RUSSIA’S POST-CONFLICT OBLIGATION TO COMPENSATE
The harrowing footage of civilian displacement and property destruction resulting from Russia’s invasion of Ukraine brings to mind the importance of a recent but overshadowed milestone – on 13 January 2022 Iraq finally satisfied its compensation obligations that resulted from its invasion of Kuwait. The Kuwait invasion compensation program was administered by the UN Compensation Commission (UNCC). Through the UNCC, Iraq paid a total of US$ 52.4 billion to severely impacted individuals, corporations, governments and international organisations. This was international law at work, imposing substantial consequences on one sovereign state for its unlawful invasion of another. Iraq’s experience raises serious issues as to Russia’s international obligations to compensate for the damage it inflicts during its invasion of Ukraine.
The requirement that a state must provide full reparation for injuries caused by its breach of international obligations is a long-held and well-settled rule of international law. The substantial line of authority supporting this proposition includes the Chorzów Factory case (‘reparation must, as far as possible, wipe out all the consequences of the illegal act and reestablish the situation which would, in all probability, have existed if that act had not been committed’) and Article 31 of the ILC Articles on State Responsibility. While restitution of property is available as a form of reparation, practice shows that pecuniary compensation is frequently the most appropriate (and often the only) remedy for damage resulting from breaches of international obligations.
Despite the refusal of a minority of states to comply with this fundamental norm, states frequently make compensation payments through agreement or to comply with a third-party finding that compensation is owed due a breach of international obligations. In addition to Iraq’s payout mentioned above, other examples of actual payment include Iran’s payment of over US$ 2.5 billion in compensation for interfering with the property of US nationals during the 1979 Iranian Revolution (via decisions of the Iran-US Claims Tribunal (IUST)) and Libya’s payment of over US$ 1.5 billion to the families of victims of the 1988 Lockerbie bombing and the 1986 attack on a Berlin nightclub.
In determining how post-conflict compensation could be made by Russia, the operations of the UNCC and IUST will provide helpful beacons of guidance. Other bodies have ordered and quantified amounts of post-conflict compensation, such the recent International Court of Justice (ICJ) 9 February 2022 judgment in Armed Activities in the Territory of The Congo (DRC v Uganda), and the Eritrea-Ethiopia Claims Commission, but the payment execution mechanisms of the UNCC and IUST are of particular interest for Russia’s compensation obligations.
In 1991, the UN Security Council – including Russia – passed Resolution 687, which held that Iraq was liable under international law for any damage resulting from its unlawful invasion and occupation of Kuwait. The UNCC was established and tasked with verifying Resolution 687 claims and assessing the compensation to be paid. Payments were made using a percentage of Iraq’s oil export sales. The UNCC paid out US$ 52.4 billion in compensation to approximately 1.5 million claimants (2.7 million claimants actually lodged claims). The process took 30 years to complete. Successful claims were made by: foreign workers who fled Kuwait after Iraq’s invasion; individuals who suffered serious personal injury; families of individuals who died from Iraq’s actions; oil companies whose wells were deliberately set ablaze by Saddam Hussain’s forces; Kuwaiti citizens; the Kuwait government; and foreign governments for evacuating their citizens, caring for the displaced or replacing damaged property. To process the enormous number of claims within a reasonable time period, mass claim assessment methods based on statistical probability or samples chosen from a certain category of claims were sometimes used rather than requiring a ‘best evidence’ approach for verifying and valuing each claim. Frequently, claimants were unable to provide the ‘best evidence’ due to the chaos and destruction caused by Iraq’s invasion.
A critical feature of the UNCC was its ability to guarantee compensation payments once claimants and payment amounts were assessed and approved. This power to pay was possible because the UNCC functioned as a subsidiary organ of the UN Security Council and the UN controlled Iraq’s oil exports. The establishment of this type of UN Security Council-backed compensation program is unlikely in the Ukrainian conflict – Russia would be expected to exercise its Security Council right to veto any such program. Nonetheless, the UNCC’s verification and assessment processes may provide useful blueprints and reference points.
An alternative mechanism to guarantee payment was established to compensate US nationals whose assets were affected by the 1979 Iranian revolution. In that instance, Iran and the US entered into a settlement via Algeria acting as an intermediary. Algeria made a declaration that recorded commitments of Iran and the US in a General Declaration and a Claims Settlement Declaration. The terms of this settlement created the IUST, which was mandated to determine, among other things, claims against Iran by US nationals. If the IUST determined that a claimant should be paid a certain amount of compensation by Iran, those payments were immediately made out of a security account. This account was funded by Iran’s assets that were frozen by the US after the Iranian revolution. Iran consented to this security account procedure because another part of the arrangement required the US to transfer the rest of Iran’s frozen assets back to Iran (sources indicate that approximately US$ 12 billion of Iranian assets were frozen by the US in 1979). If there is resolve to apply this type of mechanism to Russia, options could be explored for the international community to allocate frozen Russian funds located outside Russia to pay verified compensation claims. The Governor of Ukraine’s Central Bank has already called for this type of reparation. Potentially, this mechanism for compensation may be arranged even if Russia does not agree to it. But, naturally, the better (but more difficult) approach would be to obtain Russia’s consent.
It is too early to say whether Russia will agree to a settlement that ends the conflict, let alone agree to pay any compensation for conflict-related damages. Navigating a road to settlement will likely be difficult. But the prospect of releasing frozen funds or lifting sanctions may provide leverage, in which case the Iran’s agreement to establish the IUST and its payment mechanism may provide some practical lessons.
Even with a cooperative Russia and an in-principle agreement on a compensation program, many complex questions will have to be resolved, such as, who will be tasked with administering, verifying and valuing the hundreds of thousands of likely claims, what will be the causal nexus that triggers compensation, what categories of persons will be eligible for compensation, and how will payments be distributed to successful claimants? Of additional relevance is Ukraine’s case against Russia instituted on 26 February 2022 before the ICJ, which seeks compensation for damage caused by Russia’s actions. Previously, in the Armed Activities in The Congo case, the ICJ appointed experts to assess loss and damage. But given the magnitude of the damage and massive number of persons affected by the Ukraine crisis, could the ICJ go beyond appointing experts and order a compensation program to be set up?
If Russia refuses to support a compensation program, two other programs may provide guidance. The first is the US Foreign Claims Settlement Commission program for determining claims against the German Democratic Republic (FCSC GDR program) for losses relating to East Germany’s nationalisation and other taking of property interests of US nationals. This program had no funds available to make payments when it was completed in 1981. But after the reunification of Germany, the Federal Republic of Germany (FRG) agreed with the US to allow claimants either to accept payment of the Commission awards or to waive that right and pursue claims under German law. In 1997, the FRG agreed to pay over USD 102 million to cover claimants who elected for payment of their FCSC GDR program awards.
The second is the UN Register of Damage (UNRoD), which was set up after the ICJ concluded in 2004 that Israel was obligated to make reparation for damage caused by its construction of a wall in the Occupied Palestinian Territories. UNRoD was set up to record the damage resulting from the wall’s construction. It does this through reviewing and registering claims that fall within its mandate. UNRoD is not a compensation commission, and no funds are available to pay wall-related damage at present. Nonetheless, it is a UN-backed mechanism which is creating systematic record of damage that will become an important resource when funds become available to pay eligible claimants.
Based on these two examples, if there is no foreseeable prospect of Russia agreeing to compensate the victims of its invasion of Ukraine in the short term, a program similar to either the US FCSC GDR program or UNRoD may be an option. At the least, it will help commence the background work of claim formulation and evidence collection and drive momentum toward a Ukraine invasion compensation program, even while there are no compensation funds available.
Any compensation program relating to the Ukraine conflict will involve inherent uncertainties and difficulties, and will take many years to complete. But these problems did not prevent bodies such as the UNCC or the IUST from carrying out their enormous and arduous mandates. A program providing compensation for loss resulting from Russia’s invasion of Ukraine must be given serious and careful consideration. Post-conflict compensation to restore persons to pre-conflict positions, although not a perfect solution, is the best remedial option. It is a future cost of Russia’s present aggression.
The author is grateful for the helpful comments on this Blog provided by Dr Nilüfer Oral and Jansen Calamita.