‘Overnight’ sanctions need instant response – ALG

Compliance with EU sanctions creates significant practical and cross-jurisdictional challenges for Irish businesses, a seminar has heard.

EU Sanctions – Legal Perspectives from Dublin and Brussels (29 April) was hosted by the Irish Centre for European Law (ICEL) and chaired by Philip Crowe, Department of Foreign Affairs and Trade legal division and ICEL committee member.

Sanctions are adopted by the Council of the European Union acting unanimously by means of council decisions within the Common Foreign and Security Policy framework. 

In her overview, Mihaela Carpus Carcea of the European Commission legal service, said that these council decisions were given effect by means of council regulations adopted by qualified majority voting.

This typically happens simultaneously with the council decisions to ensure immediacy and effectiveness, particularly in relation to asset freezes. 

Financial institutions play a central role in enforcing financial restrictions, while customs authorities are central to trade measures.

Responsibility for enforcement lies primarily with member states, including their courts, which may refer questions to the EU Court of Justice (CJEU) under article 267 TFEU. 

Carpus Carcea also emphasised that sanctions were temporary and subject to periodic review, and that listings might be amended. 

All measures remain subject to judicial review before the CJEU.

Speaking of recent case-law developments, Carpus Carcea said that, since the adoption of the first packages of sanctions following the Russian invasion of Ukraine in 2022, there had been an increasing number of preliminary references from national courts.

“They touch on various topics,” she said. “However, we see two big clusters.”

The first concerns the interpretation of “ownership and control” under Regulation 269/2014. She cited three cases:

• In EM Systems C-84/24, the court held that assets of non-listed entities owned or controlled by listed persons are presumed to be controlled by those persons and must be frozen, subject to rebuttal, 
• Pending proceedings in INTER RAO C-147/25 address the legality of national lists of controlled entities. Advocate General Campos Sanchez-Bordona recognised the possibility of “informal control” based on objective indicia,
• In ČIEKURI-SHISHKI’ C-480/24, Advocate General Norkus indicated that national courts must take an active role in verifying ownership and control.

The speaker also identified recent and developing issues concerning trusts, referring to T TRUST C-483/23, where Advocate General Campos Sanchez-Bordona suggested that assets held in trust might be presumed controlled by listed settlors or beneficiaries, depending on the governing instrument and applicable law. 

Carpus Carcea noted emerging questions regarding the interaction with insolvency proceedings.

A second cluster concerns arbitral awards affected by sanctions, particularly under article 11 of Regulation 269/2014 and article 11 of Regulation 833/2014.

In Reibel C-802/24, Advocate General Biondi found that claims by sanctioned persons could not be satisfied in arbitration proceedings, and that arbitral awards must be subject to review to ensure compliance with EU public order, which includes sanctions.

This extends to pre-payments and interest. 

Non-listed entities

The speaker further noted emerging questions regarding the recognition and enforcement of arbitral awards involving non-listed entities and enforcement in third-country contexts.

ALG partner Kate Harnett identified several interrelated issues as the most significant challenges for Irish businesses operating under the regime of EU sanctions.

She began by explaining the broad scope of EU sanctions compliance.

Obligations apply within EU territory (including EU airspace), on board aircraft or vessels under a member state’s jurisdiction, to member state nationals wherever located, and to entities registered in member states. 

They also apply to business conducted wholly or partly within the EU.

EU nexus

In practice, this can capture non-EU businesses where their activities have an EU nexus.

Harnett noted that EU sanctions could also have extraterritorial effects in other ways, particularly through anti-circumvention rules. 

EU sanctions prohibit knowingly and intentionally participating in conduct whose object or effect is circumvention.

Harnett emphasised that the threshold was “very, very low” and could extend to a party being aware of, and accepting, the risk of circumvention. 

By way of example, these rules may prohibit structuring a transaction through a non-EU entity to achieve an outcome that an EU entity could not lawfully achieve directly.

Novel tools

She also drew attention to more recent, ‘novel’ tools that extended the EU’s reach.

The ‘best efforts’ obligation requires EU operators to take all necessary and feasible steps to ensure that non-EU entities they own or control do not undermine sanctions. 

In addition, an anti-circumvention tool introduced in June 2023 (and activated in April 2026) allows the EU to impose restrictions on exports to third countries considered high-risk for circumvention. 

A further practical difficulty is the pace and unpredictability of developments.

Harnett noted that 20 sanctions packages had been adopted since February 2022, with additional measures under consideration. 

Pre-existing contractual commitments 

Changes can take effect "overnight", requiring businesses to respond immediately, often while balancing pre-existing contractual commitments against newly-imposed prohibitions.

The compliance burden means that liability may arise not only from direct dealings, but through downstream supply chains, requiring businesses to conduct detailed, risk-based due diligence.

However, as Hartnett explained, regulatory divergence was frequently an acute challenge.

Irish businesses may need to navigate differences between EU, US, and British sanctions, including variations in ownership thresholds, approaches to ‘control’, and degrees of extraterritorial reach. 

She noted that this could place businesses in situations where compliance with one regime risked breaching another.

Compliance with multiple sanctions regimes may become increasingly challenging as divergences in the underlying foreign policy objectives continue to grow.

Even within the EU, businesses operating across multiple member states may face inconsistent national approaches.

Separate engagement

Harnett described as “very, very challenging” the divergent interpretations, differing requirements, and the need to engage separately with multiple regulators.

She also pointed to enforcement as an increasing concern with potential criminal liability and exposure for senior management under Irish law.

While criminal enforcement in Ireland has historically been limited, enforcement is increasing across the EU. 

Harnett also referred to Irish legislation under consideration to transpose Directive (EU) 2024/1226 into Irish law (which had a transposition deadline of 20 May last year).

The directive sets out uniform minimum requirements for the punishment of EU sanctions violations in all EU member states and will lead to certain sanctions violations becoming arrestable offences under Irish law.