This article was first published in EU Law Analysis on 2 August, 2023
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.
