The Court of Justice of the European Union (CJEU) has provided significant clarification regarding the application of sanctions in cases where a legal entity itself is not included on the sanctions list, but is controlled by a person or entity included on the EU sanctions list.
The case was brought after Lithuanian credit institutions froze the company’s assets on the grounds that 50% of the company’s shares were owned by a person included on the EU sanctions list (EU sanctions regime against Belarus). The company challenged this decision, and the Lithuanian Supreme Court referred the matter to the Court of Justice of the European Union.
In its judgment, the Court of Justice of the EU emphasized that the sanctions regime applies not only to persons directly included on the EU sanctions list, but also to companies owned or controlled by persons included on the sanctions list. This approach is essential to prevent the circumvention of sanctions and to ensure the effective application of the freezing of funds and economic resources.
The Court of Justice of the European Union noted that the concept of “control” must be interpreted broadly, encompassing both direct and indirect influence over an undertaking. At the same time, it was recognized that in cases where the sanctioned entity holds 50% of the company’s shares, it is deemed to control the company and its assets.
However, this presumption may be challenged. EU Member States must ensure a mechanism that allows both the company and the sanctioned entity to challenge the freezing of funds and, if necessary, obtain their release.
Latvia also submitted its opinion in this case, thereby contributing to the refinement of EU sanctions enforcement practices.
In light of this judgment, the Financial Intelligence Unit reminds that compliance with sanctions involves more than just a formal check of individuals against sanctions lists. The current list of sanctioned entities whose funds are frozen in Latvia can be viewed here.
In addition, the FID encourages the use of the Sanctions Search Tool, which allows for the convenient and efficient verification of natural and legal persons subject to UN, European Union, or Latvian national sanctions.