CJEU ¦ When Does a Shareholder Trigger EU Sanctions on Company Assets?
EU Sanctions: When Does a Shareholder’s Stake Lead to Freezing of Company Assets? – Insights from the EM System UAB Case
On July 3, 2025, Advocate General Tamara Ćapeta delivered her opinion in the significant case C-84/24 before the Court of Justice of the European Union (CJEU). The core question: Is it sufficient for the freezing of a company’s bank accounts that a sanctioned person holds exactly 50% of its shares?
Background: Belarus Sanctions and the EM System UAB Situation
After a Belarusian national (A.V.S.) was listed under Annex I to Regulation (EC) No 765/2006, two Lithuanian banks froze the accounts of EM System UAB, a Lithuanian company in which A.V.S. held a 50% shareholding. EM System UAB itself was not listed under the sanctions regime. One of the banks sought guidance from the Lithuanian Ministry of Foreign Affairs regarding the legality of freezing the company’s accounts.
EM System UAB challenged these actions, arguing that it is a separate legal entity; thus, sanctions targeting a shareholder should not automatically extend to company assets.
Advocate General Tamara Ćapeta: No Automatic Asset Freeze, but a Broad Interpretation of “Control”
The Advocate General clarified that there is no automatic freezing of company assets simply because a sanctioned person holds shares. The key criterion is whether that individual actually “controls” the company and its resources. Holding a 50% stake creates a rebuttable presumption of control because such ownership typically allows significant influence over corporate decisions.
The Advocate General emphasized that “control” in the context of EU sanctions must be interpreted much more broadly than under traditional company law. It is not enough to focus solely on legal formalities. The assessment must consider whether the listed individual can directly or indirectly influence the company’s use of funds and resources.
Assessment: Broad Notion of Control, No Automatic Guilt
The Advocate General found that the banks acted appropriately: they froze the accounts provisionally and then performed further due diligence regarding actual control.
Indicators that may rebut the presumption of control include:
- Clear separation between the company’s assets and those of the shareholder,
- Bank account access restricted to persons other than the sanctioned individual,
- Evidence of independent management.
However, no single factor is decisive; courts must consider all relevant facts in each case.
Legal Safeguards and Procedural Rights
The Advocate General also highlighted that automatically extending asset freezes to companies without listing them raises fundamental rights concerns. Each company is entitled to legal protection and to be heard before such measures are taken. Overly broad application would undermine these guarantees.
Conclusion and Practical Impact
The Advocate General’s opinion provides crucial guidance for banks and companies dealing with EU sanctions:
- A 50% shareholding by a listed person leads to a presumption of control and justifies provisional asset freezing,
- This presumption can be rebutted with evidence,
- Ultimately, national courts must decide based on all circumstances.
The final decision by the CJEU is still pending, but Advocate General opinions are often followed. In practice, this means increased diligence obligations for banks and companies, and a proactive need for firms to demonstrate their independence if challenged.
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