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European Union Court Lets Two Russian Oligarchs Off the Sanctions Hook

Washington, D.C. (April 26, 2024) – The General Court of the European Court of Justice recently overturned a determination by the European Union’s (EU) executive body, the European Council (EC or Council), to sanction two prominent Russian oligarchs in connection with their alleged support of the Russo-Ukrainian conflict. In reaching this decision, the General Court accorded almost no deference to the prerogatives of the EC, making it clear that sanctions are subject to a searching judicial review. 

Under this decision, which is subject to a potential appeal, the Council cannot sanction an individual on the sole basis of his or her prominence in Russia or close relationship with the Russian government. This judicial action contrasts sharply with those of the courts in the United States and the United Kingdom, which have repeatedly rebuffed challenges to the imposition of foreign policy-related sanctions. 

The General Court’s decision pertained to Mikhail Fridman and Petr Aven, who are major shareholders of Alfa Group, a conglomerate that includes the Russian giant Alfa Bank. In February 2022, the Council froze all their assets within the EU. Under EU law, two groups of people are subject to sanctions in connection with the Ukrainian conflict: (i) those who support actions and policies that undermine or threaten the territorial integrity, sovereignty and independence of Ukraine; and (ii) those who support Russian officials involved in Ukraine-related policy making or obtain a benefit from such decision-makers. 

The Council based its decision to sanction Messrs. Fridman and Aven on publicly available information, not classified intelligence. Giving no deference to the Council’s decision, the General Court undertook, in essence, a de novo review of the evidence supplied by the Council and concluded that it fell short. The court rejected the Council’s evidence item by item.

First, the court refused to assume that Fridman and Aven are supporters of Russian policy on Ukraine simply because they are close friends and regular Kremlin guests of the president of the Russian Federation. In the court’s view, “proximity” to power does not imply support of the Kremlin’s policies. Nor is there an obligation for prominent Russians to publicly criticize Russian policy to avoid the imposition of EU sanctions. Second, the fact that both individuals received support from the Russian president before the 2014 Russian involvement in Crimea for their business ventures did not mean that they benefited from the Russian president for purposes of EU sanctions law. Third, the court declined to infer that Fridman and Aven were supporters of Russian policy because they visited Washington in 2018 to lobby against continuation of sanctions imposed on Moscow after the events of 2014. In the court’s view, what happened in 2018 was too removed in time from the 2022 events for such an inference. Fourth, the court ascribed no significance to Mr. Aven’s sending in 2019 a public letter to the Russian president asking him to intercede with a pending domestic arbitration matter because, under Russian law, every citizen can directly petition the country’s president for help. 

While this decision may have limited immediate impact on Messrs. Fridman and Aven personally because they remain subject to additional EU sanctions orders, other targets of EU sanctions may read the decision as an irresistible invitation to bring their own judicial challenges. If this General Court decision does not prove to be an outlier, it means that within the EU there is meaningful judicial review of decisions to impose sanctions.

The United Kingdom has taken a very different approach. In February 2024, its Court of Appeals rejected an appeal by Eugene Shvidler, who was placed on the sanctions list in February 2022 on the basis of his ties to Roman Abramovich, a fellow oligarch who is closely associated with the Russian president. Even though Mr. Shvidler’s connection to the Russian government is somewhat attenuated, the court upheld the sanctions against him. The court concluded that judicial review is governed by the “proportionality” test. There is an express recognition under this test that courts are “less-well placed” than Britain’s democratically elected leaders to decide issues at the heart of that country’s foreign relations and/or national security. A British judge reviewing such a decision will not step into the shoes of the government decision-maker and remake the decision. The court contrasted this approach with the more rigorous “rationality” test for judicial review, under which, even “if the relevant decision-maker has had regard to all relevant factors and has reached a decision which cannot be said to be irrational, it remains open to the court to conclude that the measure in question fails to strike a fair balance and is disproportionate.” In other words, a British judge will generally not second-guess a national security-based decision to impose sanctions, even if efficacy of the sanctions or the fairness of a given case is legitimately open to question. 

Likewise, a judicial challenge to a sanctions order is unlikely to succeed in the United States. Under the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq., the president enjoys extraordinarily broad powers to impose sanctions to respond to “any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States.” As one court noted more than 20 years ago, sanctions “are an important component of U.S. foreign policy, and the President’s choice of this tool . . . is entitled to particular deference.” Presidents Obama, Trump and Biden have repeatedly invoked this law to impose sanctions on Russian persons and entities in response to events in Ukraine. While there are in theory pathways to challenge a determination under the IEEPA on constitutional and administrative grounds, such lawsuits almost uniformly fail. Oleg Deripaska found this out when he tried to overturn his placement on a U.S. sanctions list. An appellate court in Washington, D.C. deferred to the U.S. government’s judgment that Mr. Deripaska’s prominent role in the Russian energy sector “contribute[d] to the situation in Ukraine” and properly subjected him to U.S. sanctions. 

Lewis Brisbois’s attorneys are actively engaged in the wide range of legal issues in this area and are advising clients on managing legal and business risk as events continue to develop at an accelerated pace. For more information, contact the author or editors of this alert. Visit our Ukraine Conflict Response Practice page for additional alerts in this area.

Author:

Minyao Wang, Partner

Editors:

Jane C. Luxton, Managing Partner - Washington, D.C.

Andrew Pidgirsky, Partner and Chair of Ukraine Conflict Response Practice

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