Antje Kunst*
*Antje Kunst is
an international lawyer and barrister of Pavocat Chambers, admitted to the bar
of England and Wales and the Bar of Berlin advising and representing
individuals in a wide range of matters related to the CFSP ranging from EU
employment cases to EU and international sanctions against individuals.
***Comments of academic
researcher of the University of Luxembourg, Ms. Francesca Finelli were
gratefully received. All views contained in this article, however, remain those
of the author alone.
Photo credit: W Bulach, via Wikimedia
Commons
The inclusion of
family members in the categories of persons covered by EU targeted sanctions against
Russia has been justified, in the Council’s view, for maximising the
effectiveness of those sanctions. The inclusion of family members of leading
businesspersons aims to prevent the circumvention of EU targeted sanctions (in
the forms of asset freeze) by the transfer of assets between targeted leading businesspersons
and their immediate family.
Updating the EU sanctions regime against Russian
businesspersons
The EU's targeted sanctions against Russia's economic
elites introduced on 5 June 2023 a short but significant amendment to its
current sanctions regime. It extended the scope of the sanctions regime through
Council
Decision (CFSP) 2023/1094 (‘Council decision of 5 June 2023’) to permit the designation of immediate family members of leading
Russian businesspersons operating in Russia. There are in other words now EU
legal acts in place which allow for the adoption of EU sanctions against the
sons and daughters, spouses and parents of Russian oligarchs based on the
autonomous designation criterion of immediate family members of leading Russian
businesspersons operating in Russia. (In 2015 the Council introduced the
‘leading businessperson operating in Syria’ as an autonomous general listing
criterion. See Council Decision (CFSP) 2022/329
and Council Regulation
(EU) 2022/330 of 25 February 2022 on the criterion of ‘leading
businesspersons’.) Family members of Russian leading businesspersons have been
put on the lists since early 2022 but under different grounds.
The Council’s reason
for the recent amendment, undoubtedly owing to the initial rulings on Russian
sanctions from the General Court in recent months (Case T-743/22 R, Nikita
Dmitrievich
Mazepin v Council, Order of 1 March 2023 and Case T-212/22, Violetta
Prigozhina v Council, ECLI:EU:T:2023:104), is that
‘leading Russian businesspersons have engaged in a systematic practice of
distributing their funds and assets amongst their immediate family members and other
persons, often in order to hide their assets, to circumvent the restrictive
measures and to maintain control over the resources available to them’ (Recital 5 of
Council Decision 2023/1094 of 5 June
2023).
The amendment was
prompted, in particular by the successful annulment of the listing in Case T-212/22,
Prigozhina, which was initiated by the
mother of the head of the Wagner Group. In that case, the General Court emphasized
that in a legal framework such as the Syrian sanctions regime (after 2015: see Council Decision
(CFSP) 2015/1836 of 12 October 2015 and Council
Regulation (EU) 2015/1828 of 12 October 2015), the family link with ‘certain
families’ may be sufficient to include the name of the persons on the lists at
issue. In Prigozhina however, so the
General Court, the EU legal acts setting out the framework for EU sanctions as
a result of the invasion of Ukraine by Russia, did not refer to the members of ‘certain
families’. That is why the Council had not established the risk of
circumvention (para. 105 of the judgment). Another main reason was that the
Council could not prove a sufficient ‘association’ with the primary target
beyond mere family ties.
The curious nature of words
With this most
recent amendment of the framework in June 2023, the chosen wording is of
particular note. It refers to the possibility of the inclusion of immediate
family members of leading businesspersons operating in Russia, even if the
question is what exactly immediate family members are. Also, the Council does
not refer to members of ‘certain families’ as it previously did as regard
sanctions taken against Syria. Rather, the Council’s wording vis-à-vis Russia it
appears to imply a presumption of circumvention through immediate family members
of leading businesspersons operating in Russia.
In the Syrian
sanctions framework since 2015, the EU legal acts have explicitly provided for
the freezing of funds of ‘leading businesspersons operating in Syria’ and ‘members
of the Assad families or Makhlouf’, as well as persons ‘associated with them’ (Council
Decision (CFSP) 2015/1836 and Regulation (EU) 2015/1828). In this context, presumptions
are used (by the Council) and accepted by the CJEU (see for example C‑458/17 P,
Rami
Makhlouf v Council, ECLI:EU:C:2018:441, para. 91, Case T‑186/19, Zubedi
v Council, ECLI:EU:T:2020:317 para. 72; Case T‑256/19, Bashar
Assi v Council, ECLI:EU:T:2021:818 para. 166) that individuals
falling under these categories benefit from the sanctioned regime in order inter
alia ‘to avoid the risk of circumvention of restrictive measures through family
members’ (Recital 7 of Council Decision (CFSP) 2015/1836).
Testing the presumption of circumvention
The question,
therefore, is whether the Court of Justice – on appeal from a raft of judgments
that the General Court will continue to deliver in the immediate future, in the
context of the Russian sanction regime – would accept a (new) rebuttable
presumption of circumvention (see Case T-5/17 Sharif v Council, EU:T:2019:216, para. 86), i.e., that the Council can legitimately
presume leading businesspersons operating in Russia will transfer assets within
their immediate family to circumvent EU sanctions (see paras. 103–110 of that judgment).
There is no
reference to ‘certain families’ in the EU sanctions legal framework as was the
case in the Syrian sanctions regime. Thus, the Court of Justice might not so easily
accept a presumption of circumvention based on a sole family link (taken in
consideration the Court of Justice’s Tay
Za reasoning, and the Advocate General’s Opinion). It is only if the
Council could provide solid evidence that there is indeed a ‘systematic
practice of distributing their and assets amongst their immediate family
members’ (see Recital 5 of Council Decision of 5 June 2023),
that the Court of Justice might accept the Council’s rationale, accounting for
fundamental rights too.
This information of
a ‘systematic practice’ of circumvention might be in the Council’s possession, but
it might not be possible to disclose the evidence based on its classified
nature. The alternative is disclosing classified evidence, which the Council
may be reluctant to do. The Court of Justice’s closed evidence procedure (under Article 105
of the General Court’s
Rules of Procedure), introduced as a possibility for
use in restrictive measures cases, to date, remains inactive, and has never
been utilised.
“Associated”
Immediate family
members have been included in EU sanctions lists since early 2022 as ‘associated’
with leading Russian businesspersons in their individual statements of reasons.
In Prigozhina, the Council was not
able to establish ‘(economic) association’ of the mother of the chief of the
Wagner Group at the time the measures were adopted, and sufficiently link her to
her son, the primary target, and the Russian government. Thus, the General Court
relied on its established case law of Tay
Za regarding an ‘association’ which considers a mere family tie to the
primary target, a business leader, associated with the government not
sufficient. That said, the General Court in Prigozhina
ruled that there is a ‘non-negligible risk’ that individuals providing support
to the government, e.g., leading businesspersons, might exert pressure on individuals
associated with them, e.g., their family members, in order to circumvent the
effect of the measures to which they are subject (para. 105 of the Prigozhina
judgment. See also Amer
Foz v Council, Case T-296/20 ECLI:EU:T:2022:298, paras. 174 and 176, Sharif
v Council, T-540/19, not published, EU:T:2021:220, paragraph 159, and, by analogy, judgment of 4 September 2015, NIOC
and Others v Council, T-577/12, not published, EU:T:2015:596, para. 139).
Businesspersons vs rulers
Generally speaking,
the case law of the Court on the legality of family members’ designations is
characterized by two main approaches. Regarding family members of leading
businesspersons, their designation would be annulled if based on the sole
ground that the family member also benefits from the economic policies of the government
(Tay Za approach). Regarding the
family members of rulers of a third country, their designation would be lawful
by a presumed connection between the individual and the (targeted) regime (Al Assad approach). The case law has
been though at times inconsistent. For a broader analysis on circumvention of
EU restrictive measures, see Francesa Finelli, ‘Countering
Circumvention of Restrictive Measures: The EU Response’.
In Al-Assad,
another Syrian ‘immediate family member’ case (concerning the President’s sister),
the Court of Justice found that the presumed risk of circumvention was ‘quite
obvious’ between leaders of a state and their immediate family members. It also
observed that, if the EU sanctions in question targeted only the
leaders of the Syrian regime, the objectives pursued by the
Council could have been frustrated as the leaders can ‘easily circumvent’
those measures by means of
their relatives and associates.
The Al-Assad approach has generally not been
followed by the CJEU in the case of immediate family members of leading
business persons (see Tay Za) but
only in cases of ‘immediate family members’ of rulers of a third country (see Butler,
G 2023, 'Of
Rulers, Relatives, and Businesspersons: The Imposition of EU Restrictive
Measures through Sanctions on Family Members', Legal Issues of
Economic Integration, vol. 50, no. 4). The rationale is
explained by Advocate General Mengozzi in his Opinion in Tay Za with three circles of targeted individuals, which has been
accepted by the CJEU. In the Syrian sanctions case of Foz, the CJEU accepted the
presumption of a real risk of circumvention, in a case of an immediate family
member of a leading business person operating in Syria case. The Court of Justice ruled in that case that
it is reasonable to presume a ‘real risk of circumvention’ if a family member
has close business and family ties with a designated individual, even when the
designated person is a leading businessperson and not a political leader in
Syria. Moreover, it found that family ties may pose a real risk of
circumvention of EU restrictive measures, irrespective of the role of the
designated individual in the targeted regime (see Finelli, ‘Countering Circumvention
of Restrictive Measures: The EU Response’).
The relevance of presumptions
Generally, the CJEU
has accepted indirect evidence such as rebuttable presumptions in view of the
difficulties encountered by the Council to find direct evidence (see para 46 Anbouba
v Council, C-605/13 P, ECLI:EU:C:2015:248) for the fact than an
individual like an immediate family member of a primary target supports a
regime or benefits from it. In Syrian sanctions cases, since 2015, the Council
consistently relied on and the Court of Justice accepted rebuttable
presumptions rather than evidence that they have engaged in prohibited conduct.
Their designation presupposes the personal link between them and the already
designated individuals, and ultimately the third country’s regime targeted.
Consistent case law
of the Court of Justice provides that the use of presumptions is only permitted
on the condition that (i) those presumptions have been provided for by the
measures at issue, (ii) are consistent with the objective of the legislation at
issue, (iii) proportionate to the aim pursued by the EU, (iv) rebuttable and
(vi) safeguard rights of defence are safeguarded (see Case T‑714/20, Ovsyannikov v Council, ECLI:EU:T:2022:674).
The Council will
need to establish that the inclusion of immediate family members of Russian
business leaders is proportionate to the pursued aim of inter alia preventing
circumvention of the sanctions imposed.
At the moment it is
unclear whether the Court implied in the case of Prigozhina that the ‘real risk of circumvention’ through family
members can only be invoked in the context of EU sanctions against Syria (see Finelli,
‘Countering Circumvention of Restrictive Measures: The EU Response’). The established case law of Tay-Za
provides there can be no presumption that leading businesspersons with links
and association to a governing regime are using their family members for
circumventing EU sanctions (see Butler, 'Of Rulers, Relatives, and
Businesspersons’).
The Court of
Justice has accepted presumptions if they are rebuttable, but rebuttals for
targeted individuals are immensely difficult and have not been successful in
most Syrian sanctions cases before the Court of Justice since the presumptions
were introduced (see the Zubedi and Bashar Assi judgments).
The family member
would have to demonstrate to the Council that s/he has dissociated himself from
a parent, child – the primary target – and that s/he does not pose a real risk
of circumvention of the restrictive measures. Rebuttals may be possible based
on evidence that immediate family members do not assist the primary target to
have access or continue controlling the assets.
A difficult task.
The risk of circumventing EU sanctions
The risk of
circumvention is considerable in the case of leading businesspersons operating
in Russia and their immediate family and the Court of Justice might well opt in
developing its case law further for the Russian sanctions context instead of
simply continue applying its Tay-Za
case law. Similarly, as in the RT
France case, it might opt for an exceptional reasoning due to
exceptional circumstances. It might even apply its case law on the immediate
family of rulers, rather than on the immediate family of leading
businesspersons, finding that in certain exceptional cases leading
businesspersons are comparable to rulers in the Russian context.
A balance will have
to be struck by the Court of Justice between the fundamental rights of the
targeted immediate family members, who might pose no risk of circumvention
whatsoever and the difficult task to rebut presumptions, on the one hand, and
the importance of the effectiveness of targeted sanctions against Russia,
accounting for the Council’s ability in certain cases to rely on presumptions
on the other hand (for the reasons it set out in its case law (e.g.,
in Anbouba v Council, para. 46). A general blunt presumption of
circumvention of sanctions in cases of immediate family members of leading
businesspersons operating in Russia is unlikely to be accepted by the Court of
Justice.
