Budapest’s lawsuit targets the European Council’s decision to tap the immobilized funds for military aid

Hungary has sued the EU over its decision to use frozen Russian assets to fund military aid for Ukraine, a move adopted despite Budapest’s opposition.

Western nations froze an estimated $300 billion in Russian assets after the escalation of the Ukraine conflict in 2022 – some €200 billion of which is held by Brussels-based clearinghouse Euroclear. The funds have accrued billions in interest, and the West has explored ways to use the revenue to finance Ukraine.

The lawsuit challenges the European Council’s decision last year to channel military aid to Ukraine through the European Peace Facility (EPF), which reimburses countries that send weapons to Kiev.

Implemented in February, the measure directs 99.7% of interest generated from frozen Russian central bank assets to Ukraine, providing an estimated €3-5 billion ($3.5-5.8 billion) annually.

In a case first filed with the EU Court of Justice and later transferred to the General Court, Hungary is demanding to “annul the decision... on allocating funds to assistance measures for supplying military support to the Ukrainian Armed Forces” and to “order the defendants to cover the costs.”

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Budapest contends that the EPF acted unlawfully by bypassing its veto, arguing that Hungary is not a “contributing member state.”

“As a result, the principle of equality between Member States and the principle of the democratic functioning of the European Union were infringed because a Member State was deprived, unjustifiably and without a legal basis, of its right to vote,” the filing says.

Hungary opposes the bloc’s unconditional support for Kiev and prefers peace talks to continued fighting. Budapest has repeatedly used its veto to block EU financial and military aid, including a disputed €50 billion package at the end of 2023. The standoff has pushed other EU members to seek ways to sidestep Budapest’s resistance.

Moscow has denounced the asset freeze as “robbery” and a breach of international law, warning it would backfire on the West. Senior Kremlin official Maksim Oreshkin said the freeze had already undermined trust in Western finance, while Russian President Vladimir Putin cautioned that seizing the assets would accelerate a global shift toward alternative payment systems.

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