EU Court: A company’s assets may be frozen if its controlling person is under sanctions

Brussels – A company that is not directly subject to European sanctions may be subject to restrictive measures if it is controlled by an individual who has been blacklisted. This means that targeting an executive or majority shareholder extends the restrictions to the company in which they are involved, and the assets may be frozen. This was established by the Court of Justice of the European Union, which, in judgment, rejected the appeals lodged in relation to the third package of sanctions adopted by the European Union against Belarus, announced in November 2020 and adopted in the following month. 

The judges in Luxembourg affirm the principle that the assets of a company not included on the list of entities subject to sanctions “may be frozen if it is controlled by a person included on that list.” To proceed, control of a company, as well as its funds and economic resources, is “presumed” when the listed person has a 50 per cent stake in its capital. 

In the case in question, a Belarusian citizen who owns 50 per cent of the shares in the Lithuanian company EM System had the company’s assets frozen by the Lithuanian authorities precisely because he was subject to EU sanctions for his alleged links to the Belarusian president, Alexander Lukashenko. The Court of Justice of the EU has now clarified that such action can be taken.

In any event, the Court continues, precisely because corporate control can be presumed, every EU Member State must allow for the possibility of challenging such a freezing order and, where appropriate, obtaining its revocation. The right to a defence must therefore be ensured, along with the possibility of overturning the presumption and consequently obtaining the unfreezing of funds or financial resources.