Key takeaways
Trusts may not protect sanctioned assets
Sanctions apply based on actual control, not legal structure.
Real influence matters more than legal form
Authorities assess real influence, not just formal arrangements.
Navigating sanctions requires extra vigilance
Businesses must be proactive in managing legal exposure.
Advocate General provides useful guidance on interpreting EU sanctions regulation
In LLC EuroChem North-West-2 and EuroChem Group AG -v- Société Générale S.A. [2025] EWHC 1938 (Comm) (link to our article below), the UK Commercial Court noted the relevance of various pending preliminary references before the CJEU, including Case C-483/23. The Advocate General has now issued his Opinion, which provides important interpretative guidance on Article 2(1) of Council Regulation (EU) No. 269/2014 (Regulation 269).
Case C-483/23 is a reference from the Regional Administrative Court of Lazio, Italy, regarding whether assets put into a trust by a sanctioned individual (the settlor) may be considered owned, held, or controlled by that individual and thus be subject to asset freezing measures under Article 2(1) of Regulation 269.
Overall, the Opinion accords with the UK Commercial Court’s ruling and emphasises the importance of substance over form when assessing ownership and control in the context of sanctions.
In particular, Case C-483/23 confirms that trust structures, especially those governed by flexible offshore regimes like Bermuda, do not necessarily sever the settlor’s legal or economic ties to the assets. The Advocate General concluded that the settlor may still be deemed to own, hold or control the trust assets for the purposes of Article 2(1) of Regulation 269. This would need to be assessed on a case-by-case basis and would depend on the terms of the trust and the extent of the settlor’s retained powers (e.g. ability to revoke the trust, appoint trustees, or influence beneficiaries).
Case C-483/23 aligns with the UK Commercial Court’s findings, namely the purposive interpretation of Article 2(1) in line with the objectives of sanctions regulations when assessing ownership and control. It further supports the view that for sanctions compliance and enforcement, it is necessary to look beyond formal legal arrangements to the underlying reality of control, in order to prevent circumvention through complex arrangements, such as trusts.
The focus on substance over form is a common theme in both UK and EU decisions. Whilst the approach adopted by the courts is understandable, it may present practical challenges for parties conducting due diligence in this context. Without specific regulatory guidance, it is unclear what evidence would be required or would be deemed sufficient to dispel suspicions that a designated individual owns or controls an entity held via a trust structure. This is especially so where the documents provided by a counterpart appear compliant.
The usual rule of thumb is that due diligence should be reasonable and proportionate, but these concepts are not easy to grapple with even in the context of a basic corporate structure. This ambiguity may lead parties to adopt a conservative position as their default, thereby avoid transacting with certain entities altogether, increasing the risk of over-compliance and litigation.
