The Bank of Russia confirmed on the 17^th of September that it had filed a challenge with the EU general Court on the September 15^th, specifically targeting the article which introduced the mechanism allowing EU courts and member states to block the enforcement or recognition of certain Russian court decisions in other jurisdictions. 

The EU introduced this regulation as part of its sanction’s framework against Russia. The Bank of Russia has criticised the measure as a “direct attempt to intervene in the current court proceedings” in Belgium, involving Euroclear, the security depository holding the bulk of Russia’s frozen assets in Europe. Euroclear holds around €202 billion of the  €210 billion of Russian Assets. 

This dispute stems from Russia’s wider legal battle with Euroclear over the frozen assets. Earlier this year a court in Moscow upheld Russia’s central bank’s claims to recover damages from Euroclear related to the assets. The Central bank said in a statement that they welcomed the court’s decision which recognised the actions of Euroclear as “unlawful”. Russia could seek to use that judgement to pursue Euroclear’s assets in other countries, while the EU’s mechanism is designed to make such enforcement more difficult. 

The frozen Russian assets are no longer simply a sanctions issue. They have become a developing legal battle over how far the EU can and will go to protect its sanctions regime and how far Russia will go to challenge it. 

“The timing of the challenge is significant”

The timing of the challenge is significant. The topic of these assets being used to help finance Ukraine has become increasingly debated amongst European governments. While profits generated from the assets have already been used to support Ukraine, using the reserves themselves represents a much bigger step and more importantly raises questions over the precedent being set over how sovereign assets may be treated during future conflicts.  

Leaders from the European Union are set to meet in Brussels on October 15^th-16^th to discuss several issues, including Ukraine. Ahead of this summit, 122 members of the European Parliament signed a letter calling for renewed discussions on using the immobilised assets to aid Ukraine. In the letter, MEPs argue that Russia should pay for the damage caused by the war. These MEPs are not the only ones pushing to revisit this. In August, a letter was signed by four member states – Sweden, Poland, Spain and the Netherlands which stated, “Ukraine needs more financial support in both the short and the long term”. 

“The renewed debate over the assets comes as Ukraine faces a significant funding shortfall”

The renewed debate over the assets comes as Ukraine faces a significant funding shortfall. In an EPC policy dialogue on September 28^th Ukraine’s finance minister, Sergey Marchenko, warned that the country still faces a gap of $32.6 billion for 2027 as well as roughly $45 billion in additional military needs. The pressure comes as the none stop attacks on the country continue to damage businesses and infrastructure. Marchenko called on Ukraine’s partners to take “bold actions”. 

The main obstacle in the use of the assets is Belgium. Officials have warned that using these assets could expose both the country and Euroclear to significant financial and legal risks, especially as Russia is already perusing Euroclear through the courts. This creates a problem for the EU, if member states agree that the assets should be used to support Ukraine, they must still decide who would bear the consequences is Russia were to successfully challenge the move. 

Russia’s new court challenge therefore comes at a critical moment.