Ingrid Wuerth, a well-known international law expert and professor at Vanderbilt Law School, and Brian O’Toole, a well-known sanctions expert and non-resident senior fellow at the Atlantic Council who has worked at the Treasury Department and the Central Intelligence Agency, joined the study group for the session.

Before the discussion, the study group circulated the following background readings:

• Dianne Rennack, “State Sponsors of Acts of International Terrorism—Legislative Parameters: In Brief,” Congressional Research Service (May 4, 2021);
• Jason M. Blazakis, “The Ultimate Sanction: Listing Russia as a State Sponsor of Terrorism,” A. Times (Mar. 1, 2022);
• Jason M. Blazakis, “Biden Should Swiftly Put Russia on Terror List,” The Hill (May 3, 2022);
• Ingrid Wuerth, “Russia Should Not be Designated a State Sponsor of Terrorism,” Transnational Litigation Blog (July 11, 2022); and
• Delaney Simon and Michael Hanna, “Why the U.S. Should Not Designate Russia a State Sponsor of Terrorism,” International Crisis Group (Aug. 4, 2022).

The first thing the presenters did was explain what role SST designations play in the U.S. government’s arsenal of sanctions. The Department of State is in charge of designating an SST, but the Department of Treasury is in charge of making sure that the designation is carried out.

The presenters concentrated on two effects they believed would result from the designation of Russia as an SST: first, a chilling effect on financial institutions that could avoid transactions with Russia that may technically be allowed but that institutions deem too risky to participate in; and second, the pursuit of claims against Russia by U.S. citizens who could collect on judgments from Russian assets frozen by the United States, which would decrease the funds available for redress.

The presenters explained that it is challenging to predict how an SST designation will play out because businesses, particularly financial institutions that act as gatekeepers to economic activity, may determine that the risks of doing otherwise legal business with entities and people in SSTs are too great, causing the designation’s effects to extend beyond their exact legal limits. A designation might cause businesses involved in Russian grain exports to back away from these deals because of the reputational risk of doing business with an SST-designated country (or some other concern about risk), which in turn might result in higher food prices in nations that depend on those exports.

The classification of Russia as an SST may also give American claimants the chance to pursue the enforcement of judgments against Russian state assets that are now frozen. This might then make it more difficult to use those resources to rebuild Ukraine, pay compensation to Ukrainians who have been harmed by Russia’s actions, or persuade Russia to alter its behavior (or some combination of those three activities). The Foreign Sovereign Immunities Act says that, in general, sovereign countries can’t be sued in the United States. However, the SST designation is an exception to this rule. This makes it possible for lawsuits to be filed based on actions that led up to or followed the designation. Only U.S. citizens, U.S. military personnel, and U.S. government workers may file lawsuits in such cases.

Current legislation uses the Second Chechen War, Russian support for separatists in the Donbas region of Ukraine, Russian material support for Syria, private military networks of mercenaries, and claims that Russia gives shelter to a U.S.-designated terrorist group as reasons for SST designation. So, the presenters said, the criteria for SST designation would make some plaintiffs eligible and others not. The panelists opined that such broad bases for designating Russia could lead to the emergence of groups of American plaintiffs with the power to compel Russia to comply with court orders and deplete the US asset freeze, making it impossible to use those assets to pressure Russia to change its behavior, pay Ukrainian claimants who lack the legal standing to sue in US courts, or use them in other ways to rebuild Ukraine.

After the opening remarks from the outside experts, the session turned into an open discussion. Some of the things that were talked about were how SST designation interacts with other designation systems related to terrorism, how SST designation is different in the United States and other countries, and possible alternatives to SST designation.