The Strange Game of Oligarchs Challenging Sanctions

In April 2024, the Court of Justice of the European Union (CJEU) annulled EU sanctions against Russian businessmen Petr Aven and Mikhail Fridman. These twin judgments generated a flurry of media commentary, some of it suggesting that the CJEU had delivered a ‘big blow’ or ‘major setback’ to the EU’s sanctions regime. One of the key associates of the late Alexei Navalny wrote of ‘the day when European sanctions policy completely collapsed’. All of this missed the crucial caveat: the sanctions had only been annulled retrospectively for the 2022–2023 period, and the new sanctions imposed on Aven and Fridman in 2023 remain in force.

This episode highlights some of the bizarre aspects of EU sanctions. They are often adopted on a year-by-year basis, with the grounds for designations reviewed and changed from time to time. For instance, the EU sanctioned Aven and Fridman in 2022 on the basis that each of them had:

‘… actively supported materially or financially and benefited from Russian decision-makers responsible for the annexation of Crimea and the destabilisation of Ukraine. He also supported actions or policies which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine.’

In this year’s judgments, the CJEU ruled there was no ‘sufficiently solid factual basis’ for either allegation. However, by the time these judgments were handed down, the EU had adopted another decision whereby Aven and Fridman were sanctioned, among other things, for being ‘a leading businessperson involved in an economic sector providing a substantial source of revenue to the Government of the Russian Federation’. The sanctions based on this justification remain in place.

Why Can One be Sanctioned?

It is perfectly appropriate for the EU to revisit its sanctions decisions, especially those imposed urgently in a matter of weeks after Russia’s full-scale invasion of Ukraine. What is more controversial is using designation criteria based on who an individual is, such as being a leading business figure in Russia (‘status-based sanctions’), rather than any alleged malicious activity (‘activity-based sanctions’). The line between the two might be blurred, as one could argue – rightly, in my view – that running a major business in Russia and contributing to its tax revenues at the present moment is deeply problematic.

But the key point is this: governments’ sanctioning powers tend to be so vast that, once they decide to sanction a certain category of people, the role of the courts is limited to checking whether a given person fits the description. It is not to inquire into the wisdom of the decision on which designation criteria to use. This is the case in all major sanctioning powers, including the EU, the US, the UK and Australia. Human rights laws provide only scant protection.

Generally speaking, the above-mentioned governments use their sanctioning powers responsibly, although one might recall the previous US administration’s sanctions against certain officers of the International Criminal Court, which have since been revoked. Still, there are situations where intuitions might differ. A prime example is sanctioning someone because they are a family member of another sanctioned person, such as the UK designation of the Russian foreign minister’s daughter. Doing so can be essential to preventing sanctions evasion, but it can also lead to unfair treatment based on the designee’s familial connections alone. For instance, in an Australian case, the daughter of a sanctioned Burmese general claimed to have severed all contact with her father and received no financial support from him, but the court held this to be irrelevant to the lawfulness of the designation, without examining the truth of the claim.

Then, there is the issue of re-listing. Even if the sanctioned person wins their court challenge, sanctions can be simply re-imposed under a different justification. This practice is widespread in the EU. As the leading sanctions barrister Maya Lester KC observed before the House of Lords in 2017, there is a difference between a genuine reappraisal of the situation – for instance, in light of new information – and simply re-packaging previously known facts into a new form of words to provide a ‘new’ justification.

How Does One Get Around Sanctions?

Challenging sanctions in court is also notoriously difficult, although a divide is emerging between the EU and common law countries, like the US, the UK and Australia. In the common law world, two factors combine to present claimants with a daunting task. On the one hand, governments have broad discretion to impose sanctions. On the other hand, for a successful challenge, one needs to demonstrate not only that the government’s sanctions designation was wrong, but that it was palpably wrong: for instance, in the UK, that it ‘was either based on no evidence or was irrational’. This presents claimants with a steep hurdle.

As a result, the popular perception that oligarchs outgun governments in sanctions litigation is simply wrong. In the UK, claimants have lost all cases since the passing of the Sanctions and Anti-Money Laundering Act 2018: LLC Synesis, Dalston and Shvidler. In Australia, the news that the former attorney general Christian Porter represented the Russian businessman Oleg Deripaska in his court case against the federal government drew headlines. Deripaska predictably lost, as had another Russian businessman, Alexander Abramov, before him.

In the EU, the position is different. Over the years, the CJEU has decided that it can conduct full reviews of the EU’s sanctions decisions, meaning that the decision need not be glaringly wrong to be struck down. This results in a significant number of sanctions cases being lost by the EU. However, the EU can almost always maintain a particular sanctions designation if it is so inclined, using the re-listing trick mentioned above. Furthermore, the listing criteria can be adjusted. For instance, once the CJEU struck down sanctions against Violetta Prigozhina, the mother of the Wagner Group’s Yevgeny Prigozhin, the EU simply clarified its listing criteria to include immediate family members of leading Russian businesspeople.

What Does All of This Mean for Sanctions?

In summary, a CJEU court victory such as the ones by Aven and Fridman is a trivial occurrence. They remain on the list, and EU sanctions law is the same as it was before these judgments. The judgments are not a blow, a setback or a precedent for anything. One might be forgiven for wondering: why did Aven and Fridman even bother to continue litigating their cases in respect of the 2022–2023 sanctions?

We can only guess, but here is one possible answer. The real prospect of relief for someone under sanctions often lies not so much in winning the court case but in convincing the relevant government, or the EU, to take them off the sanctions list (or simply not to re-list them once current sanctions expire). This is where high-powered lawyers could prove their worth, and a judgment suggesting there is no evidence that an individual has undermined the territorial integrity of Ukraine could come in helpful. So, what happens in the halls of Brussels is more important than the drama in Luxembourg courtrooms.

Still more essential, though, are the quotidian details of domestic enforcement. For instance, how does one identify and freeze sanctioned assets, or detect and prosecute sanctions evasion? RUSI has conducted an extensive pan-European study on this topic, but far more attention needs to be given to it across the world. After all, whether or not one is on a list, sanctions only truly bite if one’s bank accounts are frozen and yachts safely docked. Whether this actually happens has been, and remains, the main concern.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

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