Court of Justice Delivers Landmark Rulings on Freezing of Voting Rights and Ownership & Control Under EU Sanctions

Two recent judgments of the Court of Justice of the European Union (“CJEU”) provide clarification on key aspects of the EU asset freeze sanctions regime, particularly the treatment of voting rights of EU designated persons (“DPs”) and the presumption and rebuttal of ownership and control.

These decisions refine how EU sanctions are to be interpreted and applied, with direct implications for compliance, governance, and risk management. The key takeaways are as follows:

• A DP is “absolutely and unconditionally” prevented from exercising their shareholding rights to vote or participate in meetings.
• A non-listed company whose funds have been frozen by private entities on the ground that those funds are presumed to be held or controlled by a DP must be afforded the opportunity to challenge such freezing, in an action before the national authorities and subsequently, if necessary, before the national courts.

Freezing of Voting Rights (Case C-465/24 – SBK)

On 12 March 2026, the CJEU issued a judgment further to a request for a preliminary ruling concerning the status of voting rights attached to frozen depository receipts. The question was posed in the context of SBK Art LLC’s (“SBK”) dispute with the Fortenova Group STAK Stichting and Open Pass Limited, as SBK being an entity subject to EU Asset Freeze Sanctions (as defined below) and holder of depository receipts, was barred from participating in meetings and exercising its voting rights.

It seems settled EU law that voting rights attaching to shares and other forms of equity holding (such as depository receipts) should be deemed frozen. However, the Court’s reasoning differs from prior approaches. Specifically, the CJEU made the following argument:

• Council Regulation (EU) No 269/2014 (“EU Asset Freeze Sanctions”) require DP ‘funds’ and ‘economic resources’ to be frozen.¹ For ‘funds’ this means “preventing any move, transfer, alteration, use of, access to, or dealing with funds in any way that would result in any change in their volume, amount, location, ownership, possession, character, destination or any other change that would enable the funds to be used, including portfolio management”.²
• EU Asset Freeze Sanctions define ‘funds’ as including “publicly- and privately-traded securities and debt instruments, including stocks and shares, certificates representing securities, bonds, notes, warrants, debentures and derivatives contracts”.³
• The CJEU affirmed that shares or ‘certificates representing securities’ (such as depository receipts) are ‘funds’ under the meaning of EU Asset Freeze Sanctions, and stated that exercising any rights attaching to such ‘funds’ (e.g. voting and meeting attendance) constitutes a ‘use of funds’.⁴
• The mere act of exercising such rights necessarily affects the dynamic of corporate decision making and, accordingly, the functioning of the company and the very value of the ‘funds’ in question.⁵
• Consequently, a DP’s exercise of shareholding rights to vote or participate in meetings is a prohibited ‘use of funds’ that “that would result in any change in their volume, amount, location, ownership, possession, character, destination or any other change that would enable the funds to be used”.⁶ DPs are thus prohibited from exercising their shareholding rights to vote or participate in meetings under the EU Asset Freeze Sanctions.
• The CJEU deemed any other / lesser interpretation a hindrance to the objective of EU sanctions.⁷ As such, it confirmed that a DP is “absolutely and unconditionally” prevented from exercising their shareholding rights to vote or participate in meetings.⁸

This argument overturns the reasoning (but not the conclusion) previously used in Case T-102/23⁹, European Commission FAQ 15, and the Advocate General Opinion¹⁰ for Judgment of the Court in Case C‑465/24 (“AG Opinion”) on this same point (together, the “Prior Positions”). All the Prior Positions variously describe voting rights as a separate “economic resource” to the shares (defined as ‘funds’) which should be “fully frozen” in any case.

SBK’s submissions also sought to argue that voting rights are a separate ‘economic resource’ to the depositary receipts themselves, but that said economic resources should not be automatically frozen: case-by-case assessment is required to determine whether the exercise of such rights would, in fact, result in the “obtain[ing of] funds, goods or services in any way” (which is what the ‘freezing of economic resources’ definition seeks to prevent under EU Asset Freeze Sanctions).¹¹

However, by using the reasoning above, the CJEU bypasses SBK’s arguments as well as the reasoning used in the Prior Positions. Instead the CJEU treated voting rights as an inherent feature of the shares / funds, and that the exercise thereof is a ‘use of funds’ which necessarily has downstream effects on the value of the funds themselves (thus breaching the ‘freezing of funds’ requirement).

The re-categorisation of voting rights as ‘funds’ rather than ‘economic resources’ is notable, since (i) the criteria for ‘freezing’ those respective categories is technically different, and (ii) SBK sought to rely on the latter definition to claim unlawful denial of shareholder participation.

Accordingly, in addition to the general confirmation on the freezing of voting rights, the CJEU judgment offers a potential principle on how ‘funds’ and ‘economic resources’ should be conceptualised going forward: the properties of a given fund (e.g. voting rights in shares) should not be isolated as a separate economic resource to the fund itself; they are inherent to the fund and subject to the freezing requirements in respect thereof.

Ownership and Control and Rebuttal of Presumption (Case C-84/24 – "EM SYSTEM")

On 12 March 2026, the CJEU issued a judgment in the context of EM System’s dispute with its Lithuanian banks, who froze its accounts on the grounds that EM System was variously ‘owned or ‘controlled’ by a DP and thus subject to an asset freeze.¹²

The asset freeze was imposed during a period where the underlying legislation and related EU guidance was unclear on the threshold for ‘ownership’ (both claiming it was only for holdings over 50% as well as for 50% or more)¹³ and the CJEU was asked to opine¹⁴on whether:

• Where a DP owns exactly 50% of the shares in a company, is it presumed that the funds of that company are owned, held or controlled by the DP (thus subjecting them to an asset freeze)?
• If so, whether that presumption could be rebutted, and the monies in these accounts unfrozen by the national court, if the company concerned can claim that funds in these accounts are not used by or for the benefit of the DP?
• If so, what criteria should the national court hearing the case in the main proceedings assess when determining whether that control presumption is rebutted?

Regarding the first question, the CJEU concluded that the concepts of ‘held’ and ‘controlled’ must be interpreted broadly and that, to ensure efficacy,  “the surprise effect and the speed with which [asset freeze sanctions] are imposed must be guaranteed”.¹⁵ It is therefore necessary to work with clear criteria and with certain presumptions regarding the internal decision-making structure of the legal persons, entities or bodies concerned in order to determine whether they are owned or controlled by a person or entity and, consequently, whether their funds and economic resources are also held or controlled by that person or entity. A person with a 50% shareholding in a company is, in principle, capable of dictating or preventing certain decisions within that company or is at least able to ensure that the affairs of that company are conducted in accordance with its wishes. Accordingly, it must be presumed that a 50% shareholding in a company makes it possible to control not only that company but also its funds and economic resources.¹⁶

Regarding the second and third questions, the CJEU noted that asset freezes must be imposed in accordance with constitutional criteria and that persons subject to asset freeze measures enjoy, by extension, judicial rights of defence to contest such asset freezes.

One of the constitutional requirements is the “the obligation for the administration to state the reasons” on which its asset freeze decisions are based and that “the competent EU authority disclose to the person or entity concerned the grounds and evidence relied on against it and afford that person or entity the right to be heard at the same time as, or immediately after, the adoption of the decision concerning it, and, secondly, that that authority, at the request of the person concerned, grant access to all non-confidential administrative documents within a reasonable time”.¹⁷

According to the CJEU, it thus follows that any person subject to an asset freeze, whether directly via a listing in the relevant EU regulation or via an assessment made by an operator as to an entity’s ownership or control status, “must be informed of the reasons why their funds were frozen” by the party freezing those assets¹⁸ This conclusion is unusual, as the legislation referenced in the judgment does not subject private operators to such obligations.

Further to such disclosure, persons whose funds are frozen must have (per their constitutional rights) a right to contest such decisions. “It is for the Member States to establish a procedure enabling” such persons to respond accordingly.¹⁹ The Member State procedure should reject the presumptions where a person can demonstrate that the DP “does not actually hold or control its funds or economic resources, in particular in the light of the governance structure, the articles of association and the functioning in practice of the legal person, entity or body concerned, and the opportunity to secure, as a result, the unfreezing of its funds or economic resources. The person included on that list must also be given such an opportunity to overturn the presumption of holding or control.²⁰

The CJEU did not provide any prescriptive outline for what the Member State procedures should look like. However, in its response to the referring court’s questions, the CJEU specifically confirmed that the available options must include “the opportunity to challenge, in an action before the national authorities and subsequently, if necessary, before the national courts with jurisdiction, the measure freezing its funds, and to have that measure lifted if it demonstrates that those funds are not actually held or controlled by the person included on that list.” Accordingly, the judgment makes clear that those targeted by such measures have the right to challenge those measures before both the competent national authority as well as the national courts.

^{1 Article 2(1), EU Asset Freeze Sanctions.}

^{2 Article 1(d), EU Asset Freeze Sanctions.}

^{3 Article 1(g), EU Asset Freeze Sanctions.}

^{4 Judgment of the Court in Case C-465/24 – SBK, paragraph 38.}

^{5 Judgment of the Court in Case C-465/24 – SBK, paragraph 36.}

^{6 Judgment of the Court in Case C-465/24 – SBK, paragraph 41.}

^{7 Judgment of the Court in Case C-465/24 – SBK, paragraphs 41 – 52.}

^{8 Judgment of the Court in Case C-465/24 – SBK, paragraphs 41 - 53.}

^{9 Judgment of the Court in Case T-102/23 – SBK, paragraph 171,.}

^{10 Paragraph 63, AG Opinion.}

^{11 Judgment of the Court in Case C-465/24 – SBK, paragraph 26.}

^{12 Judgment of the Court in Case C-84/24 – EM System, paragraphs 37 – 42.}

^{13 Judgment of the Court in Case C-84/24 – EM System, paragraphs, 44 – 45.}

^{14 Judgment of the Court in Case C-84/24 – EM System, paragraph 47.}

^{15 Judgment of the Court in Case C-84/24 – EM System, paragraph 82.}

^{16 Judgment of the Court in Case C-84/24 – EM System, paragraphs 77 - 93.}

^{17 Judgment of the Court in Case C-84/24 – EM System, paragraphs 104 and 107.}

^{18 Judgment of the Court in Case C-84/24 – EM System, paragraphs 107 – 108.}

^{19 Judgment of the Court in Case C-84/24 – EM System, paragraph 111.}

^{20 Judgment of the Court in Case C-84/24 – EM System, paragraph 112}