The Court of Justice of the European Union has ruled that the freezing of assets belonging to the Lithuanian company EM System was justified. The company itself is not included in EU sanctions lists, but 50% of it is owned by Belarusian businessman Aliaksandr Shakutsin, who is under EU sanctions.
“The assets of a company not included on the list of persons subject to sanctions may be frozen if it is controlled by a person included on that list. Control of a company and its funds and economic resources is presumed where the listed person has a 50% shareholding in that company,” the court said in a press release.
Shakutsin was added to the EU sanctions list on December 17, 2020. According to the court’s press release, the following day two Lithuanian banks — SEB and Citadele — froze the funds of EM System on the grounds that Shakutsin owned a 50% stake in the company.
EM System challenged the decision in Lithuanian courts, seeking to unfreeze its accounts, but the claim was rejected. The company then appealed to the Supreme Court of Lithuania, which referred the case to the EU Court to clarify whether the funds of a legal entity not listed under sanctions can be frozen.
The EU Court ruled that asset freezes may also apply to companies not included in sanctions lists if the funds belong to, are held by, or are controlled by a person, organization, or body that is subject to sanctions.
“For the same reasons, the concepts of ‘held’ and ‘controlled’ must be interpreted broadly, taking into account both direct and indirect ways of influencing the use of funds and economic resources of a person, entity or body linked to a person included on the list. It is necessary, first, that the sanctions are applied to as wide a range of persons, groups or entities as possible in order to prevent them from being circumvented and, secondly, to ensure the surprise effect and the speed with which those measures are imposed,” the court noted.
The court concluded that ownership of a 50% stake in a company allows control not only over the company itself but also over its funds and economic resources.
At the same time, the court stated that EU member states must establish procedures allowing companies and sanctioned individuals to challenge the freezing of funds when a company itself is not listed but its accounts were frozen on the assumption that it is controlled by a sanctioned person.
Earlier, the Belarusian Investigative Center reported how Shakutsin bypasses EU sanctions through a German company linked to EM System.