![Ruling [DEU] ¦ When Sanctions Meet Insolvency: German Court Confirms Broad Freezing of Trust‑Based Assets](/assets/images/posts/pexels-markus-winkler-1430818-5198206_1024.webp)
01 April 2026
Ruling [DEU] ¦ When Sanctions Meet Insolvency: German Court Confirms Broad Freezing of Trust‑Based Assets
A dispute at the intersection of banking, insolvency, and sanctions law
A recent judgment from Frankfurt am Main provides a detailed look at how EU sanctions operate when frozen assets are embedded in complex trust and offshore structures. The case arose from an attempt by an insolvency administrator to force a German bank to release almost one million euros held on accounts of an insolvent company. The court ultimately confirmed that the funds must remain frozen under EU sanctions law, even though neither the company nor its direct shareholders were themselves listed.
The decision highlights how far EU sanctions can reach when authorities and courts see a functional and economic link between assets and a sanctioned individual.
The background: insolvency and blocked bank accounts
The claimant acted as insolvency administrator for a company incorporated on the Isle of Man. The company held several accounts with a German bank in euros, pounds sterling, and US dollars. Together, the balances amounted to roughly €950,000 in mid‑2022.
After the opening of insolvency proceedings, the administrator demanded payment of the balances into the insolvency estate. The bank refused, arguing that the funds were frozen under Regulation (EU) No. 269/2014, which imposes asset freezes on individuals listed in Annex I and on assets owned, held, or controlled by them.
The administrator challenged this position, insisting that the company was not owned or controlled by any sanctioned person and that the accounts therefore could not be subject to an asset freeze.
A layered ownership and trust structure
At the heart of the dispute was an intricate structure spanning multiple jurisdictions. The insolvent company was wholly owned by a holding company, which in turn was ultimately linked to a trust established under Bermudan law. The trust had been set up by a Russian oligarch, who remains listed under EU sanctions, together with his sister, who was initially listed but later removed from Annex I.
Trustees, protectors, holding companies, and financial service providers in Bermuda, Switzerland, Guernsey, Panama, and the Isle of Man formed a web designed, at least formally, to separate the sanctioned individual from direct ownership and control.
The administrator argued that the oligarch had been excluded as a beneficiary of the trust shortly before his listing, that he had no formal control rights, and that insolvency law transferred control of the assets to the administrator.
The court’s key finding: de facto control is decisive
The appellate court rejected the administrator’s arguments and confirmed the dismissal of the claim. The judges held that the bank accounts were frozen under Article 2(1) of Regulation (EU) No. 269/2014 because they were controlled by a listed person.
Crucially, the court focused on de facto control rather than formal legal rights. Even though the oligarch no longer appeared as a beneficiary and even though the trust documentation denied him explicit powers, the court found strong indications that he continued to exercise decisive influence.
Among the factors cited were the timing of changes to the trust structure shortly before the imposition of sanctions, the use of a long‑standing family officer who acted both as trust protector and as the oligarch’s representative, and the overall complexity of the structure. In the court’s view, these elements pointed to an arrangement designed to shield assets from sanctions rather than to genuinely sever control.
Why the delisting of a related person did not help
A central argument in the appeal was that the oligarch’s sister had been removed from Annex I in March 2025. As a result, references to certain holding entities disappeared from the sanctions listing. The administrator claimed this stripped the asset freeze of its legal basis.
The court disagreed. It accepted that the earlier reasoning of the lower court, which relied partly on the sister’s listing, could no longer stand in that form. However, this did not change the outcome. The decisive factor was the continued listing of the oligarch himself and the finding that he retained factual control over the trust and, indirectly, over the company’s assets.
In other words, removing an intermediary from the sanctions list did not break the chain if control by a listed person persisted.
Updated EU rules reinforce the approach
The court also addressed amendments to Regulation (EU) No. 269/2014 that entered into force in October 2025. These changes removed references to assets of persons “associated with” listed individuals and introduced a clearer definition of control.
Far from supporting the administrator’s case, the court viewed the amendments as a clarification. The revised definition explicitly covers situations where a person can exercise dominant influence in practice, even without formal rights. According to the judges, the facts of the case fit squarely within this understanding.
Insolvency does not neutralize sanctions
Another important aspect of the ruling concerns insolvency law. The administrator argued that once insolvency proceedings were opened, control over the assets passed to him under national law, excluding any ongoing control by the sanctioned individual.
The court rejected this reasoning. It emphasized that ownership, holding, and control under EU sanctions law are autonomous concepts of EU law. The transfer of management powers to an insolvency administrator does not automatically eliminate factual control by a listed person for sanctions purposes.
As long as the assets remain functionally attributable to a sanctioned individual, they remain frozen.
Implications for banks and practitioners
For financial institutions, the judgment confirms that refusing payment in such cases is not only permitted but required. Even a court‑appointed insolvency administrator cannot compel a bank to release funds if there is a credible basis to conclude that the assets are controlled by a sanctioned person.
For insolvency practitioners and advisers, the case is a warning. Trust structures, exclusions of beneficiaries, and formal distancing measures will be closely scrutinized. Courts are willing to look behind legal form and focus on economic reality, especially where changes coincide with the introduction of sanctions.
A clear message from the court
The Frankfurt decision sends a clear signal: EU sanctions are designed to be robust against circumvention. Complex trust and corporate arrangements will not prevent an asset freeze if they serve, in substance, to preserve control for a listed individual. Even years after their creation, and even in insolvency, such structures can keep assets locked.
For those dealing with sanctioned wealth, the message is simple. Formal separation is not enough. What matters is who really controls the assets.
Dive deeper
EU Sanctions Helpdesk
The EU Sanctions Helpdesk platform supports European operators in complying with European Union restrictive measures (also known as sanctions) imposed worldwide.
Aimed primarily at Small and Medium-sized Enterprises (SMEs), the Helpdesk offers resources and personalised help to companies performing sanctions due diligence checks.
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