A CHILLING REMINDER OF THE LAST TIME ASSETS WERE CONFISCATED

When the Nazis persecuted the Jews in Germany in the 1930s the seizure of their properties and assets was implemented with characteristic ruthlessness and criminality.  Known as ‘Aryanization’, Jews were forced to sell their businesses and properties at a fraction of their market worth to well-connected Nazis.  Trustees overseeing their assets were appointed with the power to sell without the consent of the owner to state owned companies and pro-Nazi tycoons.

A beneficiary of this legalised theft was the German industrialist Friedrich Flick who bankrolled the Nazi Party, the SS and cemented ties between Hitler and big business.  An active Nazi, during the war his companies employed thousands of people in forced labour camps, most of whom died but he profited hugely.

At the Nuremberg trials, Flick was found guilty of war crimes and using slave labour to enrich himself.  He was sentenced to seven years in jail and the tribunal condemned his collusion with the Nazis, notably the SS leader Heinrich Himmler, in profiting from the confiscation and fire sale of Jewish-owned assets: “A sale compelled by pressure or duress should be questioned in a court of equity.  Taking of property by the sovereign (state) without just compensation is forbidden”.

Flick was released in 1950, rebuilt his business empire as the largest shareholder of Daimler-Benz and became one of the world’s richest individuals.  But most of the confiscated assets and properties were never returned to the Jewish owners.  Instead, they were stolen or sold off cheaply to politically well-connected German businessmen.

The Nuremburg judgement has chilling parallels with today’s sanctions against many rich Russians in the USA, UK and Ukraine whose assets could easily suffer a similar fate.  Ukraine’s Sense Bank, indirectly owned by sanctioned Russian tycoons, has already been nationalised by the state without compensation. 

As the UK and European governments prepare to seize Russian state assets, prominent lawyers, UN officials and pro-Ukrainian politicians are uneasy about the implications for the rule of law, especially if this involves confiscating the assets of sanctioned individuals.  “Moving from freezing the assets to confiscating and disposing them carries the risk of breaking international law that you want to protect”, said Christine Lagarde, the European Central Bank president, recently.  The French Finance Minister Bruno Le Maire was more direct:  the legal justification does not exist. 

For the assets of private individuals, the legal justification is being contested.

“Confiscating assets without proof they are the proceeds of crime is akin to expropriation”, said anti-corruption campaigner Gretta Fenner.  “This is done by dictators not by democracies that adhere to the rule and human rights.  Financial support for Ukraine is vital.  But if western governments undermine their own commitments to the rule of law to obtain that money, then they are violating the same principles Ukraine is fighting to preserve”.  The international lawyer Bob Amsterdam is more blunt.  “It is theft, pure and simple”, he told me.

I can reveal sanctions against Russia applied by western states without UN approval are in fact illegal under international law.  Known as Unilateral Coercive Measures, they breach trade agreements, human rights and bilateral investment treaties.  “Sanctions (against nation states) mandated by the UN Security Council are legal and legitimate”, said Alfred de Zaya, a UN expert.  “But unilateral coercive measures are not legal or legitimate”. 

This is confirmed by Michael Swainston KC who recently told a UN Human Rights Committee such sanctions are illegal because they are not authorised by the UN.  “Unilateral coercive measures violate human rights”, he said.  “They kill.  Witness their known impact on Venezuela and Iran during the COVID crisis.  They amount to collective punishment without trial under a law that is usually retrospective and vague.  Indeed, the measures are often deliberately vague in their impact to maximise uncertainty.  None of this is consistent with the rule of law”.  He later told ‘The Times’ that sanctions against individuals are also illegal.

Lawyers are increasingly concerned at the arbitrary and capricious way people are being sanctioned.  The decision is based on a ministerial decision not a court finding.  The process is opaque, secretive and the individual has no opportunity to see the evidence against him and defend himself.  This is in stark contrast to the process under the Proceeds of Crime Act whereby prosecutors are required to prove the accused has obtained his assets based on criminal activity.  Only then can the criminal’s assets be frozen.

And the quality of evidence required for designation is extremely low – Google searches, social media posts, obscure online messages and unverified articles on anti-Putin websites.  “The UK is supposed to be upholding the rule of law by supporting Ukraine but in fact they are undermining it”, said Steven Kay KC.  “The situation is like World War Two when ordinary Germans – not Nazis – were interned purely for being German”.  One anti-Putin activist told ‘Business Insider’ if you were a rich Russian with assets in the west in 2022 you would be sanctioned regardless of your real relationship with the Kremlin.

The application of sanctions is now being challenged.  “A criticism of targeted sanctions is whether they actually give any incentive for these individuals to change their behaviour”, Maya Lester KC told the Commons Foreign Affairs Select Committee last month.  “There are people on the sanctions lists who have divested all their business in Russia and done everything to show they have nothing to do with Putin and yet they remain on the lists.”

The public do not appear to be enthusiastic about sanctions.  A new opinion poll by the Hayhurst Consultancy for a conference on sanctions reveals 71.5 percent believe it is “unfair” that a government minister has the power to impose sanctions against any individual without the right to challenge the evidence or appeal.

Today negotiations to end the Ukraine war are imminent.  Presidents Trump, Putin and Zelensky say they are ready for direct talks.  “I think we are closer to peace than we think”, said Zelensky.  While his proposals are ambitious, an end to the conflict is inevitable.  And the agenda then turns to the aftermath.  Clearly, Ukraine should be rebuilt with Russian state money and Putin pay for his brutal illegal war. 

But what happens to the hundreds of Russian businessmen whose assets have been frozen?  Will their properties, investments and bank accounts be restored to their owners?  Judging by the police raids and state capture of banks and private companies by the Ukraine government, the prospects are bleak.  A democratic litmus test for President Zelensky, who is Jewish, will be whether Ukraine and the west repeat the crimes of the 1930s when Jewish assets were stolen by the Nazis, sold cheaply to their business benefactors and never returned.