The financial and legal nature of assets compulsorily seized from the aggressor state

Abstract

Problem setting. The large-scale freezing of sovereign and private assets of the Russian Federation abroad and within Ukraine has triggered an intense legal debate regarding the legitimacy of their forced seizure and integration into the public finance system. Currently, financial law lacks a unified conceptual model that clearly defines the legal nature, structure, and budget classification of these specific non-tax revenues. This creates significant risks of fragmented budgetary accounting, inconsistent institutional mandates, and legal vulnerability of these funds against claims of state sovereign immunity in foreign jurisdictions. Analysis of recent research and publications. Despite the extreme relevance of this topic for Ukraine, there is currently very little research on the classification, budgetary accounting, and intended use of such forcibly seized assets. One notable exception is S. V. Zakharova, who studies the financial and legal nature of public revenues arising from the forcible seizure of assets belonging to an aggressor state. The purpose of this article is to examine the financial and legal nature of assets forcibly seized or alienated from an aggressor state as a unique type of non-tax revenue of a public and coercive nature, to analyze their internal structure, and to identify their key differences from other traditional sources of public finance. Article’s main body. The article explores the financial and legal nature of forcibly seized and alienated assets of the aggressor state and its residents as a unique category of non-tax public revenues. The authors establish that these subbudgetary inflows possess four distinct markers: public-compulsory collection, non-compensatory nature, delictcompensatory root cause, and strict ear-marked utilization. The contemporary structural framework of these revenues is categorized into three paths: domestic asset forfeiture (via sanction mechanisms and special legislation), windfall profits generated from frozen assets abroad (e.g., Euroclear repository), and international credit initiatives backed by future interest revenue (G7 ERA Loans). Through a comparative analysis, the paper delineates these revenues from traditional taxes, criminal forfeitures, and classical reparations. The study highlights the lack of a unified legislative standard in Ukraine, leading to fragmented accounting and non-transparent execution. Conclusions and prospects for development. Assets forcibly seized from an aggressor state constitute a unique type of non-tax revenue of a public and coercive nature. Their defining characteristics include the coercive nature of their acquisition, the complete lack of compensation for the owner, a tortious cause, and the earmarked nature of the use of the resources obtained. To ensure the greatest possible consistency in the legal regulation and budgetary accounting of these resources in Ukraine, it is deemed appropriate to amend the Budget Code of Ukraine, by introducing a separate category within the structure of non-tax revenues called “sanctions and compensation revenues”. This will allow for a clear distinction between these revenues and ordinary budget revenues, ensure full transparency of their use to international donors, and guarantee that funding is directed exclusively toward objectives related to addressing the consequences of Russian aggression.