By: N. Pirilides & Associates LLC
The European Union’s 12th package of sanctions, announced on 18 December 2023, marks a significant intensification of the measures taken against Russian assets as a response to the ongoing situation in Ukraine.
This package introduces a range of new actions, including asset freezes, expanded trade and service restrictions, stricter compliance with the crude oil and petroleum products price cap, and new notification requirements for transferring Russian funds out of the Union. Most interesting of all, however, is the newly enhanced ability of Member States to deprive sanctioned individuals and entities of their assets, subject to a lawful judicial or administrative decision finding that such deprivation would be in the public interest.
Given the strong protection afforded to the right to property, both through Article 17(1) of the EU Charter on Fundamental Rights, and Article 1 of the First Protocol to the European Convention on Human Rights, it would be legally impossible for Member States to deprive sanctioned individuals or entities of their assets without providing some form of compensation. However, under the original Article 2(2) of Council Decision 2014/145/CFSP, making payments to listed individuals and entities was generally prohibited. As such, Council Decision (CFSP) 2023/2871 introduced a derogation to Article 2(2) of Council Decision 2014/145/CFSP, which has the indirect effect of enabling such property confiscations to take place.
In essence, the revised Article 2(2) allows Member State authorities to compensate those subject to asset deprivation, ensuring however that the funds remain frozen. This adheres to human rights provisions without offering actual relief from the sanctions. Notably, given that sanctions now extend post-mortem, any payments could theoretically be frozen indefinitely. Furthermore, given the jurisprudence of the European Court of Human Rights on the issue, the compensation provided may not equate to the market value of the seized property, as long as the interference with property rights remains proportional.
As a final sidenote, the recent political agreement on the proposed Directive on Asset Recovery and Confiscation signals an impending extension of the powers of Member States to seize property related to sanctions without affording compensation. Specifically, Article 12(1) of the proposed Directive mandates the confiscation of instrumentalities and proceeds from criminal activities following a conviction, with the European Commission considering sanctions evasion within this scope. It would thus appear that the EU is arming Member States with the means to strongly enforce adherence to any past and future sanctions.
All in all, the 12th package of EU sanctions against Russia introduces robust mechanisms for asset freezing and confiscation. In doing so, it demonstrates an innovative approach to asset seizure which respects property rights, albeit with compensations that remain effectively frozen. Any developments in this area are crucial for European legal practitioners and businesses alike, as the Union signals a growing determination to enforce sanctions adherence across the EU.
