On 12 March 2026, ECJ ruled entity assets frozen if controlled by listed person.
- ECJ issued judgement C-84/24 EM System, regarding assets of company not included on list of persons subject to sanctions may be frozen if it is controlled by a person included on that list. i.e., listed person has a 50% shareholding in that company.
Overview
- On Dec. 17, 2020, EU CNCL included Belarusian national A.V.S. on list of natural persons subject to EU sanctions against Belarus, set out in Annex I to Reg 765/2006.
- Following day, two Lithuanian banks froze the assets of Lithuanian company EM SYSTEM on ground A.V.S. had a 50% shareholding in that company.
- EM SYSTEM brought action before Lithuanian courts seeking to have assets unfrozen.
- After action was dismissed, EM SYSTEM brought an appeal before Supreme Court of Lithuania, which referred questions to ECJ for a preliminary ruling concerning possibility of freezing the funds of a legal person or entity not included on the list.
- ECJ held freezing of funds pursuant to Reg 765/2006 also covers funds and economic resources of company not included on list, provided that funds and economic resources are owned, held or controlled by a person, entity or body which is included on that list.
- Such an interpretation is necessary to achieve restrictive measures' objective.
- Concepts of held and controlled must be interpreted broadly, taking into account both direct and indirect ways of influencing use of funds and economic resources of a person, entity or body linked to a person included on the list.
- Necessary sanctions applied to as wide range of persons, groups or entities as possible in order to prevent them from being circumvented; and to ensure the surprise effect and the speed with which those measures are imposed.
- Necessary to work with clear criteria and with certain presumptions regarding internal decision-making structure of legal persons, entities or bodies concerned to determine whether they are owned or controlled by a person or entity.
- And whether funds and economic resources also held/controlled by that person/entity.
- ECJ held it must be presumed 50% shareholding in a company makes it possible to control not only that company but also its funds and economic resources.
- Such presumption must be rebuttable and legal person, entity or body not included on list as well as person included on that list must be afforded opportunity to overturn presumption and secure, as a result, unfreezing of the funds or economic resources.
