The son of a leading businessperson under the Russian sanctions framework before the CJEU: Ongoing relevance of the Tay-Za case law

 

 By Antje Kunst*

Photo credit: Alvegaspar, via Wikicommons media

Many challenges before the EU General Court of listings or re-listings of Russian oligarchs and their immediate family members have been unsuccessful in recent past. 

However, on 29 November 2023, a second de-listing application of Alexander Pumpyanskiy before the EU General Court was successful (Case T‑734/22 Pumpyanskiy v Council, ECLI:EU:T:2023:761 only available in French). This came after a first application was unsuccessful (Case T-291/22 Pumpyanskiy v Council, EU:T:2023:499 only available in French).

Alexander Pumpyanskiy is the son of Dmitry Pumpyanskiy, a Russian billionaire and founder of TMK, a leading producer of pipes for the oil and gas industry in Russia.  Sinara Group is a Russian investment company. Dimitry, the primary target of the designation criteria, and his wife have separate cases before the Court.

Introduction

The basis for Mr. Pumpyanskiy’s initial listing stemmed from his association with his father, Dmitry, through their roles in TMK and the Sinara Group. He was also said to provide support to and benefit from the government of Russia. In his first case the Court held that the positions in the two companies ‘undoubtedly gave him a power of influence and responsibilities within those undertakings’. His family relationship and business ties with his father were sufficient to show that he was associated with him.

Regarding his re-listings in Case T-734/22, after periodic reviews, the EU General Court found that the criterion of association was no longer fulfilled as the applicant had resigned from his positions within the Sinara group and TMK on 9 March 2022 following his initial listing. The only remaining connection to his father was his familial tie, which the Court deemed insufficient for an association in this particular context. Furthermore, the General Court ruled that his former roles were insufficient evidence to demonstrate ongoing ‘support for the government’. The Court only dismissed his request for damages

This ruling from the General Court within the context of Russian sanctions offers valuable insights into the Court's approach in how it will address future challenges of listings or re-listings by immediate family members of leading Russian businesspersons.  It also appears that the Prigozhina case, the case of the mother of the late Chef of the Wagner Group Yevgeni Prigozhin (Case T-212/22, Prigozhina v Council, EU:T:2023:104) continues to be important case law on which the Court will rely regarding applications of immediate family members of Russian oligarchs.

Ceasing of business relationship with primary target

In the case at hand the Court recalled that the applicant's name was initially listed on the grounds that he was related to his father, by reason of their family relationship and their business relationship, i.e., their respective activities within the TMK company and the Sinara group.

The General Court found that since the applicant had ceased his functions on 9 March 2022, i.e., six months before the adoption of the first maintenance measures, one year before the adoption of the second and one and a half years before the adoption of the third, such past functions, could not, by reason of the length of time, justify, on their own, the maintenance of the measures. The past functions alone were deemed insufficient to establish a link of association with his father within the meaning of the criterion (g). (para. 61 of the Judgment)

Mere family relationship insufficient

The General Court determined that, at the time of the applicant's re-listing, there was no evidence of ‘economic or capital ties’ or ‘common interests’ between the applicant and his father which are necessary for fulfilling the criterion of association. Relying on its case law of Tay Za v Council (C-376/10 P, ECLI:EU:C:2012:138) regarding associated family members the listing was effectively grounded solely on the family tie between him and his father which was considered insufficient.

Ongoing relevance of Tay Za case law

The Court accepted the Council’s argument that the sanctions framework was different in the present case than in the Tay Za case related to the regime of Myanmar, however it considered that notwithstanding that, the case-law of Tay Za could be applied mutatis mutandis, to the applicant's situation. (paras. 62 to 64 of the Judgment)

This underscores the ongoing relevance of the Tay Za case law, also within the context of Russian sanctions. It appears to enable sons and daughters who have been listed under the criterion associated with leading businesspersons operating in Russia to be successful with their challenges of their listings or re-listings when resigning from company positions in which the primary sanctioned individual is or was involved.

Without association no risk of circumvention established

The General Court found that the Council had not established a risk of circumvention making the exact same findings as in the Prigozhina case on the ground that there was no association. (see paras. 54, 68-71 of the Judgment)

The General Court like in Prigozhina accepted that there was 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 imposed on them. (see para. 105 of Prigozhina case) However in the case at hand association to a leading businessperson had not been established.

In the Syrian sanctions framework it was expressly provided for ‘leading businesspersons operating in Syria’ and ‘members of the Assad or Makhlouf families’ and ‘persons associated with them’. The familial connection with these families might be adequate to include individuals' names on the lists using the criterion of 'association with members of these families.' (para. 70 of the Judgment) In Pumpyanskiy's case, the relevant legal framework did not include 'members of certain families' among the listing criteria.

The importance of being up-to-date

As in other sanctions cases in which applicants succeeded with their de-listing applications, the Court made clear how important an up-to-date statement of reasons and up-to-date evidence is. In the court proceedings the Council relied, to justify the re-listings, on matters on which it did not rely when it adopted the contested measures. Regarding the Council’s claim that the applicant continued to be involved in TMK’s foreign subsidiaries after resigning from his company roles the Court ruled that this assertion was absent from the statement of reasons. Some evidence the Council provided post-dated the contested measures and was therefore dismissed. (see paras. 74 and 76, 77 of the Judgment). Other evidence was not regarded as sufficiently concrete and precise.

Material or financial support to the Government of Russia

The Court also found that the Council could not assume, merely because the applicant was chairman and a member of the board of directors of the Sinara group or a member of the board of directors of the TMK company when his name was initially entered on the lists at issue, that he could be classified as a natural person who provides material or financial support to the Government of Russia, even several months after leaving such functions. That would lead to the applicant's situation being frozen and to the periodic review exercise being deprived of any useful effect. (para. 85 of the Judgment)

In line with previous case law the General Court held that the ceasing of exercising functions within a structure did not in itself imply that former functions in companies were irrelevant, as past activities could influence behaviour. However, taken in isolation, a person's former functions could not justify the listing. If the Council intended to rely on past activities, it needed to provide serious and corroborating evidence in support of its view that the applicant maintained links with the companies in question on the date on which the contested measures were adopted. (para. 87 of the Judgment)

Conclusion

In this case the Council failed to convincingly prove that the applicant maintained ties with his father and the companies in question after stepping down from his roles in those companies at the time of his initial listing. In future similar cases, the Council might be able to furnish convincing up-to-date evidence and establish that the family member in question remained connected to the primary targeted individual by for example ‘common interests’.

This case shows that there must a complete cutting off of business ties with the primary targeted individual in order to be successful before the Court and in order not to risk a further listing by the Council on the basis of association.

The Court was correct in requiring an up-to-date statement of reasons and up-to-date evidence to support a continuous involvement of the applicant in TMK, e.g., in TMK’s foreign subsidiaries. The result might be though that the Council in Pumpyanskiy's case decides to update the statement of reasons and use the evidence which post-dated the contested measures in support of a new listing. This might be then the subject of further litigation before the General Court which is already swamped with sanctions cases.

The risk of circumvention might be considered by the Council as significant in many Russian sanctions cases. However, fact remains in the absence of a presumption of circumvention by immediate family members and the Council failing to provide convincing evidence which establishes association and a risk of circumvention, immediate family members of leading businesspersons will be successful before the Court.

What role the Council’s introduction of the new listing criterion of ‘immediate family member of leading Russian businesspersons operating in Russia’ can and will in the future play in all of this remains to be seen. On this point see my previous post: ‘The risk of circumvention of EU sanctions through the immediate family of leading businesspersons and the case law of the CJEU’.

 

*Antje Kunst is an international lawyer and a member of Pavocat Chambers advising and representing individuals in a wide range of matters in the field of the EU’s Common Foreign Security Policy (CFSP) and takes instructions from individuals for challenging EU and UN sanctions before the EU courts and international bodies.