CJEU ruling confirms extent and scope of EU sanctions restrictions

“This is an example showing that the CJEU, as well as civil domestic courts, are increasingly being asked to interpret the scope and extent of sanctions restrictions,” said Stacy Keen, sanctions expert at Pinsent Masons.

The case originated from a request for a preliminary ruling by the Tribunalul Bucureşti (Regional Court, Bucharest, Romania). Neves 77 Solutions SRL (Neves), a Romanian company, was fined by the National Agency for Fiscal Administration for providing brokering services related to military equipment without an authorisation from the competent national authorities. The regional court sought clarification from the CJEU on the interpretation of Article 2(2)(a) of CFSP-Decision 2014/512 (5 pages / 331 KB) which prohibits the provisions of brokering services in relation to military equipment to persons in or for use in Russia.

The issue arose after Neves brokered a transaction between a Ukrainian company and an Indian company for radio sets manufactured in Russia. The Romanian authorities informed Neves that this breached the prohibition on brokering services under Article 2(2)(a). Neves was issued a fine and the authorities confiscated the money Neves had received for the services.

Neves launched an appeal claiming that the prohibition did not apply because the equipment was never imported into the territory of an EU member state.

However, the CJEU held that prohibition under Article 2(2)(a) did not require an import into an EU member state. The court said that to find otherwise would mean the prohibition could easily be circumvented by sending equipment via a route that did not pass through EU territory.

The definition of “brokering services”, contained in the EU implementing decision 2014/512 at an EU level Regulation No 833, makes clear that there is no requirement that the goods which are the subject of the brokering transaction in question be imported into the territory of a member state.

The CJEU held that a member state can automatically confiscate the full amount received for the provision of the prohibited brokering services, and that doing so is appropriate and proportionate to ensure the prohibition is effective.

The CJEU has also made it clear that it has the jurisdiction to interpret a Common Foreign and Security Policy (CFSP) decision. Its responsibility to ensure a uniform interpretation of EU law cannot be circumvented when – as in the present case – the restrictive measure in question, which is of general application, should have been included in a regulation for which the CJEU has jurisdiction in any event.

European and sanctions law expert Andreas Haak of Pinsent Masons said: "The CJEU's judgment emphasises that companies' property rights can be restricted if this is necessary to ensure the effectiveness of sanctions. The decision is an important step in the enforcement of EU sanctions against Russia and clarifies the consequences for companies that breach these measures. It confirms that the EU is taking stricter measures to enforce its foreign and security policy, in particular with regard to sanctions against Russia.”