WorldECR | EU ruling allows full confiscation of proceeds

The Court of Justice of the European Union (“CJEU”) has ruled that the EU ban on brokering military equipment to Russia allows for the full confiscation of proceeds, even if the goods never enter the EU.

The 10 September judgment also confirmed the Court’s power to interpret EU Common Foreign and Security Policy (“CFSP”) decisions that serve as the basis for national sanctions.

The case revolves around the Romanian airline Neves 77 Solutions SRL, which brokered a deal involving 32 radio equipment, 20 of which were manufactured in Russia. Neves received nearly 3 million euros in fees for these services from SFTE Spetstechnoexport, despite being warned in 2019 that their brokering activities were prohibited by EU sanctions due to Russia’s actions in Ukraine. The Romanian authorities imposed a fine of 30,000 Romanian lei (about 6,000 euros) and confiscated the funds received.

The Romanian court sought clarification from the EU Court of Justice whether the ban applied even if the military equipment did not enter the EU and whether the confiscation of funds violated property rights.

The ECJ confirmed that ‘in the present case the general scope of the restrictive measures in question was to be incorporated into the Regulation and that its jurisdiction to interpret Union law uniformly could not be circumvented.’

The ruling states that the ban on brokering military equipment to Russia applies regardless of whether the goods are imported into the EU.

The court noted that “this ban could easily be circumvented by simply allowing the equipment to be transported without passing through EU territory.”

It also noted that EU law allows for the automatic confiscation of the entire amount received for brokering services related to military equipment.

“Although this limits the property rights of the provider, this limitation is appropriate to ensure that the ban is effective and is therefore proportionate to the EU’s legitimate objective of protecting the territorial integrity, sovereignty and independence of Ukraine,” the court concluded.