The lesson on the aircraft set the rule of this course: a sanction from one's own side becomes a loss when the other state responds with an act that holds, takes or prevents. What remains is the most complete form of that response, the one aimed not at a mobile asset but at an entire subsidiary. On April 25, 2023, the Russian president signed Decree No. 302 on the temporary management of certain assets. The federal agency for state property management can be appointed temporary manager of assets held by persons from countries deemed unfriendly, and it then exercises all the owner's rights except that of disposing of the asset. The text presents itself as a response: it targets cases where Russian assets abroad are seized, or threatened with seizure.
The first listings came at once. The decree placed under temporary management 83.75 percent of the shares in Uniper's Russian subsidiary and Fortum's holdings in its Russian subsidiary, 69.88 percent and 28.35 percent held by two group companies. In July 2023, a further decree added Danone's dairy subsidiary and the Baltika brewery, owned by Carlsberg. The groups responded through their accounts: Fortum fully wrote down its Russian assets and deconsolidated them after its first quarter of 2023, Carlsberg took a write-down of 9.9 billion Danish kroner on Baltika, and the deconsolidation of Danone's subsidiary led to a write-down of about 700 million euros.
The classification problem is complete, and it comes from the fact that the decree takes without transferring. Title stays with the foreign shareholder: it is on the register, still the owner on paper. But it loses management, access to the accounts, dividends and the ability to sell without the state's consent. This is the creeping expropriation this program studied from its first course, except that it is not creeping at all: it fits in a single act, dated and published. The whole question for the political risk policy is therefore what it requires. A wording that addresses the loss of effective control is triggered by the decree; a wording that requires transfer of title or confiscation is not, or only after a period of continuous deprivation set by the policy.
Then comes the question specific to this course, that of cause. The decree presents itself as retaliation against Western sanctions and seizures, that is, against acts of the insured's own side. Can the insurer argue that the loss has its root cause in the home country's policy, and exclude it on that basis? The reading that follows from the aircraft judgment points the other way: the proximate cause is the act that deprives, and that act is the host state's, whatever reason it gives for it. The exclusion of home country acts addresses what that country did, not what another state did in response. Some policies, however, expressly exclude losses arising from war or hostilities between the host country and the home country, and it is that clause, more than the decree's stated motive, that the file must read first.
Recourse against the state takes a particular form here. A group that loses a subsidiary in these conditions can bring an arbitration under a bilateral investment treaty between its country and the host state, and Fortum announced in 2023 its intention to do so. For the insurer that pays, that recourse is the route of subrogation, and its value is measured as this program has taught: an award is easier to win than to enforce, and the immunity from execution of a state that seized foreign assets precisely in response to seizures will not be lifted on its own assets without resistance. Decree 302 carries its own argument: it says it responds to seizures, and every seizure of its assets abroad is presented as one more reason.
The last lesson is about accumulation. The decree does not target a subsidiary by chance, it targets a category, investors from unfriendly countries, and it can list others by a simple decree. An insurer covering several European groups present in the same country therefore carries a risk whose accumulation key is the host state and its relationship with its insureds' side, exactly as with the aircraft. A portfolio of policies geographically concentrated on a country in open conflict with the Union is not a sum of individual risks: it is a single exposure, triggered by a list annexed to a decree.
Three steps close this lesson. Read in the policy what triggers expropriation cover, loss of effective control or transfer of title, and the period of continuous deprivation it requires, since that decides whether a temporary administration is a loss or a wait. Find the exclusion for hostilities between the host country and the home country, which can tip a file that the retaliation's stated motive does not decide. Finally, document from the listing onward the subsidiary's value, the date control was lost and the first steps toward recourse, including the notice the bilateral treaty requires: the subrogated insurer's recourse will only be worth what the insured has preserved.
A European consumer goods group wholly owns a production subsidiary in Russia, valued at 410 million euros in the last balance sheet. Its political risk policy covers expropriation, defined as any act of the host state that deprives the insured of effective control of its investment for a continuous period of 180 days, and it excludes losses resulting from acts of the government of the insured's home country. In July, a decree places the subsidiary under the temporary management of the federal agency; a new chief executive is appointed, and the group no longer has access to the accounts. The insurer, notified in January, replies that the decree is retaliation against EU sanctions and that the loss therefore falls under the exclusion.
The insurer's position confuses motive and cause. The exclusion addresses acts of the government of the home country, that is, what the Union or the group's member state did; but the act depriving the group of its subsidiary is a decree of the host state, and it is the proximate cause of the loss, whatever justification it displays. That is the reading that follows from the 2025 aircraft judgment, where an export ban presented as a response to sanctions was held to be the cause of the loss. The policy's definition is then met: it addresses deprivation of effective control, not transfer of title, and the group lost management and access to the accounts in July. The 180-day clock runs from the date of the decree; by January it has nearly run out, and the loss is constituted when it ends, unless control is restored before then. Two points remain to be checked before concluding. The first is a possible exclusion for hostilities between the host country and the home country, which the facts do not mention and which, if it existed, would shift the whole argument. The second is preserving recourse: the notice required by the bilateral investment treaty must be given by the group, and the insurer that pays will be subrogated to it. The amount will then be argued on the subsidiary's value at the date of the decree, not on the write-down the group took in its accounts.
- 01Decree 302 takes without transferring: title remains, but management, accounts, dividends and the ability to sell pass to the state.
- 02A policy addressing loss of effective control is triggered by temporary administration; a policy requiring transfer of title is not.
- 03A retaliation's stated motive is not its cause: the act that deprives is the host state's, and the home country exclusion does not reach it.
- 04The exclusion for hostilities between host and home country is read first: it is the clause that can tip the file.
- 05A retaliation aimed at a category of investors makes the host state the accumulation key of a whole portfolio.