rabkin:  So I’m going to ask you, and then I’ll go back to Paul. Do you think there’s any real record that shows that these kind of tactics are effective? They don’t seem to be deterring Putin very much.


Dean Ronald A. Cass:  Well, I don’t know Putin personally. My guess is that in order to deter him, you would have to put at risk something he cares about, and I’m not sure how much any of these individuals would count on that score.


Jeremy Rabkin:  Paul, you know a lot about the history of international relations. Can you point to an example where this kind of tactic has been effective?


Prof. Paul B. Stephan:  Examples exist, but they’re far and few between. The folks at the International Economic Institute, the Peterson Institute, have done a lot of empirical research on sanctions, and they’ve tried to tease the factors where they’re more likely to succeed. I think that at least from us law and economic folks, it’s not surprising to learn that when you have bright line rules and you have a very broad coalition enforcing them, the sanctions can work. On the other hand, when you have a single stake, say U.S. and Cuba, it doesn’t work very well.


The current environment we’re in with respect to Russia is a country is controlling—I did the math—I think it’s 67 percent of the 2020 GDP have joined in some sanctions regime or other. Although it’s this huge variation among those countries. Countries that control 57 percent of the world’s population are on the other side of this. It’s not only Russia. It’s India, China, South Africa, so that the rich world has taken its stand against the South on this issue. Particularly, as long as China’s in the game, India’s in the game, I think Russia has -- the Saudis are in the game, Russia has some powerful friends.


Jeremy Rabkin:  Yeah. But now, we’re talking about a whole range of sanctions, a lot of which are trade sanctions.


Prof. Paul B. Stephan:  Yeah. I’m talking about economic sanctions generally.


Jeremy Rabkin:  Yes. But I want to focus on this category of taking stuff that belongs to nationals of the targeted country. Do we have experience saying like, “Oh, yeah, that works”?


Prof. Paul B. Stephan:  Well, a story that you can tell is that the resolution such as it was of pieces of the dispute between the United States and Iran was helped by the fact that the Shah had roughly $4 billion worth of property that belonged to Iran, whoever Iran was, within our jurisdiction. And we got a settlement which didn’t stop us from being deadly enemies, but we did get a settlement that lead to the U.S.-Iranian Claims Tribunal, which if nothing else provided a lot of employment for U.S. lawyers—so we’re for that—and got the hostages back. We’re certainly for that. Although part of the deal was cutting off any reparations to the hostages. And, so, yeah, sometimes, when you have most of the world on your side—as we did with respect to the embassy seizure in Iran—and you’ve got real assets that unambiguously belong to some official authority, it’s an effective response.


Jeremy Rabkin:  Yes. Although, in the case of the Iran Tribunal, these were assets claimed by the Iranian government, right, not private Iranians who happened to have sold a lot of rugs and built a really nice house in Los Angeles?


Prof. Paul B. Stephan:  I think the initial wave of the sanctions was certainly the legislative authority because all you need is a foreign citizen owning the property. And then it’s up to the administration to provide licenses.


Jeremy Rabkin:  Yeah. I understand. I mean, what was the thing that really exerted leverage on new government, the Islamic Republic? Presumably, it was their eagerness to get back their own property.


Prof. Paul B. Stephan:  Right, no question about it.


Jeremy Rabkin:  Yeah. Okay. So I want to move on to a different side of this, which is effective or not, you might think give it a try. Other things are more costly to us. I mean, we don’t want to send troops to Ukraine. We’re a little nervous about even the kind of weapons that we’re supplying there. I want to just raise whether there isn’t a cost to this kind of venture, the economic sanctions that go after assets of private citizens in that we are in effect preparing an excuse for any country that wants to seize American assets in the future. And we say, “No, you can’t do that. This is private property.” And they say, “No, but we’re in a confrontation with you because you sided with some other country that we are having a conflict with. And, so, we have to grab this stuff that is here in Latin America, Africa, Asia.” Let me go to Ron because Ron has the most experience with this. Are you nervous that this is going to undermine the good work that the International Center for the Settlement of Investment Disputes has been doing in trying to stabilize expectations of the kind of protection that foreign investors can expect from poster governments?


Dean Ronald A. Cass:  I certainly worry that this is going to facilitate other people taking steps that we won’t like. Now, normally, the countries that take these steps tend to be countries that fall in one of two categories. Either they’re very large—and so they feel free to throw their weight around in a way that most countries don’t—or they are essentially rogue states which don’t care about what the rules are, and they will use any argument that is at their disposal. This simply facilitates one sort of argument among people who are professional diplomats and have some, at least, constraints on what they tend to say.


I’m more worried about the degree to which this also facilitates the use of asset taking domestically and undermines the sort of procedures that we tend to use domestically. And I think there are a lot of different pieces of this legally that are still in play and that have been moving in a direction of providing more protection against taking property without some sort of more focused legal process. And I would certainly hope this does not retard that process because I think that is an official process to have real legal proceedings and real findings on real planes of specific lawbreaking before property is taken.


Jeremy Rabkin:  Yeah. I mean, we could talk about RICO seizures, things like that that happen domestically. But I want to ask you about what to make of prominent scholars, like Laurence Tribe at Harvard, saying, “Oh, forget about freezing. We should just keep the yachts. Actually, we should sell the yachts and then give that to Ukrainian relief.” And people like Paul Stephan said, “No, wait, it’s private property. You can’t do that.” And the answer was they’re international outlaws. The oligarchs are outlaws. I mean, they’re friends of Putin. Are you worried about that kind of slide which people are sort of comfortable—some people are—just sort of dragging us into a world in which governments feel free to do things that make people feel good? All property owned by foreigners.


Dean Ronald A. Cass:  I’m certainly a fan of having a rule of law, where you have real rules that are really vague made by real lawmakers. When you say—as you point out some academics have—that this is a good idea because it lets us do what we want to do against somebody we really don’t like, I think that opens up a real can of worms. It’s always easy to get public support for doing something against people we currently don’t like. And people who are outside the country doing things that we object to—and I think we object to for good reason in this case—are certainly not a group that’s going to have a lot of public support, a lot of public empathy. The people who may or may not have done anything wrong but are somehow related to people who certainly seem to be doing something wrong are easy targets right now.


But we also haven’t had any formal process that assesses the legality of what Putin is doing. Now, I think what he’s doing is illegal. I think it’s unfortunate for a lot of reasons, and I think a more muscular rather than less muscular response to that is a good thing. None of that, however, gets me to embrace freezing or claiming other people’s property, much less claiming it and then pretending to give the assets over to somebody else almost invariably when we have pretended that’s what we’re doing. We’re giving assets from taxpayers to somebody else under the pretense that it really won’t come from taxpayers at all. And I think that that helps the government sell what it’s doing. And, if taxpayers have a vary in voters -- have a very short memory, it may be an effective political tactic. I don’t think it is commendable from a rule-of-law stand.


Jeremy Rabkin:  Could you say—I’m not asking you to divulge a confidence—but people who are arbitrators in investment disputes, maybe they meet at—I don’t know—Davos conferences, would you -- and this has now been going on for quite a few months. Would you say in that community of people involved with ICSID at the World Bank, is there anxiety about this, or do they think, “Oh, no, that’s really a separate category”? It’s all about this unique event, the Russian invasion of Ukraine.


Dean Ronald A. Cass:  I think there’s much more anxiety about a lot of the rules that are being written in terms of trade relationships and international relationships than there is about this particular episode. And that in part is because a lot of the people in that community that you describe are on the same side of this particular dispute. But there is always concern that there be rules that we can follow, and the international arbitration and conciliation community is very much concerned about that. I think that the people who are in the foreign policy community and in the military community may have a little bit broader mandate and a much broader set of chips that they are trying to sort out here. But the question that was asked in the advertisement for this discussion was whether this was really going to be a form of rough justice or something that was a dangerous precedent. And my short answer is, yes, I think it is both.


Jeremy Rabkin:  Yes. Paul, are you able to see the questions posed?


Prof. Paul B. Stephan:  There is a question --


Jeremy Rabkin:  About private -- ?


Prof. Paul B. Stephan:  Privateers, is this about the law of -- is this really about privateers or it’s about condemnation?


Jeremy Rabkin:  So I don’t want --


Prof. Paul B. Stephan:  It’s really about both. Yeah.


Jeremy Rabkin:  Let’s just start with the Constitution does seem to authorize Congress issuing letters of mark separately from declaring war. And we indeed did pursue a naval war with France that wasn’t a declared war but involved letters of mark. So there’s historic precedent for attacking enemy commerce. Do you want to say anything about how this is like/not like that practice of attacking commerce on the seas, which most of which was, of course, private cargos?


Prof. Paul B. Stephan:  Sure. We shouldn’t overlook, by the way, that in that era, naval state -- naval operations were themselves financed that way, that the United States during the revolution was at a distinct disadvantage because we had not yet created a power law of capture that rewarded our sailors. And, once we did, we had a more effective naval force. I don’t do Con Law. I think it’s abomination. I think any body of law that puts the gang of nine at the center is a misadventure. So apologies to those of you who feel differently.


But were I to think in these terms, I would say that the category that I think is meaningful is armed conflict versus non-armed conflict, even though the template up until 1945 was quite different. It was declared war versus non-declared war. So our conflict with France was, yes, not declared, but it was an armed conflict, and I would pigeonhole it that way. I think it’s a useful way of thinking about it. And I do that in order to bracket off these kinds of measures—the law of capture, the law of mark and reprisal—from the kind of pressures that we’re doing in order to avoid armed conflict.


Jeremy Rabkin:  Yes. This is really where I was going with this. I mean, even if you say it doesn’t have to be war, it’s enough that it’s an armed conflict. It has to be an armed conflict in which we are a participant, right?


Prof. Paul B. Stephan:  Right.


Jeremy Rabkin:  I mean, the context here is we are cheerleaders from the sidelines.


Prof. Paul B. Stephan:  And adamant about it, doing everything we can not to be seen as a party to the conflict along a number of dimensions. So let me just throw in here a complexity which informs our dealings with Russia. It informs our dealings with China as well—although, happily, we’ve not yet -- the rubber has not yet hit the road in that particular conflict. And that is the lack of transparency in the boundary between the public and the private. I mean, so there are parts of the world where we can say, “That is state property; that is private property.” It’s harder—not impossible, but harder—to find that boundary with respect to Russian and China, a few other places. And I think that the system we have, which relies on the good judgment and the discretion of the executive through its licensing power, is the best way to deal with that problem so that you have a categorical authority bestowed by Congress, and then you also have a licensing power to try and draw that line. And then you’re beef becomes, not with the mechanism of such, but how it’s being handled by this particular executive branch.


Jeremy Rabkin:  Could you just spell out how the licensing authority would work?


Prof. Paul B. Stephan:  Well, for example, you can get both categorical licenses. In spite of the sanctions, lawyers can get paid from Russians under the current regime.


Jeremy Rabkin:  Ah, ah.


Prof. Paul B. Stephan:  And you can also apply for a transactional license. Say, that this particular -- we do this with medicine and food for example.


Jeremy Rabkin:  You’re really talking about exemptions?


Prof. Paul B. Stephan:  Yeah.


Jeremy Rabkin:  Yeah. Somebody asks, “Is it reasonable for us to claim that we’re on the sidelines when we are the main arm supplier for one side in the Ukraine conflict?”


Prof. Paul B. Stephan:  Yeah. Well, that’s a different issue, it seems to me. It’s not an economic sanction issue.


Jeremy Rabkin:  Well, it’s a question. Is there any longer a boundary between being a participant and being a, let’s say, investor in the conflict?


Prof. Paul B. Stephan:  Well, we have spent the entire post-War period trying to find a line between proxy conflicts and outright conflicts. And that lives on today.


Jeremy Rabkin:  And, to be fair, it was also true in the immediate pre-War period, at least for us, when the Roosevelt administration coined this completely new term nonbelligerent.


Prof. Paul B. Stephan:  From May 1940 on.


Jeremy Rabkin:  Right. We didn’t really want to be neutral, but we didn’t want to belligerent. So we positioned ourselves as “We can supply arms, but don’t attack us because we’re not really fighting back.” Yes.


Dean Ronald A. Cass:  Well, it wasn’t really “Don’t attack us.” It was really placating a part of the domestic political constituency here because actually becoming involved directly in the war was not popular until we were attacked.


Jeremy Rabkin:  It’s just like a reminder. This is not really about the Cold War. This is about “Look, we’re being a powerful nation and wanting to do things but not really commit to them,” right?


Prof. Paul B. Stephan:  Let’s look back to the Lusitania, right? We were not at war with Germany when they sank the Lusitania, but we were providing aid and comfort to Germany’s enemy. And Germany thought that was inappropriate grounds for attacking supplies to their adversaries.


Jeremy Rabkin:  Yes. So this is --


Dean Ronald A. Cass:  I think that illustrates the more you go away from clear, direct, and sanctioned armed conflict to various forms of less direct conflict, the more you get these fuzzy boundaries. And I think what we’re doing today simply increases the degree of fuzz around it. I should before I hand off to Paul say a word in favor of judicial decision making in the United States because I am -- not only as a sometime teacher of constitutional law, I am more sanguine about that than I may be always about the good judgment of executive decision-making. And we can have that conversation to greater length later, but I didn’t want to let that slide.


Jeremy Rabkin:  I wonder if either of you has a sense of how well coordinated our policies are at least with Western Europe and other advanced Western countries.


Dean Ronald A. Cass:  You mean on the sanctions?


Jeremy Rabkin:  Well, on the question of when you can freeze, whether you can move from freezing to seizing. Because, of course, apart from the effect on Russia or whatever the target country is, there’s just the question of—can you maintain what you want to have as the normal standards if different countries are quarreling about what this is? The question about privateering asked, “Are we going to have something like a prize court?” And my understanding of the point of the prize court was to establish this is now who owns this ship that’s been seized. And the ship could then sail away and go into different ports, and everyone would accept, yes, it belongs to the country that seized it. We accept that. Maybe we will have difficulty getting everyone on the same page about transfer of ownership—look, could involve ships, actually yachts—if there’s disagreement between different countries. Is that a thing to worry about it?


Dean Ronald A. Cass:  Well, of course it is. But right now, it looks like a lot of the Western world—including Australia and Canada as well most of Western Europe and the United States—is on the same page with regard to this conflict. That doesn’t mean that the rest of world would be.


Jeremy Rabkin:  Is it really pedantic to separate the question of asset seizure from how you feel about the Russian invasion of Ukraine? I mean, you could think it’s terrible that Russia is committing aggression—which I think that almost everyone in the West does think—and still be uneasy about seizing yachts?


Dean Ronald A. Cass:  Well, I am in both camps. I am very uneasy about it and think we need to take a firm action and uneasy about seizing yachts, a law not to the state directly but to individuals even if it’s also [crosstalk 43:39].


Jeremy Rabkin:  And, so, maybe somebody who actually used to own this yacht when he was a billionaire, and now he’s just down to a few millions, will have an action in Argentina or New Zealand or Singapore and say, “The ship is here now. I want it back,” and ask a local court to reconsider the legality of the American action or a French action in transferring ownership. Is that just something for a law school exam, or is that a thing that could actually happen, and should we worry about it?


Prof. Paul B. Stephan:  So if you’re focusing on yachts, I think one has to look at what I call “The Ransom of Red Chief” problem. The truth is these yachts cost more to maintain than they’re worth. And at least the two yachts that are currently under U.S. government control are just bleeding us dry, and their value on the secondary market if we were -- right now, we have simply frozen them. If we were to seize them as Congress wishes and sell them off, we probably wouldn’t cover the carrying costs. Given that a $2 billion yacht once it’s sold in the open market given how expensive it is to maintain and given its providence, it’s going to be deeply discounted. So that’s an issue right there.


I agree that the title transfer is not -- the fact that we affect the title transfer under our law, under the proposals that are before Congress now, would not be binding on other countries. Doubtlessly, the UKs, the Australians, the Canadians, and the EU would accept our positions. But there’s a lot of the world that aren’t those countries, and they might take a different view. Although, they wouldn’t take the yachts back because they’re too expensive to maintain. It’s the mansions along Massachusetts Avenue that you have to worry about.


Jeremy Rabkin:  Yes. You’re saying that people would want them.


Prof. Paul B. Stephan:  Yeah, I think so. I think the D.C. real estate market is hot. That’s my impression.


Jeremy Rabkin:  Yes. What about the money that’s stashed in Swiss bank accounts. I know this is another of your research issues, anti-corruption efforts. So there’s money stashed in Swiss bank accounts, but we don’t know who it belongs to or how much. Can we demand that Swiss banks give a full accounting of money that may belong to Russian oligarchs who we think should be sanctioned?


Dean Ronald A. Cass:  That’s like saying, “Can we sue?” We can demand it. That’s not to say it would be effective or should be.


Prof. Paul B. Stephan:  Yeah. We have a tax agreement with the Swiss. But if our goal is not collecting our own taxes but bringing Russia’s retribution on others, that agreement doesn’t cover it. My friend Stewart Baker has pointed out that no oligarch worth his salt would have any assets in a Western bank that could be traced back to that person. And I think that’s probably true. That gets back to my lack of transparency point. It’s just very hard to link real assets and real bank accounts to real people, much less to their dependence on the Russian state.


Jeremy Rabkin:  Yes. Which, on the one hand, may give you some let’s call them ethical or constitutional qualms about “Are we going after the right target?” but it also means that you’re just not likely to be very effective because they can hide these assets, right?


Prof. Paul B. Stephan:  Yeah. Well, I mean, I think the conversation all along has been that if you really want to hurt the Russians, you go after the state assets, not after the oligarchs. There’s about a 10-to-1 ratio in terms of value. The problem with the state assets is they’re mostly in the sacrosanct category of central bank deposits. And there are, I think, very strong policy reasons. There’s a good reason why Secretary Yellen is out there saying, “No, no, no, no,” and I agree with her on that.


Jeremy Rabkin:  Yeah. So you’re saying that the Bank of Russia has money in the Federal Reserve or anyway an American --


Prof. Paul B. Stephan:  New York Fed.


Jeremy Rabkin:  Yes.


Prof. Paul B. Stephan:  Yeah, maybe 300 million. Maybe another 200 million in other rich world central banks.


Jeremy Rabkin:  Yes. Okay. So we have a question here from an anonymous attendee, which I think gets to what -- the anxiety that a lot of people feel. We seem to be targeting private citizens based on non-appealable designation by an executive branch entity. Is this the kind of thing that could be done to Americans, not under the existing legislation necessarily, but just sort of down the road? We get comfortable with this idea that we hold your assets hostage, as you said, because you need to be pressured.


Prof. Paul B. Stephan:  Well, point one, they’re not non-appealable. The person who claims to be the owner -- problem with the Russians is usually the people we’re after don’t claim to be the owner. TikTok, for example, President Trump invoked the International Emergency Economic Powers Act to go after TikTok. And there were reasons within the statute why that didn’t work, and TikTok sued and won in U.S. courts. So it’s not quite true that it’s unappealable. I think the beef might be that statutes can be written so broadly that the right of appeal is useless. But there is ex-post, ex-freezing conditional review.


Jeremy Rabkin:  And, also, it’s not quite for misuse of the property, right? It seems to be --


Prof. Paul B. Stephan:  It’s within statutory category.


Jeremy Rabkin:  But statutory category here is not limited to you use the property in a way that directly harms others, right?


Prof. Paul B. Stephan:  So what the question presumes, I think, is a law that could be adopted that is so broad in its coverage that review over freezing does not mean anything. Now, I have worked -- I’ve actually successfully represented amici in a case involving a terrorism seizure -- freezing rather, not seizure. And all of our terrorism sanctions, other than a very narrow category of Iranian and Cuban cases, all of them are about freezing not seizing. You can actually—it’s very hard—but you can overturn a terrorist designation. And then that affects U.S. nationals because they’re the ones who want to contribute to the entity, which they claim is not a terrorist organization. It’s a charity.


Dean Ronald A. Cass:  We do have on the domestic side some cases where the government has the authority to take assets and at least hold them, if not dispose of them. While I think that the government ought to be supporting a lot of law enforcement efforts, it is not unheard of that the government makes mistakes, and it’s not unheard of that the government is at times motivated the people who are in charge of particular decisions, are motivated by something other than a pure unadulterated view of what the facts are. And we’ve also had cases where the government has in order to facilitate, putting pressure on someone or going after someone who is disliked for other reasons, misbehaved. And I think we have to worry about all of those. Anything we do that in the short term seems to be a good idea because it gets us somewhere on a policy basis that we like is risky if we don’t do it in a way that preserves the ability of people who avoid this just because they’re disliked.


Jeremy Rabkin:  And it also is within an envelope that is in a way totally under the control of the executive, right? We don’t have to declare war. We just say it’s an emergency, and the decision about when the emergency begins and when it ends is totally in the hands of the executive, right?


Dean Ronald A. Cass:  And not only when it begins and ends, but who’s involved and how they’re involved, and what sort of involvement is enough.


Jeremy Rabkin:  Yeah.


Dean Ronald A. Cass:  And if this can happen, it will be the Ted Stevens case. Here you had the government going after a sitting U.S. senator and not disclosing that one of the major pieces of testimony had been massaged some and that prior inconsistent statements were, not only not turned over when they had to be turned over under court order, they were amended in ways that eliminated much of the inconsistency. We’ve had prosecutions where the prosecutor had a personal relationship with a key witness that wasn’t divulged. We’ve got a lot of things that have happened in what is generally thought to be a paragon of the rule of law ought to give people pause about opening the borders around it significantly.


Jeremy Rabkin:  Yes. I want to ask Paul just a very kind of lawyerly question here. We’re all assuming that the targets here have to be Russian oligarchs because it’s Russia that committed the aggression. But is there anything in the statute here, the International Emergency Economic Powers Act, that limits the discretion of the executive to go after billionaires from countries that are merely friendly to Russia, like India?


Prof. Paul B. Stephan:  Yeah. So I think if you look at the International Emergency Economic Powers Act, it only has to be foreign.


Jeremy Rabkin:  Yeah.


Prof. Paul B. Stephan:  And my favorite example that I have tried to use to scare Congress and its proposals is that the legislation that you have and indeed the legislation that the administration has drafted—although I don’t think their whole heart is behind it, quite honestly—but you would pick up right away Gerhard Schroder. If you’re defining the people as people who have political advantages from the Putin regime, he’s the poster child. Now, I personally am happy to go after Gerhard Schroder. But there probably are other people who feel differently about that. There’s certainly other people who aren’t quite as, “Oh, no, it’s Gerhard Schroder.”


Jeremy Rabkin:  The former German chancellor who then became a --


Prof. Paul B. Stephan:  Exactly. Who immediately went to -- some believed he was working for the Russians when he was chancellor. But he went overtly on their payroll as soon as he stepped down as chancellor and still is on the Russian payroll.


Jeremy Rabkin:  And was very involved in building that pipeline and lobbying the German government to have that pipeline.


Prof. Paul B. Stephan:  It was paid for.


Jeremy Rabkin:  Yes. Yes. That’s a very, very good -- so, I mean, I just want to nail this point, which is we’re not just saying, “Oh, it doesn’t have to be a war,” it’s enough that it be an American confrontation. We can just go through the entire world and say, “You’re not really getting with the program, so we want to pinch you by freezing your assets.” I mean, we’re not going to hand them to someone else, but you are going to be denied access to them for as long we think that that is useful. And this can be appealed on the grounds that I’m not who you say I am but not on the grounds that it’s futile, right?


Prof. Paul B. Stephan:  Basically, yes.


Jeremy Rabkin:  Yeah. So this is a really, really wide dragnet that we’ve put in the hands of the executive, and we have no -- I mean, that’s a very good example. The Iranian assets seem to have moved them to release the hostages. But it doesn’t seem to have a great track record in general. It’s not like it’s such an effective tool.


Dean Ronald A. Cass:  And not only that, but there are other reasons why the Iranians may have been inclined at that point to release the hostages. They had made their point. It’s like holding the yacht. It’s not costless [inaudible 57:27].


Jeremy Rabkin:  Yes. It’s one of the very few things that the world actually does agree on, which is you shouldn’t interfere with our diplomats. Almost every country wants their diplomats to return home safely after they’ve been on assignment.


Dean Ronald A. Cass:  And if you had different rules, you would select different diplomats.


Jeremy Rabkin:  Yes. That’s right. They didn’t have advanced warning. Yes, very good. Okay. Anything else that we need to say? We’re about out of time, but if there’s a particular joke that you wanted to tell, Ron?


Dean Ronald A. Cass:  I have quite a few, but I’m holding them in reserve for when my yacht is taken.


Jeremy Rabkin:  Paul, if there were one thing that you could persuade Congress to do, what would it be?


Prof. Paul B. Stephan:  I would, actually as a small-seat conservative, I’m a fan of the status quo and would hope that we could maintain that. The proposals that are kicking around I think are dangerous and I hope to be avoided.


Dean Ronald A. Cass:  Nothing about doing away with the designated hitter.


Jeremy Rabkin:  Okay, good. So we’ve had at least an airing of some of these issues, and I believe The Federalist Society has a way that you can raise issues after we leave, right?


Chayila Kleist:  Absolutely. On behalf of The Federalist Society, I want to thank our experts for the benefit of their valuable time and expertise today. I want to thank our audience for joining and participating. We welcome listener feedback by email at [email protected]. As always, keep your eye on our website and your emails for announcements about upcoming virtual events. Thank you all for joining us today. We are adjourned.