From Asset Freeze to Forfeiture: How Canada’s Volga-Dnepr Ruling Sets a Precedent for Western Allies

The An-124 landed at Toronto Pearson on February 27, 2022, shortly before Canada closed its airspace to Russian-owned aircraft following Russia’s full-scale invasion of Ukraine. More than four years later, it remains at the airport.

Canada sanctioned Volga-Dnepr in June 2023 and issued a seizure order covering the aircraft. In February 2025, Ottawa expanded the administrative order to related controlling entities and creditors, including Volga-Dnepr Group, Isaykin and Sberbank. Physical control of the aircraft was placed with the federal minister responsible for Public Services and Procurement.

But Canadian law draws a line between seizure and forfeiture.

The government can take administrative control of an asset under the sanctions framework. Permanently extinguishing the owner's title requires a separate judicial process in a provincial court, such as the Ontario Superior Court of Justice. Until that process is completed, the aircraft is seized rather than definitively transferred to the Canadian state.

That makes the Federal Court decision significant without making it the final step.

The ruling validates the sanctions listing on which the seizure rests. It does not, by itself, transfer ownership of the An-124 to Canada or Ukraine.

That legal distinction matters because the aircraft is increasingly becoming a test of whether Western sanctions can evolve into a durable system of asset redistribution.

Ottawa’s evidence versus the commercial-neutrality defence

Volga-Dnepr’s argument was straightforward: it presented itself as a commercial heavy-lift carrier, said it had stopped transporting military cargo in 2018 and argued that neither the company nor Isaykin had a meaningful role in Russia’s invasion of Ukraine.

Global Affairs Canada offered a different picture.

Ottawa argued that Volga-Dnepr had assisted Moscow in circumventing Western export controls involving military and sensitive dual-use technologies. The government relied on evidence concerning state contracts and state subsidies to establish a continuing relationship between the company and the Russian state.

That distinction goes to the heart of a broader sanctions problem.

Russian companies operating internationally can formally separate their commercial activities from the state while remaining economically dependent on state contracts, subsidies or logistics networks. If Western courts accepted corporate separation as sufficient protection against sanctions, companies with deep state ties could potentially preserve access to Western jurisdictions simply by describing themselves as private commercial actors.

The Federal Court's rejection of Volga-Dnepr's challenge therefore matters beyond the individual carrier. The court has left intact Ottawa’s ability to rely on the broader relationship between a sanctioned company and the Russian state when defending its sanctions decisions.

For companies seeking to contest sanctions, that raises the cost of proving that their commercial identity can be treated independently from Moscow’s strategic interests.

From immobilising assets to taking them

Canada’s Special Economic Measures Act provides the legal architecture for a step that has become politically important in discussions among Ukraine’s allies: moving beyond immobilising Russian property towards forfeiting it and using the proceeds to support countries affected by violations of international peace and security.

This is where the Toronto case becomes more than an aviation dispute.

A conventional asset freeze is designed to prevent an owner from using or moving property. Seizure goes further by placing physical or administrative control in government hands. Civil forfeiture can go further still, permanently extinguishing the original owner's title.

The sequence matters because each stage carries different legal consequences.

In the case of RA-82078, Canada has reached the seizure stage. The Federal Court has now upheld the sanctions decision supporting that measure. A separate judicial application would be required to complete permanent forfeiture.

That creates a legal pathway towards an eventual transfer or monetisation of the asset, but the briefing does not establish that such a transfer to Ukraine has yet occurred or that ownership of this aircraft has already been allocated to Kyiv.

For Ukraine and its allies, the importance lies precisely in the precedent. If the legal architecture survives subsequent challenges, the distance between a sanctions designation and the eventual use of a seized asset for reconstruction becomes considerably shorter.

The treaty fight is not over

Volga-Dnepr has another avenue open to it.

In August 2024, the company launched international arbitration against Canada under the 1989 Canada-USSR Bilateral Investment Treaty, using UNCITRAL rules and seeking damages over what it characterises as unlawful expropriation.

The Federal Court ruling does not automatically resolve that dispute.

It does, however, give Ottawa a stronger domestic legal position. Canada can now point to a judicial decision that found its sanctions listing reasonable and procedurally fair. The company therefore faces a more difficult task if it seeks to portray the Canadian measures as arbitrary administrative action.

The interaction between domestic sanctions law and investment treaties is likely to remain contentious. The case tests how far national-security measures can restrict the practical protections traditionally available to foreign investors, particularly when the investor is connected to a state involved in a major armed conflict.

For Russian businesses, the implication is uncomfortable: corporate status and investment protections may provide less shelter when Western governments establish a substantive connection to state-supported strategic activity.

A strategic aircraft with no easy replacement

The legal battle also concerns a piece of infrastructure that is unusually difficult to replace.

The An-124, designed by the Ukrainian Antonov bureau during the Soviet era, can carry roughly 120 to 150 tonnes. Only a limited number remain in active commercial service globally. Of around 36 aircraft built or remaining in Russia across military and civilian operators, about 15 are still in active commercial use worldwide.

The aircraft stranded in Toronto is therefore not an interchangeable commercial asset.

Russian operators face additional constraints because they cannot simply reproduce the existing An-124 fleet. The aircraft depends on Ukrainian-made Ivchenko-Progress D-18T engines, original technical support from Antonov State Enterprise and Western components that are now subject to export restrictions.

Every aircraft removed from the international commercial network makes the remaining fleet more strategically important.

For Russia, that matters well beyond conventional freight. Heavy-lift aircraft are needed to move oversized industrial, energy and military equipment that cannot be transported efficiently by ordinary cargo aircraft. Restrictions on access to maintenance, components and Western servicing progressively narrow the operational options available to Russian operators.

The result is a form of attrition that sanctions policy rarely captures in a single headline: not the immediate destruction of infrastructure, but the gradual fragmentation of a specialised logistics system.

The price of leaving the aircraft idle

There is also a prosaic financial dimension to the dispute. The aircraft has accumulated more than CAD $1.5 million in unpaid parking and airport fees at Toronto Pearson.

That debt is growing while the legal dispute continues.

Yet the financial cost is secondary to the institutional question now before Canada. Ottawa has established control of the aircraft and secured judicial confirmation of the sanctions decision. The remaining challenge is whether it can convert that control into permanent forfeiture under the separate judicial procedure without undermining the legal safeguards that have allowed the sanctions regime to survive review.

That is the point at which Canada’s experiment becomes consequential for other G7 governments.

If the seizure-forfeiture chain withstands further legal scrutiny, frozen Russian wealth becomes something different: not merely property that cannot be used, but property whose ownership can potentially be altered through a defined legal process.

For Moscow, the significance is equally stark. The dispute is no longer confined to whether Russian companies can operate under Western sanctions. It is becoming a question of whether assets accumulated through decades of participation in Western markets can remain legally protected once their owners are tied to a state whose actions have triggered those sanctions.

The An-124 is still sitting at Pearson. Its title has not yet passed to the Crown, and the final destination of the aircraft or its value remains a matter for the next stage of the legal process.