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The Court of Justice of the European Union (“CJEU”) has published its Annual Report 2024 for the Court of Justice and the General Court highlighting, inter alia, the number of cases brought in relation to the EU’s restrictive measures, in particular in the context of the Ukraine crisis. It is clear that sanctions remain highly relevant not only for businesses in their day-to-day activities but also for the courts. Below we highlight some cases to look out for in the coming months.
EU sanctions: The status quo
The EU currently maintains nearly 40 sanctions regimes via which it aims to encourage a change of policy or conduct on the part of the sanctioned persons and entities to promote the objectives of the EU common foreign and security policy. It is not only a perception that restrictive measures have been used increasingly often in the last years. This is also supported by data published by the EU (EU Sanctions Tracker; which concerns asset freeze sanctions):
In particular, the EU’s Russia measures keep on being extended. Despite efforts for negotiations to end the war, it currently does not seem likely that restrictions will be dismantled soon. Following the introduction of its 16th sanctions package (have a read on this in our Responses to the Russia/Ukraine Crisis – Sanctions Update No. 9), the EU is negotiating yet another package with a reported “clear consensus” that this is needed (High Representative Kaja Kallas at the EP plenary).
CJEU: “Eye-catching” number of restrictive measures cases
The trend above is reflected in case numbers at the CJEU. If a national court is in doubt about the interpretation or validity of an EU law, it can ask the CJEU for clarification. Thus, via preliminary rulings, the CJEU has the power to provide clarity on the operation of EU sanctions.
The CJEU’s reports disclose consistently high or even increased numbers of sanctions cases (preliminary rulings as well as litigation by sanctioned individuals). The Court of Justice reported that “no fewer than […] 117 requests for a preliminary ruling […] were brought before the Court in that field in 2024”. According to the Deputy Registrar of the Court of Justice, “what will prove undoubtedly more eye-catching […] is the high number of cases concerning […] the restrictive measures adopted in the context of the war in Ukraine”.
Exemplary and amongst many others, it will be interesting to look out for the following outstanding preliminary rulings:
- In May 2024, an Italian court referred the following question to the Court of Justice (Case C-428/24): “Does Article 2(1) of Regulation (EU) No 269/2014 preclude an interpretation according to which – in the case of assets or resources held in a discretionary trust (the beneficiary of which is listed in Annex I to that regulation) – those assets and/or resources are nevertheless to be regarded as ‘belonging’ to the beneficiary of the trust, even if the national law applicable to the trust (or a contractual safeguard clause contained in the trust deed) expressly prohibits the beneficiary from performing any act of enjoyment or disposal of the trust assets or resources for as long as the beneficiary is listed in Annex I to Regulation (EU) No 269/2014, or in any event for as long as the use or disposal of such assets or resources would constitute an infringement of [EU] law?”
- Amongst other interesting questions on the asset freeze prohibitions and the notion of “associated with”, a Latvian court requested a preliminary ruling on the so called no claims clause in EU Regulation No. 269/2014: “(3) Do the persons, entities or bodies mentioned in Article 11(1)(b) of Regulation No 269/2014 also include associated legal persons within the meaning of Article 2 of Regulation No 269/2014? (Case C-480/24, lodged in July 2024).
- In case C-465/24 (also from July 2024), the main proceedings concerned the appeal of a Russian company against the judgment of a Dutch court, which (referring to EU Commission guidance) essentially ruled that EU Regulation No. 269/2014 precludes the designated appellant from exercising the rights to attend meetings and the voting rights attached to the depository receipts it holds in a Dutch company. The Dutch appeals court asks: “In the case of depository receipts belonging to, owned, held or controlled by natural persons included in Annex I to Regulation 269/2014, or natural or legal persons, entities or bodies associated with them, should the freezing of funds within the meaning of Article 1(f) of Regulation 269/2014 be interpreted as meaning that the rights to attend meetings and voting rights attached to depository receipts cannot be exercised, at least in so far as this does not result in disproportionate prejudice to the depository receipt holder concerned?”
What to expect going forward
We expect this trend to continue in the foreseeable future and advise organisations to remain vigilant as regards new sanctions developments. Noting that the duration of CJEU proceedings has slightly increased to 17-18 months, the outcomes of the preliminary ruling cases mentioned above (and others not mentioned here) might help bring clarity to EU businesses amidst this continuing focus on sanctions.
If you have any questions on EU sanctions generally or on specific preliminary ruling cases that might affect your business, please do not hesitate to reach out to us or your usual Linklaters contact.