Succession à la Carte: How Moscow Chooses What to Inherit from the Russian Empire

American investment fund Noble Capital RSD has filed a lawsuit in US federal court against the Russian Federation. The claim amounts to 225 billion dollars. The basis: tsarist bonds issued in 1916 with a face value of 25 million dollars at 5.5% annual interest. The fund claims to be the lawful successor to the holders of these securities, which were placed through National City Bank of New York.

Russia demands the lawsuit be withdrawn by January 30. Otherwise, it will file a motion to dismiss based on the US Foreign Sovereign Immunity Act. Attorney Sergey Sokolov from the law firm Marks&Sokolov stated that the Russian Federation denies responsibility for the 1916 tsarist bonds. This debt was annulled by the Soviet government on February 3, 1918, by a decree of the All-Russian Central Executive Committee signed by Yakov Sverdlov. The bonds were long ago consigned to the "dustbin of history."

The legal position is clear. On February 3, 1918, the Bolsheviks declared all external and internal debts of the Russian Empire and Provisional Government invalid, totaling approximately 60 billion rubles. Of this, 16 billion constituted external debt, the remainder internal. The only exception was made for impoverished holders of government securities worth no more than 10 thousand rubles.

The main creditors of the Russian Empire were Britain and France. British loans accounted for 46-47 percent of the debt, French loans for 34-35 percent. Germany, the United States, and Holland followed. The 1918 decree caused a diplomatic scandal. European powers sent protests to the RSFSR government. Soviet Russia countered with claims for compensation for damages from the 1918-1922 intervention.

The question of tsarist debts was discussed at the 1922 Genoa Conference. The Soviet delegation was headed by People's Commissar for Foreign Affairs Georgy Chicherin. Creditors demanded annual payments exceeding one billion rubles from the Soviet government. For comparison, under the tsarist government, annual payments of 400 million rubles were required. The Soviet delegation responded with demands for compensation for damages caused by the intervention. Negotiations reached a deadlock.

In the 1920s and 1930s, the issue was discussed separately with the United States, France, and Great Britain. No concrete agreements were reached. Paris continued trading Russian securities on the stock exchange until 1927—French investors hoped for the collapse of the Bolshevik regime.

The situation changed after the collapse of the USSR. In 1986, Mikhail Gorbachev signed an agreement with Margaret Thatcher on settling the state debt of pre-revolutionary Russia. The Kingdom undertook to pay its citizens compensation from 5.5 tons of Nicholas II's gold stored in an English bank.

In November 1996, a memorandum was signed in Paris between the governments of the Russian Federation and the French Republic on the final settlement of mutual claims arising before May 9, 1945. Russia undertook to pay France 400 million dollars over four years. Of this, 280 million was allocated for payment of tsarist bonds, 120 million for compensation to French owners of Russian real estate lost during nationalization.

In May 1997, a final agreement was signed. Russia fulfilled its obligations—compensation was paid in eight installments of 50 million dollars during 1997-2000. The last tranche was transferred on August 1, 2000. France renounced support for any financial claims by its citizens regarding tsarist debts. Russia undertook not to present claims related to damages from the intervention.

Moscow's position on tsarist debts is understandable from a legal perspective. The Soviet decree of 1918, international agreements of the 1990s, closure of the issue at the state level. From the American fund's side, the lawsuit appears unpromising—French courts have already denied similar lawsuits, citing Russia's sovereign immunity.

But there is a nuance. On December 24, 1991, the Russian Federation officially took the USSR's seat on the UN Security Council. A statement to the Secretary-General was sent by USSR Ambassador to the UN Yuli Vorontsov. The letter spoke of the continuation of USSR membership by the Russian Federation with the support of the Commonwealth of Independent States. The Russian Federation retains full responsibility for all rights and obligations of the USSR under the UN Charter, including financial obligations.

The Secretary-General circulated the request among UN members. No objections followed. On January 31, 1992, Boris Yeltsin personally took the Russian Federation's seat at a Security Council meeting. The Russian Ministry of Justice explained in a letter dated January 16, 2012: the Russian Federation became a continuator of the USSR, not a successor, unlike other republics.

Succession gave Moscow permanent membership in the UN Security Council with veto power. Russia became an official nuclear power in accordance with the Nuclear Non-Proliferation Treaty. The USSR ratified the treaty on November 24, 1969. The Russian Federation is the USSR's successor in implementing the treaty. Nuclear weapons remained with Russia. Ukraine, Belarus, and Kazakhstan signed the Lisbon Protocol to START-1 in 1992 and joined the NPT as non-nuclear-weapon states.

A peculiar legal construction emerges. Russia is the USSR's continuator regarding UN membership, Security Council seat, nuclear weapons, and international treaties. Russia is the USSR's successor regarding obligations for Soviet external debts—this issue was settled by separate agreements with former Soviet republics. But Russia categorically is not the Russian Empire's successor regarding tsarist debts.

The 1918 decree annulled these obligations. Agreements with France and Great Britain in the 1990s put an end to the matter. The financial obligations of the Russian Empire are in the "dustbin of history," according to attorney Sokolov's formulation.

Simultaneously, territorial claims against Ukraine, Belarus, and the Baltic states are based on the historical belonging of these lands to the Russian Empire and USSR. Soviet nuclear weapons were fully inherited. The Security Council seat too. Debts—no. The principle of selectivity works flawlessly.

Federation Council Committee member Alexei Pushkov commented on the recent US statement regarding Greenland. Trump's special envoy Jeff Landry stated that Denmark seized Greenland's territory after World War II in circumvention of UN norms. According to Pushkov, the United States found international legal justification for its claims on Greenland by accusing Denmark of illegal seizure after the war. "As we see, there's even a reference to the UN," the senator noted.

The principle is the same for all players on the international stage. International law norms are applied selectively. For others they are mandatory. For oneself—depending on circumstances.

The Noble Capital lawsuit for 225 billion dollars is unlikely to succeed in an American court. The Foreign Sovereign Immunity Act protects Russia from such lawsuits. International agreements of the 1990s closed the question of tsarist debts at the state level. French and British courts have already denied similar lawsuits.

But the very fact of the lawsuit demonstrates the vulnerability of the legal construction of selective succession. If a state is a continuator and successor regarding advantages—UN seat, nuclear weapons, territory—then why not regarding obligations? International law does not provide for an "à la carte" regime where a state decides for itself what to inherit and what to consign to the dustbin.

Russia's frozen assets in the United States amount to approximately 5 billion dollars. The total amount of frozen property in Western countries is significantly greater. Noble Capital proposes that the court recognize the right to debt repayment from assets blocked in 2014 and 2022. The fund requests that responsibility be extended to any sovereign assets under the control of the Ministry of Finance, Central Bank, or National Wealth Fund. It also demands the appointment of an independent external manager to control assets in case of their unfreezing.

These demands create a potential precedent for managing Russian assets abroad. Even if the court rejects the lawsuit, the legal argumentation itself will remain in American court practice. Other creditors may use a similar scheme for their own claims.

Russian diplomacy traditionally insists on strict adherence to international law by other states. Statements about sovereignty violations, interference in internal affairs, and non-compliance with treaties sound regularly. Simultaneously, its own practice demonstrates flexibility in applying the same principles.

The 1918 decree annulling debts was a revolutionary act. Soviet power refused to recognize the obligations of the previous regime. This had consequences for international relations throughout the USSR's existence. Diplomatic recognition of the Soviet state was delayed for years. Obtaining new credits was impossible without settling old debts.

But after the USSR's collapse, Russia actually recognized part of the tsarist debts by concluding agreements with France and Great Britain. Compensation payments of 1996-2000 meant recognition of the principle of succession regarding the Russian Empire's financial obligations. The question was only the size of compensation and payment mechanism.

The current position—categorical refusal of responsibility for 1916 tsarist bonds—contrasts with 1990s practice. Then Moscow was ready to pay for the sake of integration into the world economy and obtaining new credits. Now the refusal is absolute. The bonds are in the "dustbin of history," the question is closed forever.

The Noble Capital lawsuit shows that the question may reopen under different circumstances. Frozen assets create temptation for creditors to use them for repayment of old debts. American legislation theoretically permits such operations under certain conditions. Central bank immunity is not an absolute guarantee of protection.

The claim amount of 225 billion dollars includes accrued interest and the gold clause—linking payment currency to the gold standard that operated until the early 1970s. The fund proposes to determine the final amount during litigation. This is a typical tactic of maximalist demands for subsequent bargaining.

Will the lawsuit succeed? Lawyers interviewed by Russian media consider the chances minimal. The Foreign Sovereign Immunity Act, international agreements, statute of limitations—everything works in Russia's favor. But sanctions policy has created new possibilities for applying provisional measures and managing assets. Precedents of recent years show that traditional legal guarantees are not immutable.

The question is not in legal subtleties. The question is one of principle. A state cannot be a continuator and successor in advantageous aspects while simultaneously refusing obligations. International law is based on pacta sunt servanda—treaties must be observed. Selective application of this principle undermines trust in the state as a reliable partner.

The Russian Federation took the USSR's seat on the Security Council, declaring responsibility for all rights and obligations under the UN Charter. If responsibility is full, it cannot be selective. If the state is a continuator, it continues everything, not just privileges.

The attorney's statement about the "dustbin of history" is a vivid metaphor. But in international law there are no dustbins. There are treaties, obligations, responsibility. The attempt to divide the inheritance into pleasant and unpleasant works only up to a certain point. The Noble Capital lawsuit is a signal that this point may come sooner than it seems in Moscow.

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