EU lost in court to Russian oligarchs. What does it mean for the future of sanctions?

Sanctions against Russians are usually lifted when they die. This seems the likeliest outcome for most of Putin's supporters…

On Wednesday morning, many Ukrainians were concerned about some news that was not even about Ukraine, but meant a lot for the country's further resistance against the aggressor. 

The European Court of Justice upheld claims brought by two Russian oligarchs – Mikhail Fridman and Petr Aven, co-owners of Alfa-Bank – seeking to annul their inclusion on the EU sanctions list. Fridman and Aven are the first Russian oligarchs to have won a "sanctions" case. Several dozen cases filed by some of Russia’s wealthiest individuals, seeking to unfreeze their assets in the EU, are still pending in the same court. Some of them may be counting on victory too.

This gives rise to the question: has the European sanctions regime collapsed? No, this is not a tragedy now or any time soon.

The oligarchs’ victory does not mean their assets will be instantly unfrozen. This is the specific way the ECJ works with sanctions rulings: the annulled ruling is already out of date, replaced by another one, and now the oligarchs need to go back to court.

Ukraine has had experience of this in the past, when Yanukovych's henchmen began winning sanctions cases one by one in the ECJ but continued to remain sanctioned. However, after several defeats, Brussels began to yield and "forgive" the most active plaintiffs.

Fortunately, there is unlikely to be a repeat of this story with the Russian oligarchs. The European Union has learned from its mistakes, so it is not likely that even Fridman and Aven will win the next trial. Since 2023, the EU has had the legal right to impose sanctions on any Russian businessman, and Brussels lawyers have received the first court rulings confirming the robustness of the new scheme.

So currently there are only two options available for oligarchs to avoid sanctions:

•  Death
•  Public and systematic condemnation of the Kremlin's actions against Ukraine.
  

So far, volunteers are not exactly lining up to avail themselves of one of these options.

Endless sanctions

Many people misunderstood the news on the EU Court ruling to lift sanctions from Fridman and Aven. That isn’t surprising: usually, if a court overturns a decision, it ceases to be valid. 

But when it comes to sanctions, the mechanism is more complex.

The EU Court, located in Luxembourg, challenges not the sanctions themselves, but specific decisions of the EU Council. Aven and Fridman were appealing a decision made in 2022 that was valid when they filed their lawsuit. And since the EU Court is slow in its proceedings, its ruling has only just been issued now, two years later. The decision challenged by the oligarchs had expired by itself and been replaced by updated sanction lists adopted in 2023, and then in 2024. The Court did not consider or annul these updated decisions.

It sounds absurd, but that’s how it works with sanctions. Back in 2014, when Ukraine and the EU faced a similar situation of challenging sanctions against Yanukovych and his team, the Court officially advised Ukraine not to worry.

History has shown, however, that the EU’s resilience is not unlimited.

Yanukovych's henchmen did not give up. They appealed the sanctions again and again. After several defeats, the EU Court began to demand a review of the approach from European institutions. As a result, the EU removed the Ukrainian ex-officials from the sanctions lists one by one.

Brussels explained that the reason for "forgiving" representatives of Yanukovych's regime was actually the Ukrainian authorities’ fault. After all, in 2014, sanctions against Yanukovych and Co. were imposed at Kyiv's request on rather flimsy documentary grounds. Years passed, and Ukraine had not conducted a proper investigation into the crimes of the previous regime.

So only three out of the 18 officials from the Yanukovych group are still sanctioned – Yanukovych himself, his son Oleksandr, and former Prime Minister Mykola Azarov. The rest had managed to unfreeze their assets in the EU by 2022.

Why the Russian oligarchs won 

The sanctions imposed by the EU against the Russian elite in response to the full-scale invasion of 2022 are fundamentally different.

First of all, there was no "request from Ukraine" as a legal basis for them. The EU institutions imposed sanctions against Russian companies and oligarchs of their own accord and had to independently find both formal grounds and evidence that the sanctions truly needed to be imposed.

It may look as if sanctions are purely political, arbitrary decisions; that the EU simply chooses whoever they want and "appoints" them guilty. The reality is different. Each name or company on the sanctions list is accompanied by a "sanctions file" containing arguments, evidence, documents, etc., intended to prove that the sanctions are justified and the sanctioned individual meets the criteria.

This "file" remains non-public until it needs to be presented in court.

And we learned from the court ruling which lifted the 2022 sanctions against Aven and Fridman how the EU proved the need to sanction the oligarchs. For example, Fridman’s compliance with the sanctions criteria at the time when the first decision was adopted in February 2022 was proven by:

•  an article by The Daily Beast from 2018 on the control of Alfa Group by Fridman and his two senior partners and allegations of corruption;
•  an open letter signed by twelve Russian and American journalists, intellectuals, activists and historians and posted on the Atlantic Council website on 21 May 2018, protesting against Fridman and Aven being invited to the Atlantic Council headquarters in Washington to attend a round table dinner;
•  a Dzerkalo Tyzhnia article dated 11 November 2015 concerning Alfa Bank’s funding of a charitable project run by Putin's eldest daughter;
•  a Reuters article dated 10 November 2015 concerning Alfa Bank’s funding of a charitable project called Alfa-Endo, run by Putin's eldest daughter;
•  a Comnews article dated 19 July 2005 on Putin rewarding the Alfa Group's loyalty to the Russian authorities by promoting Alfa Group's foreign investment plans in Türkiye.

This list of evidence itself does not look overly convincing. But the key problem is that it also does not meet the criteria for adding these oligarchs to the sanctions list, which the EU has established for itself, the EU Court noted.

There are two criteria regarding the February 2022 decision on Fridman and Aven:

•  That these oligarchs were responsible for, supporting or implementing actions or policies which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine,
•  That they supported, materially or financially, or benefitted from Putin or other Russian decision-makers responsible for the annexation of Crimea or the destabilisation of Ukraine (the support after the occupation of Crimea in 2014; testimonies from 2005 are irrelevant here).

That rather meagre package of "evidence" accompanying the initial sanction decision regarding the oligarchs was clearly insufficient to substantiate these claims in court. So the court literally shattered the EU Council position and acquitted the oligarch plaintiffs.

There's no reason to believe they’ll be the last to receive a favourable decision from Luxembourg. And the fact that the oligarchs won't stop at their first victory and will continue to appeal is not just an assumption, but an established fact. Indeed, new complaints from Aven and Fridman are already before the EU Court.

But there is also some good news.

Learning from mistakes

The problem which led the court to lift sanctions against Fridman and Aven is present in some other sanction files. We can assure you of that even without having access to them.

Among the risk group are all the names that appeared on the sanction lists for the first time in the EU decision of 28 February 2022. These include Igor Sechin (Rosneft), Nikolay Tokarev (Transneft), Alisher Usmanov (a range of major assets), and Sergey Roldugin (one of Putin's financial backers and ideological associates).

Sanctions were hastily put together back in the early days of the war, so the files on them may be just as unconvincing.

The EU sanctions lists include several thousand Russian individuals and legal entities. Some of them are seeking to have the sanctions lifted. As of the summer of 2022, about 30 Russians had filed complaints with the EU Court seeking to lift the sanctions. Another dozen were in negotiations with the EU, preceding a court appeal. These figures are unlikely to be final.

So why do we say there is no danger?

Because the EU has long been aware that they might lose several sanction cases and have prepared a solid foundation to ensure that the Russian oligarchs’ victory is merely symbolic and does not lead to the unfreezing of their assets.

Starting from the next sanctions package, adopted in March 2022, an additional reason was added to the criteria for applying sanctions: it is sufficient for this person or their businesses to pay a significant amount to the Russian budget, as these funds go towards financing the war. And there is no need to prove intent.

And starting from the spring of 2023, another, very concise reason was added to the list of criteria for imposing sanctions, which sounds like "being a Russian businessman".

The EU has significantly strengthened its evidentiary base. Given the description of the sanctions extension against Aven and Fridman in 2023, it’s clear that the file of evidence has been significantly expanded. So a new lawsuit from these oligarchs will almost certainly be thrown out.

And these are not just bold assertions.

Over the past few months, the EU Court has also issued several decisions rejecting appeals from Russian oligarchs. In every case, the sanctions were imposed more thoughtfully, taking the mistakes that the EU made in February 2022 into account. For example, the well-known oligarch Roman Abramovich lost in the EU Court.

But the most telling ruling was the one on German Khan, issued in November 2023. Khan was added to the EU sanctions list as an Alfa Group co-owner, so his story is almost identical to Fridman's. But it so happened that the sanctions against Khan were imposed half a month later, now with the errors corrected. 

After these amendments, the court fully sided with Brussels.

The judges emphasised several times in the ruling that with the introduction of new criteria in the EU Council, there was no longer a need to prove that a certain oligarch bribed Putin or received benefits from him. It’s not even necessary to prove that the oligarch supports the war.

The fact that the sanctions against him harm the Russian state machine is enough.

"The objective is to put pressure on the Russian Government and increase the cost of the Russian Federation's actions aimed at undermining the territorial integrity, sovereignty and independence of Ukraine... Therefore, restrictive measures are always justified in view of the objective pursued, namely to exert maximum pressure on the Russian authorities, so that they put an end to their actions and policies destabilising Ukraine as well as to the military aggression of this country," the court explains.

With these arguments, all subsequent appeals by oligarchs, other than the very first ones introduced in early 2022, seem doomed to failure.

A path to lifting sanctions still exists, though, and it does not lie through the court.

The EU Council has set a precedent in removing Yandex co-founder Arkadiy Volozh from the sanctions list because he openly opposes Putin's actions and was able to prove this to the European Union. And sanctions against individuals are usually lifted after their death. This seems the likeliest outcome for most of Putin's supporters.

Sergiy Sydorenko,

Editor, European Pravda